Wal-Mart Wal-Mex

In an effort to compete with Amazon.com Inc., Wal-Mart Stores Inc. is acquiring online retailer Jet for about $3 billion in cash to be paid over time and $300 million in Wal-Mart stock, also to be paid over time.

The acquisition will build upon Wal-Mart’s existing e-commerce platform, bringing fresh ideas and an attractive brand. Jet has grown quickly as an online retailer, reaching $1 billion in gross merchandise value in the first year. Jet adds 40,000 new shoppers each month and averages 25,000 orders a day. The move is seen as an attempt to tackle the online juggernaut that is Amazon.

“We’re looking for ways to lower prices, broaden our assortment and offer the simplest, easiest shopping experience because that’s what our customers want,” said Doug McMillon, president and chief executive officer at Wal-Mart. “We believe the acquisition of Jet accelerates our progress across these priorities. Wal-Mart.com will grow faster, the seamless shopping experience we’re pursuing will happen quicker, and we’ll enable the Jet brand to be even more successful in a shorter period of time.”

The two companies will maintain distinct brands with Wal-Mart.com remaining focused on the low price strategy, while Jet will present a curated assortment. The two companies will share technology solutions, though.

“We started Jet with the vision of creating a new shopping experience,” said Marc Lore, the company’s ceo and cofounder. “Today, I couldn’t be more excited that we will be joining with Wal-Mart to help fuel the realization of that vision. The combination of Wal-Mart’s retail expertise, purchasing scale, sourcing capabilities, distribution footprint and digital assets — together with the team, technology and business we have built here at Jet — will allow us to deliver more value to customers.”

Lore previously cofounded Quidsi, the parent company of sites like Diapers.com, Soap.com and Wag.com. In its early days, Jet generated some controversy when it was found that it was linking to products on other retailers’ sites without notifying those companies. Jet has since stopped the practice.

 “While it will likely be awhile before the return calculus can be assessed, Wal-Mart’s financial strength and flexibility, in tandem with its excellent liquidity, give the company plenty of time from a credit perspective to integrate and leverage the legacy Jet business,” stated Moody’s Credit Corporation lead retail analyst Charlie O’Shea. “From a competitive perspective, we believe the impact on Amazon will be fairly benign, however this acquisition, in tandem with its joint-venture in China with JD.com, demonstrates that Wal-Mart is attacking online retail with significant zeal. As we believe ‘catching’ Amazon online is an unrealistic goal for any brick-and-mortar retailer, Wal-Mart now has a definite leg-up on its competitors in the very important race to be number 2 online. Being the site next clicked following Amazon amongst online shoppers is very important for brick-and-mortar retailers as they morph online, and Wal-Mart is aggressively positioning itself to be that site.”

The deal, assuming it receives regulatory approval, should close sometime this year.

Wal-Mart stock is up modestly in pre-market trading by 38 cents to $74.14. After taking a tumble at the end of 2015, the stock has been steadily climbing and has gained 20 percent year-to-date. Wal-Mart will report its second-quarter earnings on August 18.

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