The retail giant has made a string of e-commerce acquisitions
SMITH BRAIN TRUST – Walmart has been on a shopping spree.
It’s been buying up successful online retailers and ecommerce-related businesses — nearly 20 of them — as it seeks to better position itself against the only other retailer in its weight class, Amazon.com. So far, it appears to be working.
“Walmart has been pursuing a very aggressive strategy,” says Jie Zhang, professor of marketing and the Harvey Sanders Fellow of Retail Management at the University of Maryland’s Robert H. Smith School of Business.
In its latest acquisition in November 2018, it bought up Art.com, an online specialty retailer of wall art and other home-decor products. Just the month earlier, it bought two separate popular online lingerie retailers, Bare Necessities and the plus-sized Eloqii.
“Walmart is a one-of-a-kind retailer,” Zhang says. “It comes from a very different background than Amazon.”
That’s largely because of its legacy as a brick-and-mortar retailer and its reputation for offering low prices. “It’s known to tailor to lower-income and budget-conscious households, primarily in rural and suburban areas.”
In ecommerce, she says, Walmart initially struggled to find its place. “There is a fundamental mismatch between the Walmart brand image and the more tech-savvy, educated, affluent, urban consumers that are the core customer base for ecommerce businesses.”
As it looks to appeal to that target audience, Walmart has scrapped its old playbook. And instead is buying the playbooks of successful, smaller rivals.
It bought Jet.com, a smart and fast-growing online retailer, for $3 billion in August of 2016, grabbing hold of its customer base of urban and millennial customers, and its broad group of retailer and brand partners.
A few months later, Walmart would buy Shoes.com for $70 million, creating a rival to Amazon’s Zappos. It later scooped up online outdoor apparel retailer Moosejaw for $51 million. It bought Modcloth, an online women’s clothes story with a vintage-funky vibe, at a price estimated to be between $50 million and $75 million. And then it struck a $310 million deal to buy Bonobos, a men’s clothier that had drawn a devoted millennial following for its slim, modern designs.
For devotees of Modcloth, Bonobos or Moosejaw, the acquisitions seemed to be creating odd bedfellows. For Walmart, well, that was the whole point.
The acquisitions are helping Walmart make inroads with higher-income, more-tech-savvy, young, urban consumers, Zhang says. In almost every case, she notes, Walmart has kept intact the brand identity of the companies that it has acquired. “Consumers might not even know that Bonobos or Jet.com is now owned by Walmart,” she says. And that allows Walmart to diversify beyond its low-cost, low-price strategy, and sell higher-margin products.
“And it’s a mutually beneficial acquisition because brands like Bonobos started out as a pure-play internet retailer, a fairly small niche brand, which has grown to be very successful online,” says Zhang. “But online is not enough anymore, so online-only brands are looking for ways to go offline, to go to the physical world to really expand their market.”
But Walmart isn’t just interested in buying up small online stores as it fends off the Amazon threat.
It also swept up Parcel, a technology based, same-day grocery service that delivers to customers in New York City. “It’s not an e-commerce company per se, but it is very much part of the e-commerce business endeavor,” says Zhang. “And it’s an effective way for Walmart to reach ecommerce customers, especially urban consumers and younger consumers.”
And it has reached beyond New York City and the United States, buying India’s Flipkart, kind of an Amazon-style everything store that sells mobile phones, clothes, shoes, electronics, books, home appliances and other stuff. (India is home to 443 million millennials.) It also bought online marketplace Cornershop, which offers on-demand delivery from supermarkets, specialty food retailers and pharmacies in Mexico and Chile.
If the competition between Amazon and Walmart is intense, it’s also well matched, with both boasting strong product assortment, technology, logistics and supply chain management systems, Zhang says. “They are very strong competitors. And the rivalry has intensified in the past few years, particularly since Amazon bought the Whole Foods grocery chain in late 2017.”
Zhang says competition between the two U.S. retail giants is only going to heighten.
For Walmart, she says, the acquisitions spree is likely not finished. It’s likely to continue to envelop more online-only retailers, from across a range of product offerings.
That’s the retail landscape now.
“Online retailers want to go offline, and offline retailers want to go online,” Zhang says. “Everybody wants to be able to interact with customers through multiple channels and touchpoints.”
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