BEIJING TIME, June 13 (Reuters) - Wal-Mart announced Wednesday a radical overhaul of Jet.com, the start-up company it bought for $3.3 billion in 2016, which failed to meet the world's largest retailer's ambitions in e-commerce.
Wal-Mart said it would integrate Jet.com's retail, technology, marketing, analysis and product teams with its online business. Simon Belsham, the current president of Jet.com, will leave office in early August.
According to interviews with six suppliers, two consultants and three Wal-Mart employees, Wal-Mart's initiatives have reduced the scope and importance of Jet.com in its entire U.S. e-commerce business, which competes with Amazon.
According to people familiar with the situation, Jet.com was expected to increase Wal-Mart's reach, especially for urban residents and "millennial" shoppers, but it failed to become a driving force for online grocery sales and the growth of market share in urban areas.
Wal-Mart has increased its emphasis on consumer services, such as day delivery and "online order, offline pick-up", focusing on providing food and grocery sales through these delivery methods. Jet has been marginalized as a platform for selling similar products, people familiar with the matter added.
Jet's reforms are yet another indication that Wal-Mart is trying to address its different ways of exposing its website and delivery to shoppers. Earlier this year, the company terminated its Deliv delivery partnership with Google. Last year there were reports that it was trying to use its employees to distribute products.
Several large and medium-sized consumer goods companies that have business relationships with Wal-Mart and Jet say they are beginning to notice that Wal-Mart executives are cutting back on Jet purchases.
They said that the decline in orders in Wal-Mart's Jet division began in March, when many suppliers began discussing with Wal-Mart the business priorities for fiscal year 2019.
In 2016, Jet expects revenue to be $1 billion. According to Kantar, a consultancy, sales shrank to $689 million in 2019.
Data from Kantar also showed that the number of American households shopping on Jet.com in January 2019 was 2%, down from 3% three years ago in the same period. It also forced Wal-Mart to readjust Jet as a platform for promoting online grocery sales.
Several suppliers told Reuters they planned to launch new packaging and pricing on Walmart.com and Jet, Wal-Mart's affiliates, this year. They also said Wal-Mart had asked them to find ways to increase Walmart.Com's future sales, rather than spending resources to develop new sales strategies for products on Jet.
According to supplier sources, Wal-Mart also notifies grocery, apparel and electronics suppliers who want to launch new products online that Jet is not the focus of their development.
In addition, current and former Jet employees told Reuters that Jet, based in Hoboken, New Jersey, had difficulty maintaining its sales momentum and achieving revenue targets. Two consultants who provided e-commerce and online grocery consulting to Wal-Mart confirmed that Jet did not achieve Wal-Mart's internal sales goals.
They said Wal-Mart had lowered the priority of the business, focused more on increasing sales through its website of the same name, and offered a variety of fashion and accessories to attract the Millennium generation through Moosejaw, Modcloth, Bonobos, Eloquii, Hayneedle and other small brands acquired in the past few years.
Wal-Mart had previously said it expected losses in its online business, including Jet.com, to increase this year, but did not provide additional details. In the last quarter, Wal-Mart's online sales grew by 37%. Wal-Mart hired Jet.com founder Marc Lore in 2016 to head the U.S. e-commerce business, which he still leads.
In 2018, Wal-Mart CEO said that his marketing efforts will always focus on Walmart.com, because the cost of acquiring new customers across the country is lower and the investment is less. From then on, Jet's crisis began to emerge. Wal-Mart has targeted Jet's investment in the urban market, where it has a good growth position, he said.
In the same year, a study by a retail analysis company found that shopper traffic on Jet.com declined in March. But Wal-Mart said the study was inaccurate and did not reflect trends.