Walmart's $3.3 billion acquisition of Jet.com is still the foundation on which all of its e-commerce dreams are built

Sarah Jacobs/Business Insider

Jet.com will keep its Hoboken, New Jersey, headquarters.

• Walmart bought hot e-commerce startup Jet.com in a $3.3 billion deal in 2016.
• Now, Walmart is folding all Jet employees in to the rest of its e-commerce operations, while retaining the Jet brand.
• While Jet has struggled to thrive in the niche Walmart wanted it to fill, the acquisition has still played a fundamental role in the strong growth of Walmart.com.
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Walmart shocked the world when it bought hot e-commerce startup Jet.com in a $3.3 billion deal in 2016.

CEO Doug McMillon hailed it as a new era for Walmart.

"Together, both Jet.com and Walmart.com will be able to leverage each other's assets to grow the ways we serve customers," he wrote in a Walmart blog post as the deal closed.

Some still scratched their heads. One analyst joked that Walmart was " lighting money on fire."

After all, Walmart already had a website that was directed at a mass population. How would Walmart.com and Jet.com work together? Would they inevitably clash?

Over the next three years, it was something of a tale of two websites. Walmart.com surged, adding millions of items to its selection and growing e-commerce sales 40% in 2018.

At the same time, Jet was refocused on serving a much smaller niche: the urban millennial consumer, which Walmart has historically found hard to reach. The site subsequently saw falling traffic and sales as it tightened its focus. According to Kantar estimates cited by Reuters, Jet's sales shrunk to $689 million in 2019, down from the $1 billion it forecasted in 2016.

Now, the rest of Jet's retail, marketing, technology, analytics, product, and other teams are being integrated into the larger Walmart teams, and the Jet president role will be eliminated, Marc Lore, president and CEO of Walmart e-commerce US, wrote in a blog post.

Read more: Jet's president will step down as Walmart overhauls the site it acquired for $3.3 billion

Jet.com will still be around. The brand will be kept up, and it will still work on partnerships with brands like Nike.

It's easy to look at the Jet acquisition as if it hasn't met the lofty promises of 2016. But in fact, Walmart's and Jet's teams have been working together very tightly already, and Jet technology and talent has played a huge role in the online success Walmart has experienced.

The first and most obvious example of this is the cofounder of Jet, Lore himself. He moved over to head e-commerce when the acquisition closed, and since then he has overseen a number of success stories at Walmart, from growth of Walmart.com sales to the runaway success of grocery pickup.

But two other Jet cofounders are still with Walmart in prominent roles. Nathan Faust, formerly Jet's COO, heads up supply chain for Walmart US e-commerce, and Mike Hanrahan, who was Jet's CTO, is now the head of Walmart's Intelligent Retail Lab, the tech-infused Walmart store in Long Island, New York.

Jet's team has also functioned as a launching pad for innovations that have enabled Walmart to better compete with Amazon, including two-day shipping.

"Our combined supply chain team has retooled fulfillment centers and mirrored inventory," Lore wrote in the blog post announcing the newest change. "This initially led to two-day free shipping, and more recently, free NextDay Delivery."