How Amazon Reacts to Wal-Mart Buyout of Jet.com

By Douglas A. McIntyre Updated Jan 13, 4:48AM EST · Published Aug 9, 8:25AM EDT

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Amazon.com Inc. (NASDAQ: AMZN) did not increase discounts on products or drop the price of free shipping. It did not discount membership to Prime. Any of these might be a reaction to the $3.3 billion buyout of Jet.com by Wal-Mart Stores Inc. (NYSE: WMT). Nor will it. Amazon is so far ahead of Wal-Mart in the e-commerce business that the Jet.com deal will not affect it at all.

Consider how small a company Wal-Mart bought for $3.3 billion, which was more a sign of desperation than a wise strategic move. Wal-Mart says Jet.com has:

Demonstrated ability to scale with speed, reaching $1 billion in run-rate Gross Merchandise Value (GMV) and offering 12 million SKUs in its first year.
A growing customer base of urban and millennial customers with more than 400,000 new shoppers added monthly and an average of 25,000 daily processed orders.

Best-in-class technology that rewards customers in real time with savings on items that are bought and shipped together, thereby reducing the supply-chain and logistics costs often buried in the price of goods.

A select group of more than 2,400 retailer and brand partners tailored to create an attractive and distinctive assortment for consumers.

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There is absolutely no evidence that Amazon does not dominate the millennial market, just as it does every other demographic measure of e-commerce dominance. There is no evidence that Amazon’s technology is anything short of “best in class.” Amazon’s revenue “run rate” is well over $100 billion a year (though a few billion comes from Amazon Web Services). Its “retail and brand partners” run into hundreds of thousands, via Marketplace:

Marketplace’s early days were not easy. First, we launched Amazon Auctions. Not many customers came. Auctions transformed into zShops, which was basically a fixed price version of Auctions. Again, no customers. But then we morphed zShops into Marketplace. Internally, Marketplace was known as SDP for Single Detail Page. The idea was to take our most valuable retail real estate—our product detail pages—and let third-party sellers compete against our own retail category managers. It was more convenient for customers, and within a year, it accounted for 5% of units. Today, more than 40% of our units are sold by third-party sellers worldwide. Customers ordered more than two billion units from sellers in 2014.

Amazon has a set of branded consumer electronics, most of which help tether e-commerce customers to Amazon. Primary among these are the Kindle e-reader, Fire TV, Fire Tablet and Echo.

The most important tether is Prime, a sophisticated blend of free shipping, streaming video, music, personal photo storage and barrage of special offers on Amazon products.

Nothing will help Wal-Mart gain on Amazon by more than the most modest amount. So Amazon’s reaction to Jet.com will be nothing.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.