When Wal-Mart Stores, Inc. (NYSE:WMT) spent $3.3 billion to take over e-commerce start-up Jet.com, much of the financial media raised its eyebrows.

The consensus seemed to be that Wal-Mart dramatically overpaid for an unproven, profitless, e-commerce business as it was the highest price ever paid for a U.S. e-commerce business, while others derided the move as a "acqui-hire," arguing that Wal-Mart shelled out billions primarily to gain the services of Jet.com Founder Marc Lore. Lore, who had sold his first e-commerce business, Diapers.com-parent Quidsi to Amazon.com (NASDAQ:AMZN) in 2010, is considered by many to be the sharpest mind in e-commerce behind Amazon Founder and CEO Jeff Bezos. Lore took over Wal-Mart's U.S. e-commerce operations and continues to run Jet.

Despite those claims, Wal-Mart's performance and its advances in e-commerce show that the acquisition, even with its lofty price tag, was the right decision.

A warehouse worker gets a Jet.com box ready for shipping.

Image source: Wal-Mart.

Since the deal, Wal-Mart's U.S. e-commerce sales have soared, climbing 63% in its most recent quarter, and the stock has gained 10% over the last year. While that is worse than the S&P 500, it's significantly better than the broader retail industry, as the chart below shows.

WMT Chart

WMT data by YCharts.

Beyond the headline numbers, both Wal-Mart and Jet have made a number of improvements to their businesses that put them in a position to grow over the long term and compete with Amazon.

"Moving at the speed of a start-up"

Those were Lore's words back in January when he announced that Wal-Mart would offer free two-day delivery on orders over $35. The move puts Wal-Mart nearly on par with Amazon and gives shoppers who don't want to pay the $99 annual fee for Amazon Prime another option for free, fast delivery. 

Wal-Mart's online inventory has also grown from just 10 million items last year to at least 67 million today, and the retailer is leveraging its brick-and-mortar real estate with the expansion of grocery pickup service to more than 1,000 stores and the launch of pickup discounts, which gives customers discounts on select items if they pick them up in the store. The company is also installing pickup towers in some stores to make in-store pickups easier.

Elsewhere, Wal-Mart has made several acquisitions of fashion and apparel brands including Bonobos, ModCloth, ShoeBuy, and Moosejaw, which will be sold on the Jet.com site. Jet, which continues to operates as a stand-alone site, gives Wal-Mart the opportunity to sell upscale brands and reach higher-income customers who wouldn't normally consider shopping at Wal-Mart.

Jet is continuing to expand its own offerings with private-label groceries, a move welcomed by suppliers as it increases competition with Amazon. 

Perhaps most importantly, the Jet acquisition gives Wal-Mart a second front against Amazon with an upscale brand that will draw a customer demographic that avoids Wal-Mart and flocks to Amazon. Upping the stakes further, Lore said that Jet.com has begun offering free same-day delivery in the New York area, and that Wal-Mart would soon do the same. If Wal-Mart can expand that offer to more cities, it could upend the traditional hierarchy in e-commerce. 

Did Wal-Mart overpay?

Wal-Mart's acquisition of Jet.com was not cheap and was considerably ahead of the next most-expensive e-commerce acquisition, which was QVC's $2.4 billion buyout of Zulily a few months before. At the time, Jet was estimated to be on track for $500 million in revenue over the next year, meaning the revenue multiple was steep at greater than 6. That's more than double Amazon's revenue multiple.

Still, Wal-Mart makes more than $3.3 billion in profit in the average quarter, so while the price was expensive, it was a necessary deal for the retail giant. The company is much stronger with Jet and Lore than it is without it, and had it not spent that $3.3 billion on the acquisition, that money likely would have gone to share buybacks, on which the company has spent $8 billion over the last year. Though investors cheer buybacks, they do nothing for the long-term health of the underlying business.

With free, same-day delivery on the way, a slew of hip brands now within its umbrella, and a much larger online inventory, Wal-Mart's competitive position is much stronger than it was a year ago. As Lore continues to innovate and leverage the company's advantages, the acquisition will continue to pay dividends beyond its price tag.