Walmart Seeks Outside Investors for Jetblack
05 October 2019 - 4:31AM
Dow Jones News
By Sarah Nassauer
Walmart Inc. is talking to investors and companies about taking
over its Jetblack personal shopping service in a potential spinoff
that would have the unprofitable venture's CEO Jenny Fleiss exit,
according to people familiar with the matter.
Walmart has been working since at least this summer to spin off
Jetblack by raising money from others interested in the business,
including a logistics provider and a payments company, these people
said.
The retailer has engaged several potential partners including
Microsoft Corp. and United Parcel Service Inc., as well as
venture-capital firms, including New Enterprise Associates, some of
these people said.
Negotiations are ongoing and it is unclear if those firms will
ultimately decide to invest, the people said. The talks are
expected to continue for several more weeks and involve other
investors, one person said.
Jetblack was developed at Walmart's internal incubator and
spinning off those projects with external partners is one of the
goals of that initiative, said a person close to the company.
Walmart is expected to retain a stake in Jetblack, the people
said.
To date, Jetblack has been a costly project serving a small
customer base in New York City who pay for concierge-like shopping
by text and fast deliveries. Walmart has budgeted $60 million for
Jetblack this fiscal year, said another person familiar with the
business.
As of early this summer, Jetblack was losing around $15,000 per
member annually, according to documents viewed by The Wall Street
Journal. Jetblack has tried to allow more members to join from a
waiting list, but service quality often falls soon after, say
current and former employees. The service had about 600 active
members as of this summer, according to documents viewed by The
Journal.
Ms. Fleiss, who previously co-founded apparel rental company
Rent the Runway, will step down as CEO of Jetblack in conjunction
with the spinoff, one of the people said. Walmart didn't make Ms.
Fleiss available, and she didn't immediately respond to requests
for comment.
Nate Faust, a longtime lieutenant of Walmart U.S. e-commerce CEO
Marc Lore, has taken a leadership role at Jetblack and has been
working since at least this summer to spinoff the unit, some of the
people familiar with the situation said.
Bloomberg News earlier reported that Walmart was weighing the
future of Jetblack, had received inquiries from unnamed parties and
that Mr. Faust could take a leadership position at the
business.
Walmart executives have touted Jetblack as a potential avenue
for growth and research since the service launched last year,
offering members, some paying $600 a year, the ability to order
anything except fresh food via text message for fast delivery.
Walmart didn't see Jetblack as a profit center, but as a way to
eventually power an automated personal-shopping service, preparing
Walmart for a time when the search bar disappears and more shopping
is done through voice-activated devices, executives said earlier
this year.
The largely manual nature of delivery and product ordering by
text message at Jetblack is costly, but the largest expense per
member has been selling products at a loss, according to documents
reviewed by the Journal. That's because Jetblack promises members
the lowest available price, but often has to buy the product at a
higher price from a New York City store to meet its fast delivery
promise, said a person familiar with the system.
Jetblack has worked to lower that expense by partnering directly
with other retailers and buying more from Walmart directly, said
this person.
"It's the tech of the future, right? It's not what everyone is
doing today," Ms. Fleiss told the Journal earlier this year,
describing the experimental nature of Jetblack's mission inside
Walmart. She said it could be five to seven years before the system
is mostly automated and less reliant on humans. "This is a long
journey," she said. "We were aware of that going in."
Walmart bought e-commerce startup Jet.com in 2016 for $3.3
billion, placing its founder Mr. Lore at the head of its U.S.
e-commerce operations. Mr. Lore spearheaded the Jetblack launch
inside Walmart and hired Ms. Fleiss in 2017 to run it.
Write to Sarah Nassauer at sarah.nassauer@wsj.com
(END) Dow Jones Newswires
October 04, 2019 14:16 ET (18:16 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
Walmart (NYSE:WMT)
Historical Stock Chart
From Mar 2024 to Apr 2024
Walmart (NYSE:WMT)
Historical Stock Chart
From Apr 2023 to Apr 2024