On Friday, Walmart announced they agreed to purchase menswear eCommerce site Bonobos for $310 million in cash. After Jet.com, this is Walmart’s largest purchase of an eCommerce retailer.
Unfortunately for Walmart, they announced this deal around the same time Amazon announced their acquisition of Whole Foods Market. Not surprisingly, few major media outlets gave it any mention as all the talk was about Amazon upsetting the grocery business.
WHAT DOES BONOBOS BRING TO WALMART?
Walmart has gone on a buying spree for higher end and niche eCommerce clothing and specialty retailers. Presumably, the company sees a growth opportunity in this niche also known as fashion-forward apparel.
Recently, Walmart bought ModCloth, a Millennials are also known as Generation Y, Echo Boomers or Millenniums. They encompass the age group of 18-35 as of 2017. With over 71 million in the US population, they are the largest working group... “fashion-forward” women’s clothing eCommerce retailer in addition to Hayneedle, ShoeBuy, and Moosejaw.
The long game for Walmart appears to be to change its image for eCommerce from a budget retailer to one that also offers unique and exciting fashion items.
Amazon is also expanding into niche markets with its brands of fashion products ranging from basics to similar fashion-forward brands. There is no doubt that Walmart is trying to duplicate the success of Amazon in fashion.
Let’s face it, Walmart on the storefront level mostly carries standard fare of essential products; some people would consider boring. These acquisitions by Walmart are designed to provide an opening for Walmart in a fashion segment not represented in its stores.
As an intriguing bonus, Bonobos owns 37 Guideshops to help customers with their fashion purchase. These Guideshops are found in affluent sections of main metro areas.
Will Walmart keep these Guideshops or incorporate them into their existing stores? It is hard to imagine the typical Bonobos customer walking into a Walmart to obtain fashion guidance.
So, Walmart may be thinking about turning the Guideshops into fashion shops for all their niche apparel eCommerce sites. That would make a lot more sense.
WHY ARE NICHE ONLINE RETAILERS SELLING TO WALMART?
Customers may be wondering why their favorite niche online retailers are selling out to a company better known for budget fashions.
The answer may lie in that venture capital has dried up a bit for eCommerce. These niche online retailers grew steadily for years through investment rounds but have hit a growth plateau.
Now they face stagnant sales and increased competition from Amazon and regular brick and mortar mall-based specialty stores. Many of the retail mall fashion chains are adding significant eCommerce departments to stop the slide in retail sales.
How Walmart will navigate this clash of customer bases will be fascinating to watch.
If Walmart can successfully maintain the higher end fashion-forward customers, the buying spree of online retailers may produce additional pressure on mall fashion chains and other niche eCommerce retailers.
At the same time, the company gains market share in a segment in which it doesn’t have any. But it is difficult to imagine this will work under the Walmart or Walmart.com branding.