By Bridget McCrea
In August, Walmart announced that it would acquire Jet.com for $3.3 billion. Dubbed by Walmart as "one of the fastest-growing and most innovative e-commerce companies in the U.S.," Jet could help the retailer lower prices, broaden out its assortment of goods, and offer a simpler and easier shopping experience for customers. Jet's claim to fame is a "variable pricing model," that finds shoppers getting lower prices when they either purchase certain items or opt out of free returns on items.
The merger may also put Walmart in a better position to go up against e-tailing behemoth Amazon, and possibly even strengthen the former's footing in the business-to-business (B2B) e-commerce space in the future. "Walmart has definitely put its stake in the ground saying, 'We're going to be winning in e-commerce,'" said analyst Joseph Feldman in Bloomberg's Walmart acquires Jet.com for $3.3 billion. "Amazon should be concerned about what Walmart is doing."
Justin King, senior partner with B2X Partners in Ashburn, Va., and founder of e-commerceandB2B.com, says electrical distributors should also be aware of this latest development and how it—and future mergers of this kind—could impact the B2B environment. For starters, he says the reasoning behind the deal itself is worth noting. "Walmart did this to bolsters its own strategy against Amazon," says King. "It was less about competing with 'everyone else,' and more about going head-to-head with the giant."
King says Walmart was probably also interested in Jet's resources and people. "Yes, there's a brand name with Jet and clearly it's a company that's made some progress and done some good things," says King, "but at the end of the day this [deal] is about getting a good team of people and e-commerce resources together—things that Walmart may not have wanted to go out and handle on its own."
King says that motivation should resonate with the electrical distributor that also lacks the resources and manpower to go up against Amazon in the B2B space. "We all know that resources are scarce and good people are hard to find," he continues. "The fact that Walmart had to go out and spend $3.3 billion to get those resources definitely says something about the retailer's e-commerce strategy."
What Does it All Mean?
The latest pairing of e-tailing behemoths should push small to midsized electrical distributors to ask themselves where they stand right now and their future status on the e-commerce continuum. It should prompt any distributors that have yet to make a full-scale investment in e-commerce to think about how their tech-savvy, online-shopping customers want to buy electrical products, equipment, and supplies right now, and how they'll want to make purchases in the future. Ignore these key questions and you could find yourself eating your competitors' dust and struggling to catch up in a world where we've all become accustomed to 24/7/365 online shopping and next-day/2-day delivery windows.
"When you look at this merger from a competition standpoint, we're not really seeing another large, B2B giant coming into view," says King. "However, this could be a way for a giant, established organization to gain speed and traction in an e-commerce sector that requires speed, agility, and creativity. I think there are some lessons in there that electrical distributors should be paying attention to."
Put simply, King compares the pure-play, bricks-and-mortar electrical distributors to Walmart, and the online-centric distributors to Jet. The latter, he notes, tend to move quickly, adjust to market trends and customer demands on the fly, and remain "unencumbered by the traditional, political electrical distribution business models." These attributes could make the online distributors particularly attractive for potential acquisitions by more traditional firms. Add the former's talent and resources to the mix and the proposition becomes even more attractive to the electrical distributor that needs a boost in the e-commerce department.
"The message to electrical distributors is that people are important, and that there are some creative ways you can go out and get talent by, say, acquiring a company that's focused on e-commerce," says King, who adds that the acquired firm doesn't even necessarily have to be in the electrical distribution space. "It could be a tangential business. The key is to find that talent, bring them in-house, and let them run at their own pace without the encumbrances of a traditional business model."
Expect to see more Walmart/Jet-type acquisitions in the coming months as more companies realize the value of adding tech-savvy talent and resources to their traditional business models. And while this latest deal isn't necessarily focused on the B2B space, there could be more activity coming down the road in that arena as well. He points to Home Depot's recent Interline Brands pilot program announcement (i.e., the company is currently piloting its first business use case offering Interline's catalog of products to professional contractors) and the fact that eBay is "actively out there trying to acquire new brands for its B2B business," as two recent examples.
"I think we'll see Amazon making similar moves on the B2B side very soon," says King, "with more acquisitions focused on helping the e-tailer build out its B2B community." The silver lining for electrical distributors, he says, is that no one is really doing e-commerce well right now, and that opens the doors of opportunity for companies that invest in their online strategies and find ways to meet their customers' growing demands for seamless, fast, accurate online and mobile ordering.
"When it comes right down to it, electrical distributors still understand their customers and products better than the big guys do," says King. "That spells massive opportunity for the distributors that embrace product content and e-commerce technologies. The companies to do this first will have a significant opportunity to corner the market, certainly in their own regions and possibly even on a national level."
McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at email@example.com or visit her website at www.expertghostwriter.net.