WASHINGTON (Reuters) - Walmart Inc on Wednesday announced a sweeping overhaul at Jet.com, an online start-up it acquired in 2016 for $3.3 billion, after it failed to live up to the world’s largest retailer’s e-commerce ambitions.

FILE PHOTO: Walmart's logo is seen outside one of the stores in Chicago, Illinois, U.S., November 20, 2018. REUTERS/Kamil Krzaczynski

Walmart said it will integrate Jet.com’s retail, technology, marketing, analytics and product teams with its own online business. The current president of Jet.com, Simon Belsham, will leave in early August.

Walmart’s move reduces the scope and importance of Jet.com in its overall U.S. e-commerce business, which competes with Amazon.com Inc, according to interviews with six vendors, two consultants and three Walmart employees.

Jet.com, which was expected to boost Walmart’s reach particularly with city dwellers and millennial shoppers, failed to become a driver for online grocery sales and growing market share in urban areas, the sources added.

Walmart has put more emphasis on shopper perks such as same-day delivery and curbside pickup of groceries ordered online, focusing on food and grocery sales using those delivery methods. Jet, as a platform to sell similar items, has fallen by the wayside, the sources added.

The Jet overhaul is the latest sign that Walmart is attempting to fix the ways it reaches shoppers using different websites and delivery methods. Earlier this year, it ended a delivery partnership with Google-backed Deliv and last year Reuters reported its struggles to use its own employees to deliver products.

Multiple large and medium-sized consumer goods companies that do business with both Walmart and Jet have told Reuters they began noticing Walmart executives buying less of their merchandise to sell through Jet.

The reductions in Walmart’s order sizes for its Jet unit, they said, started in March, when many vendors began discussing business priorities with Walmart for the 2019 fiscal year.

In 2016, Jet forecast revenue of $1 billion and according to recent estimates from consulting firm Kantar, which was shared with some vendors, the company’s sales shrunk to $689 million in 2019.

The data from Kantar also shows the number of U.S. households that shopped on Jet.com in January 2019 was 2%, down from 3% during the same period three years ago, forcing Walmart to recalibrate using Jet as a platform to drive online grocery sales.

Several vendors, who told Reuters they were keen to introduce new packaging and pricing on Walmart.com and Walmart-owned websites like Jet this year, said the retailer told them to look for ways to push more sales on Walmart.com going forward and not spend resources on a new strategy for sales of their merchandise on Jet.

Walmart merchants are also informing grocery, apparel and electronics suppliers that want to introduce new products online that Jet is not a priority, according to vendor sources.

Separately, current and former Jet employees told Reuters that Hoboken, New Jersey-based Jet, is struggling to keep up its sales momentum and hit revenue goals. Two retail consultants, who advise Walmart on e-commerce and online grocery, have confirmed to Reuters that Jet is failing to keep pace with Walmart’s internal sales goals.

They said Walmart has de-prioritized the business and is focusing more on growing sales through its namesake website and offering a broader assortment of fashion and accessories through the multiple smaller brands like Moosejaw, Modcloth, Bonobos, Eloquii, Hayneedle and others it has acquired in the past few years to attract millennials.

The retailer has previously said it expects losses from its online business, including Jet.com, to increase this year, without giving additional details. In the most recent quarter, Walmart’s online sales grew 37% and Marc Lore, founder of Jet.com, who Walmart hired in 2016 to run its U.S. e-commerce operations, is still leading the business.

In 2018, the first cracks in Jet’s business started to appear when Walmart’s CEO said the retailer’s marketing efforts will always be centered on Walmart.com as it is cheaper to acquire a new customer nationally with such a strategy and it is investing fewer ad dollars in Jet. He said the retailer will target Jet’s investments in urban markets, where the business is “well-positioned to grow.”

A study from a retail analytics firm the same year found shopper traffic on Jet.com had declined in March, a study Walmart said then was inaccurate and not reflective of a trend.

Going forward, Kieran Shanahan, who oversees Walmart’s food, consumables, health and wellness categories, will be responsible for Jet.com’s strategy and management, in addition to his current role.