ModCloth FitShop – Photo: ModCloth
Walmart sells ModCloth, seeks Jetblack spinoff and cuts Bonobos jobs
Walmart’s e-commerce business, as previously reported, is in a state of flux. That was made even more evident with news in recent days that the retailer has sold its ModCloth business, is looking to spin off its Jetblack personal shopping service and has laid off workers at Bonobos.
In the case of ModCloth, it appears as though the e-tailer, known for selling vintage-inspired clothing for women of all shapes and sizes, has never really been a fit for Walmart and has struggled in the two years since it was acquired. Now, ModCloth becomes the property of the investment firm, Go Global Retail. The new owner has pledged to let ModCloth continue operating independently.
As the ModCloth sale was being announced, The Wall Street Journal reported Walmart looking to sell its Jetblack personal shopping service operating in New York City and led by Rent the Runway co-founder Jenny Fleiss. The Walmart division has been losing around $15,000 annually for each member of the subscription service. The Journal reports that Walmart has been looking for partners, including Microsoft and UPS, in a spinoff of Jetblack.
Recode reports that Bonobos, which Walmart acquired two years ago for $300 million, laid off “dozens” of its employees yesterday as part of its parent company’s efforts to rein in costs of its digital operations. In July, Walmart announced it was integrating its physical and digital finance and supply chain teams.
- Walmart sells ModCloth just two years after buying it – The Verge
- Walmart Seeks Outside Investors for Jetblack – The Wall Street Journal
- Walmart paid $300 million for Bonobos. Two years later, the men’s fashion brand is laying off staff. – Recode
- Walmart shakes things up, further integrating online and physical store teams – RetailWire
- Will Walmart have more success creating consumer direct brands than acquiring them? – RetailWire
- Is Walmart at an online crossroads? – RetailWire
- What will Walmart do with its newest acquisition, ModCloth? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: What is your take on the current state of Walmart’s digital operations? Where do you see it a year from now?
Poll
BrainTrust
Walmart’s struggles with these DNVBs are a cautionary tale for all acquisitions: To Thine Own Brand Be True. From a brand marketing perspective, these acquisitions never made sense to the Walmart value proposition (or to the Walmart customer), and I am honestly surprised it took this long for the sell-off to begin.
First of all, props to Walmart for pushing the digital envelope in their exploration of the e-world. As usual, they were not afraid to try and fail. Now e-commerce at Walmart is settling down into the role it was destined to play — an online adjunct to the stores. I suspect many retailers will settle in the same place. A security professional once told me that “locks and gates don’t stop thieves — they are just to help honest people stay honest.” For most retailers, e-commerce will not be to challenge Amazon, but merely to keep them away from the back door.
Walmart has been aggressively trying new strategies to expand its portfolio and drive incremental revenue. Some have been successful and these examples are ones that weren’t. Maybe Walmart was a little too aggressive with its acquisition frenzy and now it is time to focus on what is going to drive the most revenue and profit growth for the future.
Walmart continues to experiment with new technologies and processes and I am confident that they will be the top competitor for a long time. Never underestimate Walmart or Amazon.
All of these brands were acquired at a time when Walmart was initially trying to accelerate its e-commerce business. Having sucked some expertise from them, I think Walmart is now much more confident about its core Walmart.com asset and wants to devote most of the time to developing this. That makes sense and any sale will help raise capital and potentially reduce losses for the online division.
Incidentally, I don’t think the acquisitions were a mistake. They were part of the growth program as Walmart tried to experiment and learn.
It was a commendable strategy for Walmart to acquire, learn and drive new innovative strategies based on what they learned from these digital-native companies. Walmart has had to redefine and refine their online-to-store operational model, and while on the surface these acquisitions didn’t make sense, it was the human capital talent that probably will be the lasting legacy from this era.
Walmart’s value proposition will remain its stores, where they have a distinct advantage to drive cross channel sales via BOPIS and leverage their stores as fulfillment centers. The unfortunate downside of all of these moves are the potential impacts to ModCloth, Bonobos and other brands, which face a somewhat uncertain future.
I agree it was an expensive and important learning opportunity. They acquired talent that was less traditional and I am sure it will have a lasting impact on the org as a whole.
Walmart is refining its online niche. Some of these acquisitions were never right for the quintessential Walmart customer. Fortunately for Walmart, it had the deep pockets to experiment and the long-term results won’t be heavily impacted. I still question why they made those investments in the first place.
I see Walmart’s acquisition of these brands as a way to acquire digital expertise and knowledge, which I think they have done. They’ve also learned like so many other that as a digital-only business, it’s really hard to make money. I’m sure they believed that these brands could be accretive to the Walmart brand but after two-plus years and little to no profit, it is smart to take these learnings and exit the businesses. Going forward, I see Walmart investing in digital initiatives closer to their core value prop.
Good point, David. Walmart is one of those fortunate retailers with room to experiment. I’d love to have been the fly on the wall that heard the initial strategy behind acquiring three brands so far outside their core value prop.
100%, acquisitions were important but I never agreed with the ModCloth or Bonobos acquisitions — too far out of their lane to project a successful outcome for the brands.
Walmart can look back on these acquisitions as superior learning experiences. Amazon has long been held up as the poster child for experimental investment, and Walmart has taken a page from that playbook. That these were not really a solid fit is beside the point – they provided a new perspective, and offered insights the company wouldn’t have otherwise gained. Kudos to Walmart for taking the leap, and for knowing when to let go.
The acquisition of Jet.com leveraged Walmart into the digital game. Acquisitions of Bonobos and ModCloth, niche players in the marketplace, continued the PR buzz positioning Walmart as a competitor to Amazon in the “pay to play” arena. A quick look at Walmart.com today shows a much different, more fashion-relevant product assortment than even six months ago. Walmart.com has upped its game influenced by previous acquisitions which internally has lead to more modern ways of presenting and merchandising products. Scoop is relaunched — fashion at a price point. As a third-party seller, Lord & Taylor offers mainstream career/work apparel, lifting the price point in an easy-to-understand Walmart value proposition. A year from now, more people will become customers of Walmart.com.
Jet.com was a great play and has a huge opportunity to grow the business and digital footprint for Walmart. Jet can aquire the customers that Walmart never would. However, providing personal shopping services via JetBlack with a $60 million budget to chase an affluent customer is just ludicrous. There are supply-chain and logistics initiatives that would have a higher ROI and drive margin gains.
First of all, Walmart’s going to be just fine, let’s get that out of the way. Second, no matter the end result, it was a good idea to buy Bonobos, ModCloth and Jet, if for nothing else than to learn about algorithms, capture the best talent and, most of all, understand their customers.
But unless you’re inside the Walmart fortress, it’s hard to tell exactly what their strategy was/is regarding dumping or tightening the screws on these brands now. If I had to guess, I’d say they’ve learned or acquired what they set out to glean and so now it’s time for the “big people” to step in and make some business decisions. Walmart is not WeWork. Losing a ton of money for an extended period of time is not an option so, ModCloth doesn’t work, Bonobos needs tightening (for now) and Jetblack could be a money maker through acquisition. Onward goes the half-trillion dollar retail brand. Never underestimate them.
Walmart was absolutely correct in taking the path of testing and experimenting. So now it’s all about lessons learned. Next case. Time to move on. I’m most curious about Bonobos. Do we now know if “showrooming” works? Can it be profitable? I suspect this iteration didn’t work. Too much growth, too fast, in breadth of product offering in an unproven business model. Logistics, returns, processing, clearance markdowns. I like the brand, but the business model has so many blind spots to an outsider.
I have never seen “showrooming” work outside of Home Design and Home Goods. It goes against the most basic of consumer behaviour, the essence of shopping, and from my point of view adds an additional step to the buying process that is just not necessary for apparel.
It’s one thing for Walmart to acquire digital expertise as a shortcut instead of developing it internally. It’s another thing when the acquired brands are mismatched with Walmart’s core consumer. I always felt that Bonobos in particular was a bad fit for Walmart — its product is sold online, in its showroom-style stores and at Nordstrom — given its higher price point and more aspirational positioning.
It took Lands’ End years to recover from Sears’ mishandling, and I hope brands like Bonobos don’t fall victim to the same kinds of issues.
After a three year period of aggressive digital acquisitive-ness, Walmart is clearly taking stock, divesting of some acquisitions and scaling back others. What we don’t see is where they’re doubling down, where employees have been integrated into the mothership, what lessons they’ve learned, and what habits they’ve changed. No aggressively acquiring company bats a thousand. But if Walmart had been idle, we can be fairly confident that its stock price would not be up 59 percent since its acquisition of Jet, compared with 33 percent for the S&P 500 over the same period.
I am more interested in the ModCloth strategy of Go Global Retail more so than Walmart’s digital strategy. Walmart continues to ignore the basic elements of decent shopper experience when the catalog pages look like a garage sale.
There is a lot of work to do on the infrastructure and supply chain side to solidify their own market strength and loyalty. I can get 2 hour delivery in Manhattan from Amazon, but not even next day from Walmart. The acquisitions provided a meaningful learning experience, but it’s time for Walmart to sell them off, take stock of the learnings and get back in its lane.
Over the next year, Walmart has an opportunity to grow its customer base exponentially, but it will have to define why consumers will choose Walmart vs. Amazon — again and again!
These reductions, sales and alignments towards its key business platform reflects the strengths which Walmart already has in place. This reaffirms Walmart’s commitment to its core competencies, and demonstrates that it doesn’t need to purchase other organizations to grow, redefine or clarify its business model. These are smart business decisions by Walmart and should be continued as Walmart audits its business structures, especially those from external growth and acquisition.
It is common for tech companies to buy smaller companies for talent and intellectual properties. Walmart is basically doing the same experiments to find out what it can and can’t do with digital ops. Some of these acquisitions obviously don’t fit and need to be spun off. It is an expensive lesson but in the grand scheme of things, it isn’t that much money.
This was both a learning experience and an experiment for Walmart. They wanted to use these acquisitions to see if they could expand beyond their core customers and grow into other customer segments. Plus, this gave Walmart the ability to learn as much as they could about digital native brands and allowed them to learn how to build these themselves.
Just look at the mattress brand Walmart created. The sell-off shows that the experimental portion of the plan — growing to new customer segments — may not have succeeded in the timeline they wanted and it just makes sense to cut the losses now.
I’m sure they learned what they wanted from these brands in the 2 years they owned them and can now walk away more knowledgeable for the effort. There are few retailers that can afford these expensive experiments as Walmart can.
On the other hand, the Jetblack spinoff is more interesting as this does not give any indication of success. If they are losing that much money per sub (and the reports are there are very few subs at all) it mostly proves that no matter how you choose to brand a concierge service like this, it’s hard to distance yourself from the value-oriented Walmart brand when faced with a target audience of luxury concierge shoppers!