Bezonomics by Brian Dumaine
Author:Brian Dumaine
Language: eng
Format: epub
Publisher: Scribner
Published: 2020-05-05T00:00:00+00:00
CHAPTER 11 Godzilla Versus Mothra
In the summer of 2016, Marc Lore, like so many other entrepreneurs before him, came to the realization that his company lacked the firepower to compete with Amazon. His e-commerce start-up, Jet.com, sold hip, upscale products such as Yes to grapefruit face masks and Fitbit Ionic smart watches to millennials, and it was growing fast with $1 billion in gross revenues. Like other leaders in his field, Lore knew the retail game was morphing toward a boundaryless customer experience. No longer was it enough to just own stores, nor was it enough to just be online. Successful retailers had to offer their customers a multitude of robust choices—either buy at the store, order online and pick up at the store, or buy online and have the order arrive in a few days or hours, whatever the preference. The idea had been around for some time, but it was devilishly hard to execute. To be able to offer that kind of hybrid experience, Lore knew he needed scale, which takes a mountain of capital. He’d raised $225 million in venture funds, but it wasn’t nearly enough, so he turned to Amazon’s archrival: Walmart.
In the fall of that year, Walmart bought Jet.com (and Lore along with it) for $3.3 billion. At the time, Jet.com had been valued by some analysts at about $1 billion, so one way of looking at the deal was that Walmart paid $2 billion to buy Lore. The world’s largest retailer saw in Lore someone who had the online savvy to dig into Amazon’s dominance in e-commerce. With nearly 40 percent of all U.S. online sales in 2018, Amazon was ten times the size of Walmart in that market. One pundit quipped that Walmart’s purchasing a hip, online company was like a middle-aged man in a midlife crisis buying expensive hair plugs.
Lore saw in Walmart the scale and capital he needed to go after Amazon. The Bentonville, Arkansas, company operates roughly 4,700 U.S. stores, and those locations put it within ten miles of 90 percent of the U.S. population—an ideal setup for same-day shipping. In an attempt to match Amazon Prime’s free shipping, Walmart started to offer free one-day shipping for orders over $35, but the key was the company’s ubiquitous stores. Lore saw that they could be used as giant local warehouses where products can be picked up curbside by online shoppers or delivered hours after an order is placed. “We have 1.2 million associates in our stores across the country who can do this,” Lore says. “That allows us to deliver fresh, frozen and general merchandise in two hours or on the same day cheaper than anybody else.” Walmart customers can also order groceries online and drive to a nearby Super Store to pick them up curbside. According to Cowen analysts, in January 2019, some 11 percent of Walmart shoppers used its curbside pickup program. They simply drove to a Super Store, and an employee stashed their order in the trunk.
Lore well knows what he’s up against with Amazon—as noted earlier, he used to work there.
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