- A recent acquisition spree including Jet.com gives the retail giant much-needed digital chops.
Last summer, Marc Lore, founder and chief executive officer of e-commerce startup Jet.com Inc., sat down to record a private video for the top officials of the world’s largest retailer: Wal-Mart. In the video, meant for Wal-Mart executives and board members who weren’t yet part of weeks of secret negotiations between the companies, Lore stares earnestly into the camera and shows off his Bentonville bona fides. After humblebragging about reading every annual report since 1972, he says he’s been “struck by Wal-Mart’s maniacal focus” over its storied 54-year history.
But Lore’s 40-minute presentation doesn’t hold back about the threat posed by its most fearsome and increasingly powerful archrival. “AMAZON IS DOMINATING” reads a slide on a large screen behind him. In the video, Lore presents a plan to bet Wal-Mart’s future not on e-commerce standbys such as books, electronics, and toys, but on product areas only now becoming popular online, including apparel, fresh food, and “everyday essentials” like drugstore items. “We’ll need to take the offensive, swim upstream,” Lore says. “As Sam Walton said, ‘Opportunity lies in the opposite direction.’ ”
The video worked exceedingly well. In August, Wal-Mart Stores Inc. announced it would acquire Jet.com for $3.3 billion in cash and stock. It was an extraordinary sum for a 15-month-old, purple-hued website that was struggling to retain customers and is still far from making a profit. Even more astonishing, Lore and his management team in Hoboken, N.J., were put in charge of Wal-Mart’s entire domestic e-commerce operation, overseeing more than 15,000 employees in Silicon Valley, Boston, Omaha, and its home office in Arkansas. They were assigned perhaps the most urgent rescue mission in business today: Repurpose Wal-Mart’s historically underachieving internet operation to compete in the age of Amazon. “Amazon has run away with it, and Wal-Mart has not executed well,” says Scot Wingo, chairman of Channel Advisor Corp., which advises brands and merchants on how to sell online. “That’s what Marc Lore has inherited.”
Lore’s ascendancy at Wal-Mart adds bitter personal drama that wouldn’t seem out of place on Real Housewives of New Jersey to a battle between two of the most disruptive forces in the history of retail. In 2010, Wal-Mart tried to buy Lore’s first online retail company, Quidsi Inc., which operated websites such as Diapers.com for parents and Wag.com for pet owners. But it moved too slowly and lost out to a higher bid from Amazon.com Inc. Lore then toiled at Amazon for over two years before quitting, in part out of disappointment with its refusal to invest more in Quidsi and to integrate his team into the company, according to two people close to him.
Jet, which he started a year after leaving Amazon, sells almost everything—books, electronics, clothes—so it was difficult to miss an element of revenge among his motivations. Jeff Bezos, Amazon’s CEO, certainly noticed. In case anyone underestimated the enmity coursing through the Lore-Bezos feud, Amazon announced in March that it was closing Quidsi, saying it didn’t see a path to profitability. Coming from the historically money-losing internet giant from Seattle, the pointed wording of the announcement was widely interpreted as an effort to undermine Lore’s credibility at Wal-Mart.
Lore cuts an unusual figure at the Bentonville headquarters, which he now visits once a month on a private company plane, and in the geeky hallways of San Bruno and Sunnyvale, Calif., where most of Walmart.com’s engineers work. He’s a former bank risk manager and longtime New Jersey resident who’s a fan of Bruce Springsteen and of figuring out ways to simplify the routines of daily life. He recently ditched his Tesla and uses only Uber, for example, and he visits the same sushi restaurant near his office four times a week, always ordering the salmon sashimi. He also spends time on customer-pleasing contrivances that, in the parlance of Silicon Valley, do not scale. He recently devoted a 12-hour day to recording a thousand variations of a video greeting for new Jet customers. Now when customers sign up, Lore welcomes them by their first name.
He’d like to extend Jet’s sensibility and business model to Walmart.com, the second-biggest e-commerce destination in the U.S., according to ComScore Inc. A site redesign is due this summer. (He’s thinking of recording another set of personalized introductions.) Lore also recently announced free delivery on Walmart.com for orders of more than $35, a Jet-like (and Amazon-like) tactic to give customers discounts for buying more stuff at once, so it can be shipped more efficiently in a single box. He also announced that shoppers will be able to save money on 1 million products if they order online and pick them up at one of the chain’s 4,700 U.S. stores, where it’s cheaper for the company to deliver.
Crowning the entire strategy is an acquisition spree: buying middling e-commerce startups such as Shoebuy.com ($70 million), fashion retailer ModCloth ($45 million), and outdoor apparel seller MooseJaw ($51 million); installing their founders as his deputies; and selling their products on Walmart.com, where the selection still lags far behind Amazon’s. Later this spring, Lore is also likely to announce Wal-Mart’s reported $300 million acquisition of Bonobos Inc., a decade-old menswear website that offers well-fitting pants and a team of enthusiastic customer service people—Bonobos calls them “ninjas”—that wouldn’t normally be associated with a giant like Wal-Mart.
Wal-Mart has a lot riding on Lore. Last year he received $244 million in pay, 10 times that of his boss, Doug McMillon, Wal-Mart’s CEO. His project could determine the future of Sam Walton’s legacy and the eventual success of McMillon. It will also settle the score on whether Lore is good at building profitable e-commerce sites or just selling unprofitable ones to his competitors for piles of money.
“Marc’s been given quite a bit of freedom to go get it done,” McMillon says.
Courtesy Brad Stone and Matthew Boyle/ Bloomberg
Frontpage November 14, 2018