Walmart winds down four years after $3.3 billion acquisition of e-commerce company

Key Points
  • Walmart acquired for $3.3 billion in 2016 to help it fend off  Amazon's rapid rise.
  • The company said Tuesday that it will discontinue the website.
  • Walmart CEO Doug McMillon credited the acquisition for "jump-starting the progress we have made the last few years" with e-commerce.
An employee double checks the contents of a customer order before sealing the package for shipment at the fulfillment center in Kansas City, Kansas.
Daniel Acker | Bloomberg | Getty Images

Four years ago, Walmart made a pricey bet on its e-commerce future. It paid $3.3 billion to buy, an e-commerce startup that it hoped would attract younger, affluent and city-dwelling customers and help it fend off  Amazon's rapid rise.

On Tuesday, Walmart announced it will discontinue and phase out the brand.

Walmart CEO Doug McMillon said the company gained more than a name. On a call with analysts, he credited the acquisition for "jump-starting the progress we have made the last few years." He pointed to Walmart's curbside pickup, delivery to the home and expansion of categories beyond groceries, such as apparel and home decor.

"While the brand name may still be used in the future, our resources, people and financials have been dominated by the Walmart brand because it has so much traction," he said. "We're seeing the Walmart brand resonate regardless of income, geography or age.'s founder, Marc Lore, leads Walmart's e-commerce business in the U.S.

McMillon said Walmart doesn't "anticipate a significant accounting charge due to this decision." He said most employees had been moved to roles tied to the Walmart brand.

In the years since Walmart bought, it's bought other digital natives, such as menswear company Bonobos, and birthed others like mattress brand, Allswell. It's grown its curbside pickup and home delivery business. And it's launched new online offerings, including Express Delivery, a new store-to-door service that delivers to customers' homes in less than two hours.

Those investments have paid off as e-commerce growth. Last year, e-commerce sales grew by 37%. During the coronavirus pandemic, they shot up by 74% in the first quarter and attracted customers who tried its online services for the first time.

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But Walmart's e-commerce business has yet to turn a profit. It's still trying to broaden its online sales beyond grocery. And Amazon has continued to be a tough rival.

Some initiatives have been costly flops. It bought, but then sold women's apparel company, ModCloth. It shut down Jetblack, a high-end personal shopping service that catered to affluent families in New York City, in February. Through the members-only service, customers could order items by text, whether a bottle of champagne or box of diapers, and have them delivered on-demand. It was launched in 2018 and initially led by Rent the Runway co-founder Jenny Fleiss.

Lore said on Tuesday's call that Walmart continues to expand its assortment of higher margin items, such as home decor and fashion, and add new brands, such as Ray-Ban, Keds and Champion. He said it will build upon its e-commerce gains during the pandemic.

Moody's retail analyst Charlie O'Shea said on CNBC's "Squawk Box" that the pandemic has pushed more customers to try new retailers, get comfortable picking out groceries online and discover the convenience of curbside pickup.

"You'll see online growing much more rapidly than we thought it would prior to this," he said. "You're going to see a lot of the brick and mortar retailers demonstrate to consumers that 'Hey, it's not just an Amazon world here online. We're here as well.'"

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