Walmart is buying menswear online seller Bonobos, intensifying retail competition with Amazon on the same day its archrival announced its acquisition of Whole Foods.
The nation's largest retailer said Friday that it would pay $310 million for Bonobos, which also has 35 brick-and-mortar shops, as it continues to scoop up niche retail sites.
The move was immediately overshadowed by Amazon's seismic acquisition of Whole Foods, sending Walmart shares down 5.2% in early trading to $74.84.
But it reflects Walmart's bid to grow its customer base into niche areas where its stores are not as strong. The company said it would offer Bonobos brands through its recently-acquired Jet.com division and "possibly other Walmart brands in a variety of countries over time."
"Bonobos is a brand with loyal customers, premium price points, and expertise in a differentiated niche,'' said Stephen Beck, managing partner of management consultancy cg42. "It attracts exactly the kind of buyer who does not frequent Walmart today.''
In recent months, Walmart has begun to offer free two-day shipping for a minimum purchase of $35, and sought to leverage its network of locations by offering a discount on thousands of online-only products if customers are willing to pick them up at a local store.
At the same time, it has been enhancing its online offering by buying other sites. In August, it acquired the online marketplace, Jet, for $3 billion and made that company's top executive, Marc Lore, the CEO of e-commerce for Walmart in the U.S.
The latest addition to the Walmart digital team is Bonobos CEO and founder Andy Dunn, who will oversee Walmart's digital brands.
“Adding innovators like Andy will continue to help us shape the future of Walmart, and the future of retail," Lore said in a statement. "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.”
In December, Jet bought online footwear seller ShoeBuy for roughly $70 million. Two months later, Walmart scooped up Moosejaw, an online outdoor gear and clothing retailer. And in March, Walmart announced that it had purchased ModCloth, an online seller of women’s clothing and accessories that targets customers looking for full sizes.
"Apparel and accessories are now the number one category for digital commerce,'' Ravi Jariwala, a Walmart spokesman, said in an interview prior to the Bonobos announcement. "So with so many customers shopping there. as you’re looking to grow your e-commerce presence, it’s important to be where your customers are . . . . And at the same time these acquisitions do allow us to reach essentially new customers that may have not shopped within our ecosystem in the past.''
Along with potentially ushering new customers into the Walmart fold, the new sites provide deep wells of expertise about products ranging from shoes to apparel, and Walmart has kept the sites' management teams and staffs intact.
The Boston-based ShoeBuy, for instance, kept its CEO Mike Sorabella and staff of roughly 200. ModCloth CEO Matthew Kaness is still in place. And Moosejaw CEO Eoin Comerford and his team are still at the helm of their outdoor-focused site.
"Think about the expertise these teams inherently bring,'' Jariwala said. "Moosejaw has been in business almost 25 years and focused that entire time on the outdoor space so they have deep industry knowledge, deep industry relationships . . . The type of content, visuals, product descriptions you need to sell something like specialty apparel is different than the content you need to sell a video player or box of diapers.''
That knowledge is also being drawn upon to benefit the entire e-commerce network. Moosejaw's CEO oversees the outdoor category for both Walmart and Jet.com, Jariwala says, while Sorabella helms the footwear category for the various sites.
"That will enhance the customer experience for our existing customers,'' he said, while Walmart "can help the business of the companies that are new to our e-commerce family through synergies, through efficiencies in cost of goods and shipping rates.''
Still, Beck said that Walmart's latest acquisition may hobble Bonobos, and not do as much to bolster Walmart's customer base as it may hope.
"Unfortunately, while this may make sense on a spreadsheet or in a conference room, in the real world it represents the end of the Bonobos brand,'' he said, adding that some Bonobos customers were not pleased with news of the pending deal. "Therefore, if Walmart’s play is to acquire Bonobos to broaden its appeal to customers who do not see Walmart as relevant, the negative perceptions associated with the Walmart brand and its inconsistencies with the Bonobos brand mean the strategy is doomed to fail.”