Will Walmart have more success creating consumer direct brands than acquiring them?
It’s been a couple of months since the news first broke that all was not well in Walmart’s digital paradise. The retailer’s strategy of acquiring digitally native brands and retailers including Bonobos, Jet.com, ModCloth, Eloquii and others, which has been widely praised in recent years, hasn’t paid the dividends that some within the company envisioned when the deals were made. In fact, Walmart’s e-commerce division in the U.S. is on pace to lose $1 billion this year.
Now, Marc Lore, the person responsible for leading Walmart’s e-commerce operations in the U.S., says the retailer is turning away from looking for acquisitions and turning its attention to developing its own digitally native brands.
In an interview with Recode, Mr. Lore pointed to Allswell, a mattress brand that Walmart created to compete in the bed-in-the-box category. Allswell, he said, has become a “multi-hundred-million (dollar) brand” for the brand.
“This was like an ‘aha’ for us,” Mr. Lore told Recode. “This is super interesting. We can create these ourselves.”
Much of what Mr. Lore and Walmart have done in recent years has been designed to gain an advantage against Amazon.com. While Walmart has improved its performance online and in stores, it currently holds a 4.7 percent share of online sales compared to 38 percent for Amazon.
In July, Walmart announced that it was integrating its supply chain and finance teams for walmart.com and its stores. The move was made to facilitate the retailer’s omnichannel push while taking redundant costs out of the system.
“Our customers want one, seamless Walmart experience,” wrote CEO Doug McMillon in an employee memo obtained by news outlets at the time. “Earning more of our customers’ business in food and consumables is foundational to our strategy, and, at the same time, we will expand our ability to serve them with general merchandise in stores and through our broad e-commerce assortment as we continue to invest and build our e-commerce business.”
- Walmart is done trying to buy small retailers to compete with Amazon – Vox
- Is Walmart at an online crossroads? – RetailWire
- Walmart shakes things up, further integrating online and physical store teams – RetailWire
DISCUSSION QUESTIONS: Do you agree that Walmart is better off creating its own consumer direct brands such as Allswell than acquiring them? What will be the keys to Walmart succeeding in the development of its own consumer direct brands?