Walmart today doubled down on its efforts to continue building out a online retail fashion business in its bid to outpace Amazon in the wider world of commerce and specifically e-commerce. Today it announced that it would acquire menswear site Bonobos for $310 million in cash.
The deal is part of a bigger strategy at Walmart, the world’s largest physical retailer, to grow its e-commerce business, partly to offset competition from Amazon. But — perhaps in a very intentional bit of timing — almost at the same time that Walmart announced its Bonobos acquisition, Amazon announced it would be buying Whole Foods for $13.7 billion, giving it a very, very significant leg up in its budding food retail business. That underscores even more how important it is for Walmart to continue expanding into new areas.
In fashion specifically both have been making several acquisitions and launching labels to expand their customer bases.
Walmart’s Bonobos deal follows and complements several other acquisitions that the retail giant has made in the area of online fashion. They include Modcloth in March 2017, outdoor retailer Moosejaw for $51 million in February 2017, Hayneedle in March 2016, and Zappos-style shoe retailer ShoeBuy for $70 million from IAC. Many of these have been fuelled by its acquisition of Jet.com, which it purchased in 2016 for $3 billion.
Rumors had been circulating of the deal between Bonobos and Walmart for a while, and as predicted, this in part is a way to bring Andy Dunn, who had founded and was leading Bonobos, into a wider leadership role at Walmart running all of its fashion and related lifestyle operations. He will be reporting to Marc Lore, president and CEO of Walmart U.S. eCommerce (who joined with the Jet.com acquisition).
“We began Bonobos ten years ago to give men a completely different product and shopping experience: better fitting, higher quality clothing, in new and imaginative ways. That will always remain our mission,” Dunn, who will oversee Walmart’s collection of “digitally-native vertical brands,” said in a statement. “We are excited about applying all that we have learned to help shepherd in the next era of retail.”
Walmart, the world’s biggest physical retailer, has been looking for more ways to grow its e-commerce business in competition with Amazon, and it sees fashion and targeting younger users as a key part of that strategy.
Walmart said that in the last quarter its e-commerce sales were up 63 percent, with “the majority coming from organic growth in Walmart.com” — meaning it has yet to prove that its big acquisition play to buy into “digitally native” brands has or will pay off.
“We’re seeing momentum in the business as we expand our value proposition with customers and it’s incredible to see how fast we’re moving,” said Lore in a statement. “Adding innovators like Andy will continue to help us shape the future of Walmart, and the future of retail. I’m thrilled to welcome Andy and the entire Bonobos team. They’ve created an amazing product and customer experience, and that will not change. In fact, Andy will be a great influence on the company, especially in leading our collection of exclusive brands offered online.”
Bonobos had raised just under $128 million, with the last round in 2014, and had always said it had its sights set on an IPO. The fact that this deal happened, and that Bonobos hadn’t raised any more money in the last three years, speaks to how those plans may not have been materialising as it had hoped.
One of the big issues is that to win in e-commerce, you need economies of scale, and in that regard it may have proven to be too much of a challenge for the company. What’s interesting is that one of Bonobos’ specialties has been building a connection between online and offline shopping, which is something that Walmart may be interested in tapping.
There is another interesting parallel between Walmart and Amazon in its acquisition strategies: both are very much taking a page from Apple’s playbook of aiming at premium customers. Whole Foods is sometimes known as “Whole Paycheck” for being so expensive to shop in. Bonobos and other fashion purchases that Walmart has made, meanwhile, are not known for cut-price goods. In both cases, Amazon and Walmart have built reputations on being super competitive (read: cheap) on pricing, but they both appear to be turning a new leaf with their new waves of business.