Why Wal-Mart’s Jet.com Is Launching Its Own Grocery Label

Reports suggest that Wal-Mart’s (NYSE:WMT) e-commerce site Jet.com will soon be launching its own line of groceries which will include several household products including laundry detergent, staples and coffee. This private label is expected to be of a superior quality and appears to be Wal-Mart’s attempt to create a line which is different from its mass market, cheap products. Jet.com’s grocery line will be called “Uniquely J” and will compete with Amazon, which is aggressively expanding in the grocery segment after its acquisition of Whole Foods. As Wal-Mart looks to attract younger shoppers, we believe it is trying to shed the image of a cheap, lower-quality store and provide an option to millennials to choose high quality products at reasonable prices. However, whether this new private label will appeal to this segment remains to be seen.

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Retaining Its Leading Market Share In The Grocery Segment

The grocery segment is a significant part of Wal-Mart’s business, and reports in May suggested that the company is gaining market share in the segment. Some analysts estimate that Wal-Mart commands a nearly 21% market share in the $800 billion U.S. grocery market.  However, with the acquisition of Whole Foods, Amazon has confirmed that it plans to be a serious player in this segment. The space has gotten intensely competitive for Wal-Mart, and with Amazon’s focus on technology to provide convenience to consumers, Wal-Mart will need to stay on its toes to maintain its market share. The latter is introducing several “convenience” factors to attract and retain customers, such as pick up towers to collect items ordered online, a patent for automated shopping carts, and improving its logistics network to ensure quicker delivery of groceries. While Wal-Mart has remained focused on technology to provide a better experience, it is now taking the next logical step – product improvement. Private labels are generally more profitable, but with products such as laundry detergent and other household goods for which customers have brand preferences, it could be difficult to gain initial traction. Jet.com is likely to offer a mix of products to address this challenge.

Wal-Mart is gradually accumulating enough ammunition to fight Amazon in the grocery battle. With a series of technology initiatives and a range of products, including the private label offerings, the company is well-positioned to defend its market share.

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