What will Walmart do with its newest acquisition, ModCloth?
Those who thought that Walmart’s acquisition of Moosejaw came out of left field should be prepared for another stunner. According to reports, the retailer is about to become the proud owner of ModCloth, an e-tailer known for selling vintage-inspired clothing for women of all shapes and sizes, as the result of an acquisition made by its Jet.com business.
The news of the deal, which was first reported by Jezebel, appears to have come as a shock to the rank and file at ModCloth. The company’s CEO, Matthew Kaness, notified employees of the deal yesterday, and current staff received employment offers from Walmart. Closing on the acquisition is expected to happen today with a formal announcement made on Friday.
ModCloth has gone through a difficult period over the past two years, seeing several rounds of layoffs. The company, which grew sales to $150 million by the end of 2015, has found it difficult to turn a profit. Venture capital, which flowed freely in ModCloth’s earlier days, has been hard to come by. According to a Recode report, ModCloth may not even get the nearly $80 million investors put into the company in its deal with Jet.
As reported by CNBC, Walmart CEO Doug McMillon, who spoke earlier this week at the Bank of America Merrill Lynch Consumer & Retail Technology Conference, said access to new product assortments was a deciding factor in recent deals made for Moosejaw and ShoeBuy.com. It would appear the same is true in the case of ModCloth.
“We can pick up some of these companies that are great in terms of the assortment and the service they provide, but they don’t have enough money to lose, to go market their brand and scale it,” said Mr. McMillon.
- ModCloth
- Women’s Retailer Modcloth To Be Bought By Jet.com, Which Is Owned By Walmart – Jezebel
- Walmart is acquiring ModCloth, the online women’s fashion retailer – Recode
- Wal-Mart is about to scoop up another online retailer – CNBC
- What will Walmart gain from its Moosejaw acquisition? – RetailWire
- Will its acquisition of ShoeBuy.com boost Walmart’s online performance? – RetailWire
- Why did Walmart buy Jet.com? – RetailWire
DISCUSSION QUESTION: What do you expect Jet.com and Walmart to do with ModCloth? Are concerns about the cultural fit between ModCloth and Walmart valid when assessing the likelihood of future success?
Jasmine GlasheenContent Marketing Manager, Surefront
Jasmine GlasheenContent Marketing Manager, Surefront
Jasmine GlasheenContent Marketing Manager, Surefront
Jasmine GlasheenContent Marketing Manager, Surefront
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15 Comments on "What will Walmart do with its newest acquisition, ModCloth?"
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President, Max Goldberg & Associates
Smart move by Walmart — buying ModCloth at a discount will add to the company’s growing lineup of e-commerce offerings. Walmart management knows it must diversify. Rather than struggle to find innovation within, it’s easier to acquire it.
President of FutureProof Retail
Walmart is accelerating its online presence just as Amazon is starting to come offline. When Walmart pushed free two-day shipping (with no membership fee) it was a direct move to compete with Amazon online. The acquisition of online fashion brands are no exception. Amazon brought Zappos, Jet.com brought ShoeBuy. Amazon started eyeing fashion acquisitions (e.g. American Apparel earlier this year); Walmart acquired ModCloth to add to their online portfolio.
It’s a competition between two giants for both online and off-line dominance. I anticipate both companies will be pushing for more technology and more acquisitions in a race to brand themselves as the default “one-stop” shopping center for most consumers.
Principal, Your Retail Authority, LLC
I too felt the Moosejaw acquisition came out of left field but not this one. This seems like a good fit for the Walmart customer due to its diversity and price points. Also, sounds like they got a good deal.
For my 2 cents.
Global Vice President, Strategic Communications, SAP Global Retail Business Unit
For my $9 the ModCloth deal will take time to integrate due to the unique people at ModCloth. After that is done then the ModCloth team will drive a strong level of demand on a new powerful platform of technology and brand. Someday the Walmart of the past image will fade and the new Walmart will stand out, meaning someday Walmart may just rebrand as “W.” A cool store name owned by Sam’s Retail (or Walton Retail).
Strategy Architect – Digital Place-based Media
Buy low and sell higher and, better still, buy low and sell lots, seems to underpin the ModCloth transaction through the Jet.com acquisition. I wonder if ModCloth has production capability and maybe even consumer awareness capabilities that allow an extension to how Walmart operates.
Strategy & Operations Transformation Leader
From the perspectives of competition, diversity and inclusion, acquiring ModCloth certainly makes things even more interesting in the winner-take-all online and offline battle with Amazon. The brand-within-a-brand strategies and offering a diversity of fashion choices outside the normal Walmart assortment strategies are big wins for the organization.
Walmart has already invested significantly into growing their innovation, enhancing their technological e-commerce capabilities and achieving an economies of scale as it pertains to their commerce and fulfillment processes. Diversifying their fashion brands is key to remaining competitive with Amazon, as the two commerce giants go to an all-out strategic war to become the one-stop shop for everything.
The one component where Walmart hasn’t ventured yet is to directly compete with Amazon and Google’s AI assistants. This is the next generation of commerce, and it’s only a matter of time before Walmart throws its hat into the ring.
Content Marketing Manager, Surefront
To be honest, my head exploded when I read that ModCloth sold. Brand awareness for ModCloth among Millennials runs deep. It’s not that they sell clothes you can’t find elsewhere for cheaper, it’s how well curated of a selection they offer. The vintage aesthetic is a huge draw.
Walmart is ensuring their longevity by picking up brands that speak to the next generation. Walmart’s success in these acquisitions will be determined by their ability to allow each brand, Moosejaw and ModCloth, to continue the fun, customer-centric and slightly irreverent marketing campaigns that put them on the map.
I think the ModCloth we used to know and love is long gone. Most of their products are now made overseas and the quality you get for the price you pay isn’t worth it. I’ve found better deals through smaller boutiques like Jane Divine Boutique, Unique Vintage, and Lazy Caturday just to name a few. They’re able to offer better customer service and better prices IMHO.
Founder, CEO, Black Monk Consulting
To me, culture is the issue. The acquisition itself makes sense. The clothes seems like they will fit the Walmart shopper’s lifestyle and taste, it probably expands their customer base a little in the right direction and it helps further round out their digital portfolio. But … that still leaves the culture issue. It’s too early to say definitively but it will be interesting to see if Walmart builds two cultural models — one traditional, the other more digitally-oriented in attitude, thinking and work roles and rules. That might work although it leaves you with the “us and them” problem. Forcing digital folks to think like brick-and-mortar retailers probably isn’t a good idea and I’m not sure reversing the cultural model works much better. But Walmart is resilient, so maybe they will be the first retailer to create a true multi-channel culture. If they are, they will be even harder to stop.
CEO, Fuse Inventory
From Walmart’s perspective, the cash is a throwaway. I predict that in two years, both the ModCloth and Moosejaw brands will hardly exist within Walmart. What this also highlights is the difficulty of being a venture-backed e-commerce-only business (ModCloth, Nasty Gal, Jackthreads) as many have suffered setbacks. Venture funding can be terrible for these companies because it encourages them to pursue unsustainable and unprofitable growth.
Independent Board Member, Investor and Startup Advisor
Co-founder and VP of Engineering at Bold Metrics
Contributing Editor, RetailWire; Founder and CEO, Vision First
Walmart is taking a page from departments acquiring online stores-within-stores. I think it’s a smart move to increase range and channel options for consumers.
If Walmart is smart, they will leave ModCloth alone. Let it continue to delight its customers. And go to school on how that shopper segment behaves.
As Amazon creeps into bricks, it is doing the same thing. Test and learn.
Any acquisition offers the opportunity for disaster. In this case, WMT/McMillon has jet.com/Bore as a barrier to Bentonville’s myopia, “not invented here” syndrome, and ever present FoxNews on its TVs.
I like where WMT is going. If you are going to compete with the long tail, you gotta get a long tail. And the recent acquisitions give WMT breadth that prior to them, it didn’t possess. The previously acknowledged diversity here is as much in “lifestyle” as it is in age. Moosejaw brings it too. Both could help if it wants to pursue college campus and thwart the Amazon and Target incursions.
I wish them well because we need alternatives to Amazon, and ironically WMT is the much needed diversity.
Retail Transformation Thought Leader, Advisor, & Strategist