Retail

Walmart Fires 293 Employees of New York City-based Jetblack Shopping Service

Paul Ausick

Published: February 13, 2020 1:25 pm

Ending a program begun in 2017, Walmart Inc. (NYSE: WMT) on Thursday announced that the first company to emerge from the massive retailer’s Store No8 incubator has “graduate[d] from incubation to join Walmart’s Customer Organization.” For shopping service Jetblack, that meant that most of the startup’s approximately 350 employees would lose their jobs.

The Wall Street Journal reported that a Walmart representative will “lay off” 293 Jetblack employees. Last October, Walmart began trying to drum up a buyer for Jetblack, but the effort apparently came up empty. Deliveries will cease on February 21.

The service cost $50 a month and was available to deliver items purchased from other retailers, including Saks and Sephora. Jetblack staff responded to text messages requesting products and then sent out other employees to purchase the items and take them to the delivery hub where they are wrapped and delivered the same day.

At the time Walmart began shopping Jetblack to potential buyers or investors, the service was limited to New York City and had signed up only around 600 active members, each of which cost Walmart about $15,000 annually. Walmart claimed that Jetblack customers spend an average of $1,500 a month on the service.

The Jetblack service promised to purchase customer-ordered products at the lowest available price and deliver it the same day. Employees often had to buy from competitors and pay a higher price for the goods than the company sold them for. This is not one of those business plans that improve with scale.

Walmart expected to have the system mostly automated in five to seven years after the data gathered from early customers was used to train an artificial intelligence system that provided the platform for an automated personal-shopping service.

Jetblack was a clever idea, but would a substantial investment of time and capital have paid off in a big way? Walmart is trying to reduce costs and has closed or consolidated a number of small firms it has acquired over the past few years.

Unlike Amazon investors, Walmart investors expect a dividend for their investment. Since January 2019, investors have received a bonus as Walmart shares added nearly 28% and the total return investment rose to just over 29%. Meanwhile, Amazon shares added nearly 37% in 2019.

Walmart reports quarterly and full-year results next week, and analysts are looking for quarterly earnings of $1.44 per share and full-year earnings of $4.98 a share. Expectations call for modest growth in both profits and revenues. Walmart shares traded at around $117.17 shortly after noon on Thursday, in a 52-week range of $95.00 to $125.38 and with a 12-month price target of $130.34. That works out to a potential upside of more than 11% on Walmart stock.