The deal, one of the biggest ones yet for an e-commerce company, is designed to bulk up Walmart's online presence.

Walmart is hoping to take its online presence to new heights -- and is willing to pay big for it.

The world's largest brick-and-mortar retailer said Monday it has signed a deal to acquire e-commerce startup Jet.com in a cash and stock deal worth $3.3 billion. The purchase, expected to close this year, will be one the biggest yet for an e-commerce company.

Rumors of the purchase first started up last week.

The deal could create a significant rival to Amazon, which has been the undisputed king of online retail for years.

The increased competition might create more choice for online consumers, force prices lower and puncture the dominance of Amazon and its Prime loyalty program. Still, Walmart -- even with Jet -- would have a long way to go to catch up to the Seattle retailer. While Walmart makes significantly more revenue than Amazon overall, Walmart's e-commerce sales last year were a mere $13.7 billion. Amazon's were $107 billion.

"This is Walmart being even more committed to winning in e-commerce," Walmart CEO Doug McMillon said on a call with reporters Monday. In a statement set out earlier in the day, he said the deal will help Walmart.com grow and develop faster, while allowing Jet to become more successful in a shorter period of time.

Walmart and Jet disclosed that the retail startup adds 400,000 new shoppers every month and processes an average of 25,000 orders each day. Since officially launching just over a year ago, Jet's marketplace is on track to hit $1 billion in total sales from both the company and third-party sellers.

Walmart and Jet will maintain their separate brands. A bulk of the deal is in cash, with Walmart paying $300 million in stock over time.

The acquisition is the second major exit for Marc Lore, CEO and co-founder of Jet. Lore started Quidsi, parent of Diapers.com and Soap.com, and eventually sold it to Amazon for $545 million in 2011 after a price war. He stayed at Amazon for a few years but departed to start Jet. According to CrunchBase, Jet has raised $565 million in equity funding, a huge sum for a startup and a clear sign of investors' confidence in Lore's abilities to take on Amazon again.

Jet has distinguished itself by offering real-time discounts to customers for purchasing more items from the same warehouse and for waiving free returns, both of which save Jet money. The company has developed a complex algorithm to power these discounts, likening it to a real-time trading platform. Still, Jet has been furiously burning through its war chest in an effort to acquire new customers and get the word out on its new business.

Despite plenty of skepticism that Jet could -- from scratch -- take on Amazon, Lore offered an ambitious plan to push Jet to $20 billion in sales by 2020. He may now pursue that goal under Walmart.

Lore will be responsible for both Jet.com and Walmart's US e-commerce business, taking on the title president and CEO of Walmart's e-commerce business. Walmart's current global e-commerce chief, Neil Ashe, will leave the company by the end of the fiscal year. Before joining Walmart, Ashe was president of CBS Interactive, parent of CNET.

Source:
courtesy of CNET

by Ben Fox Rubin and Roger Cheng

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