The Logic Behind Walmart’s Recent Acquisitions

by Sean Ogino |

The Logic Behind Walmart’s Recent Acquisitions

Walmart's Recent Acquisitions

Just when analysts were trying to dissect  Walmart’s recent acquisitions of Shoebuy.com ($70 million) and Moosejaw ($51 million), last month they saw one more acquisition by the retail giant, with another now on the horizon.

Walmart’s ModCloth Buy

Walmart purchased ModCloth for a price between $50 million and $75 million. ModCloth founder Susan Gregg Koger had her reasons to go for this move. It may give her products the more reach and visibility- something which is expected when you get aligned with big names like Walmart. But the truth is the brand, which started out in a college dorm room, and over the past 15 years grew to be one of the biggest independent online fashion retailers in the world, was going through a crisis. It has also seen rounds of  recent layoffs. But the move that Gregg Koger considered a necessary evil has clearly not gone down well with her brand loyalists and brand enthusiasts.

Anyone who has followed ModCloth keenly will understand that it’s a brand with indie cred. Known for its inclusive sizes, vintage-style clothing, supportive attitude towards independent designers, and Photoshop-free advertising, ModCloth has always endorsed inclusive, progressive and pro-feminist business practices. Susan didn’t even hesitate in slamming Donald Trump on the issues of women. Naturally, fans have been finding it difficult to see why such a brand with fearless views and spirited founder would park itself in the lot of Walmart.

ModCloth
ModCloth swim campaign

The largest retailer in the country has been an object of scorn for many due to its low pay and anti-union tactics. After a lot of criticism, Walmart raised its corporate minimum wage from $9 to $10 in 2015. These well-documented shady ethics of Walmart have upset many women, as ModCloth’s progressive messaging and thinking is at odds with Walmart’s business practices. This sentiment is apparent in various comment sections of articles discussing the latest of Walmart’s recent acquisitions:

“Amplify your message by joining a company that keeps women in poverty while lining [Walmart’s] pockets with more and more money? No thanks. You’re deleted. Know your audience.

“Walmart doesn’t respect their workers or respect women. You’ve sold out to one of the worst companies in the world. They don’t pay a living wage, a huge percentage of their workers are on food stamps, and they hold holiday food drives so their employees can feed their families at Thanksgiving and Christmas. They’ve been sued for gender discrimination. They refuse to stop using sweatshops in other countries. This is a major disappointment. I’m done shopping with you.”

“Walmart has horrid business practices, doesn’t believe in the power of a union, and refuses to give their employees anywhere near a living wage. I’m sorry, even if they’re your parent company – I cannot in good standing support your business anymore.”

And Now, Bonobos

Before the dust of this controversial acquisition has died down, it’s been reported that Walmart is in the last leg of talks to acquire Bonobos, a 10-year-old men’s fashion retailer based in New York City. According to the industry experts, this deal will be costlier than Walmart’s other acquisitions. Bonobos has between $100 million and $150 million in annual revenue and is in better financial shape than ModCloth. It’s important to know that it valued $300 million in 2014. For Bonobos, the move makes a clear sense. It has already raised more than $125 million from investors like Forerunner Ventures, Lightspeed and Mousse Partners in part to fuel this expansion. However, it is finding it difficult to raise more money and come up with investment terms that will satisfy all the involved parties.

Bonobos is another brand that’s known for its innovation and youthful spirit. It’s popular with millennials and has gained attention in the industry for its “fit shops”–brick and mortar locations that streamline inventory and logistics by only being a space for customers to try on clothing. Instead of sending them home with their purchases, Bonobos ships orders to these shoppers.

Bonobos is extremely popular among stylish, affluent, young men.
Bonobos is extremely popular among stylish, affluent, young men.

The Logic Behind Walmart’s Recent Acquisitions

The most prominent understanding that all of Walmart’s recent acquisitions is that the retailer is trying hard to reach new markets and channels. In his seven-month tenure as Walmart’s U.S. e-commerce CEO, Marc Lore has spearheaded three other acquisitions. It began with the acquisition of Jet.com.

It’s interesting to note that all these new acquisitions have been happening under Jet.com, which is a Walmart subsidiary and was founded by Lore. Walmart bought Jet.com and poached Lore in August. If one looks at the acquisitions of Shoebuy.com, Moosejaw, ModCloth, and Bonobos, it’s quite clear that Walmart is targeting the special product categories that appeal to millennials–a demographic which was never a core buyer of Walmart. By roping in fashionable brands that stand out to this audience, it is trying to stay alive in a deeply competitive retail landscape by safeguarding and enhancing its customer base. Indeed, last summer Walmart announced their intention of expanding their millennial fashion offerings.

The another reason that has shaped Walmart’s recent acquisitions is that Walmart never really had singularly fixated attention on e-commerce. That has changed in just a year. Walmart has tried to acquire customers by opening physical stores in new markets. But 2016 saw closures of most of the Walmart’s convenience-sized stores (“Walmart Express”) in urban areas. It has actually forced Walmart to move into e-commerce zone…and gobbling up these online retailers will help Walmart in catching up with Amazon, an initiator of e-commerce. In that sense, buying Jet.com for more than $3 billion was a move in that direction. Plus, Walmart also made two-day shipping free on all online orders over $35, without any membership fees to compete with Amazon’s popular Prime shipping program.

Clearly, when looking Walmart’s recent acquisitions, these are strategic buys with an aim of building e-commerce reach, capabilities, and assortment into critical categories. As explained earlier, it will open up a whole new path for Walmart through which it can have access to the shopping world of millennials. With $1.3 trillion annual buying power, they have already become indispensable customers for any business. And all these factors will form a pivot if Walmart has to position itself as a serious competitor of Amazon!

Watch Out, Uber! Here’s Walmart’s Self-Driving Technology Plan

walmart's self-driving

Alright, Walmart isn’t getting into the self-driving car game, but they’re planning for some in-store technology that might be even more interesting.

The retail behemoth recently patented a concept for robotic shopping carts, which could end up causing a huge shift in both customer and employee relations in stores. Here’s everything you need to know about Walmart’s self-driving shopping carts.

These “motorized transport units” will  attach to shopping carts, enabling them to drive on their own around stores. They’ll be able to move containers, check inventory, dock themselves, retrieve trash, and scan, obtain, and deliver products. Perhaps most importantly, they’ll be programmed for customer interactions, too.

This illustration shows that Walmart's self-driving shopping carts will have motorized transport units on the bottom of normal carts.
This illustration shows that Walmart’s self-driving shopping carts will have motorized transport units on the bottom of normal carts.

Walmart’s self-driving shopping cart patent mentions that these robots will address some of its major in-store issues, including insufficient staffing during busy hours, messy aisles, theft, and under-trained employees.

Of course, this news doesn’t exactly bode well for retail store staff, as these robots will be able to take over many duties from them. The reduction in personnel that Walmart’s self-driving cart tech would create could exacerbate the shoplifting problems already associated with automated retail technology.

Furthermore, over 200 violent crimes have been committed at Walmart locations in the US in 2016 so far. Bloomberg argues that this spike in crime is related to understaffing. Reductions in  in-store personnel are, of course, a trend among many retailers. Forrester reports that robots will eliminate 6% of all US jobs by 2021.

Customers, especially younger ones, will probably appreciate Walmart’s self-driving carts, though. An InReality survey published in March of this year discovered that 69% of customers would be more likely to make in-store purchases if they had access to kiosks or interactive displays. Furthermore, 78% would be more likely to visit a store if it offered self-service for finding products or brands, and 75% say that a self-service solution for comparing products or prices would increase their purchase likelihood.

Walmart spokesperson Lorenzo Lopez told Business Insider that “Walmart was able to revolutionize retail using technology to better serve customers, and as the retail landscape continues to evolve, we want to be able to serve customers when and how they want to shop. That means testing new and innovative ways to serve the customer, which we’ve done through different initiatives like our grocery pickup service.”

The retail giant already has a mobile payment app called Walmart Payread our thoughts on improving it here–and recently signed deals with both Uber and Lyft to have drivers start delivering grocery orders to customers. It looks like Walmart’s self-driving carts will be another building block in the 54-year-old company’s journey of modernization.

That’s what’s new with Walmart, and here’s what’s new with us! In our Ratings and Reviews FAQ sheet, Annex Cloud’s Customer Success Team answers your most pressing product review questions. We also just published a case study with Vivobarefoot–our Social Login and Sharing and Referrals solutions achieved a 10:1 ROI, 38% increase in orders, and 20% email list growth!

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