How Bonobos is growing up under Walmart's wing
Since CEO Micky Onvural took over in September, she says "Nothing has changed, but everything has changed."
When Micky Onvural walked into Bonobos two years ago as chief marketing officer, her goal was to put Bonobos on the map. For better or for worse, that happened within months when Walmart announced a $310 million deal to takeover the brand built on chinos and guide shops.
From the get-go Bonobos Founder Andy Dunn was hired on as Walmart SVP of digitally native brands. And in September, he turned his full attention toward acquiring and developing such brands to fuel the big-box retailer's quest for more upscale, digitally savvy shoppers.
In turn, Onvural, also then co-president, took over as CEO of Bonobos. Since then, she told Retail Dive in an interview, "Nothing has changed, but everything has changed."
Now nearly 12 years into the business and one year into the Walmart family, Bonobos has become a case study for how a digital brand can keep its cool factor despite being owned by one of the biggest and arguably least cool retailers. But now that its future is intrinsically intertwined with the evolution of Walmart's digital operations, and as its founder steps back, it remains to be seen just how much independence Onvural will have to take it from here.
What's changed under Walmart?
If you ask Onvural, she'll tell you the biggest change so far is the fact that employee paychecks are now printed with Walmart's letterhead. While that certainly downplays the inherent messiness of any merger, to be fair, Bonobos has remained largely untouched by Walmart — much to the pleasant surprise of customers and industry insiders alike.
"Changes have been much much less than anyone could have possibly anticipated," Peter Fader, a professor of marketing at Wharton's school of business, told Retail Dive in an interview. When the company was first acquired, Fader was a part of the vocal minority who decried the brand for selling out and vowed to never shop there again. But, so far, he acknowledged, the product and experience have stayed the same.
"I would have thought by now they would have greatly expanded the lines, brought down the quality and changed the messaging," he said. "That's remarkable for any company to remain disciplined like that, but especially when you have this big corporate behemoth looking over your shoulder."
Data provided to Retail Dive from Gartner L2 show that Bonobos experienced a dramatic 40% drop in digital traffic in the month following the acquisition. That has since steadily recovered and monthly visitors are now 10% higher than at the moment of the acquisition, according to Gartner L2.
While a negative perception of Walmart may have played a role in the traffic dropoff, nothing points to that as the root cause, Jane Fisher, vice president of specialty retail and activewear at Gartner L2, told Retail Dive in an interview. In fact, there are a lot of macro factors that are making it harder than ever for specialty brands to drive traffic to their websites, including increased competition for organic search and the fact that more searches are starting on Amazon — a channel many specialty retailers are staying far away from.
"One of the things that stood out to me was if you compare where Bonobos was in 2017 around the time of the acquisition for instance, they were getting about a quarter of the traffic to their website from organic search, and that number has declined pretty substantially. It's less than 20% from organic search," Fisher said.
Unlike many digitally native brands that credit social media with their rise in popularity, Bonobos still has a long way to go, according to Fisher.
"When I look at what they could be doing better, I think social media as a whole, in particular Instagram and also email and organic search, are some of the big levers they could be pulling on a little more forcefully," Fisher said. Bonobos' social media posts average fewer than 500 interactions, she said, significantly below Gartner L2's index average.
While Walmart doesn't break out financial figures for its brands, including Bonobos, data provided to Retail Dive from Edison Trends found that Bonobos has steadily grown orders and revenue under Walmart's wing. According to an analysis of three million consumer purchases and e-receipts, Edison Trends found that November revenue was up 74% from August of last year, and up 34% from the previous year. Orders were up 48% over August 2017 and 25% over November 2017.
Numbers aside, the business has also realigned as its founder steps away. Dunn may be gone, but he and Onvural still text, call and pass each other in the halls of the New York office where they both still work most of the time.
"He has done an incredible job of empowering me to run this business, but he's always there for me as a sort of bedrock if I have questions or thoughts," Onvural said. And because Bonobos is the biggest of Walmart's collection of brands, Onvural has become a mentor of sorts to the executives at brands like Eloquii and Modcloth, answering questions on everything from scaling the supply chain to developing stores.
"I wouldn't say there is a formula to how often we speak or on what kinds of subjects," she said. "I think we look at each other and each other's businesses and say 'What can we learn from them?' And what they can learn from Bonobos is probably quite different than what they can learn from the other smaller brands at this point."
Can Bonobos remain purpose-driven under Walmart?
As the company scales up to 600 employees, Onvural says her biggest focus is on people.
"I love people in all their joyous, messy glory," she said. "It's probably why I love being a marketer because trying to understand what makes the consumer tick is really not that different from what makes an employee tick, and how can you bring out the best in an employee is not that different from how can you illicit what you want from a customer."
On a practical level, making sure employees connect on the same brand purpose means that each month she spends one day in stores, another in the customer service ninja "dojo" and another dining with more junior members of the organization. Every two weeks, Onvural also leads a company-wide conference call.
"At the end of the day, Walmart bought Bonobos because it's Bonobos and they recognize the power of our brand and so we will continue to invest in it and continue to drive that agenda forward."
"I think staying rooted in the customer and the employee, and certainly how those employees speak to customers, helps you scale culture," she said. "Because, for us, our culture is all about the customer and it's all about bringing joy to the customer whatever that might look like."
One of Onvural's most celebrated accomplishments so far stems from a bold, and controversial, marketing campaign released this summer called #EvolveTheDefinition, which challenged traditional notions of masculinity. Dunn made a point of calling out the campaign in his announcement of her as CEO.
Onvural says that going forward, it's critical to her that the brand propel its mission to "make fit happen for every body," she says emphasizing the space between the last two words. It's a subtle but important distinction for a brand aiming to be more inclusive and diverse. Earlier this year, the brand expanded its sizes for big and tall men.
Being purpose-driven is nothing new for digitally native brands, many of which actively support environmental and social equity issues and win more brand loyalty because of it. But, it is new for a unit within Walmart, which has never stood for much beyond low prices.
"At the end of the day, Walmart bought Bonobos because it's Bonobos and they recognize the power of our brand, and so we will continue to invest in it and continue to drive that agenda forward," Onvural said when asked about how the company's mission has shifted in the Walmart era. "And I think, to be honest with you, the world more than ever needs brands that are standing for something."
How much does Jet affect Bonobos' potential?
As independent as Bonobos and its customers may feel it is, its greater purpose is now as a small piece of Walmart's growing digital puzzle, which rests heavily on the success of Jet.com's recent urban millennial rebrand.
The site, which was acquired in 2016 for a whopping $3 billion, has become the focal point in Walmart's growing portfolio of digital brands. This fall, Bonobos was the first to get its own dedicated webstore. Early data provided by Edison Trends showing that digital sales on Cyber Monday plummeted 39% year over year may be cause for concern for Bonobos. But a Walmart spokesperson told Retail Dive that year-over-year comparisons are irrelevant given the marketplace's recent and ongoing shift.
"At some point, if Jet goes sour then Doug [McMillon] and the Bentonville people will step in and say 'The gig is up, it's time to grow up,' and I think a lot of the independent things that are being managed through Hoboken will change."
Professor of Marketing, Wharton School of Business
While it's too early to tell what impact Bonobos' Jet.com storefront is having on the brand, the spokesperson said, the ultimate goal for Walmart is to put as many digitally native brands on the site as possible. That includes brands like Modcloth, Eloquii and Allswell, while category specialists like Bare Necessities, Art.com and Hayneedle are aimed at boosting Walmart.com.
Fader is one of many critical of Jet's rebrand. "I like the intention behind it, but I think the execution has been very poor," he said. "I speak to my kids, former students and others up there in New York, and very few have ever bought anything from Jet, and those few have done it once."
It's not that the Walmart brand is hurting Jet, Fader explained, but the marketplace hasn't done enough to distinguish its benefit to consumers or why it's a better option than Amazon. And executives at Walmart, historically wedded to the interests of its shareholders, will only be patient for so long as Jet looks to find its footing.
"At some point, if Jet goes sour, then Doug [McMillon] and the Bentonville people will step in and say 'The gig is up, it's time to grow up,' and I think a lot of the independent things that are being managed through Hoboken will change," Fader said.
How long will Bonobos' independence last?
Bonobos is often credited as a pioneer in the direct-to-consumer digital movement and one of the original digital disruptors. Now, nearly every category has a Bonobos of sorts, whether it's Glossier in beauty, Away in luggage or Casper in mattresses.
Bonobos is growing up, but Onvural says the title of disruptor hasn't faded away yet. "What got us here won't get us there, so we're going to continue to have to disrupt ourselves. Whether that is in terms of product innovation, consumer experiences or business model, you can expect to see that from us over the coming couple of years," she said.
Thanks in part to acquisitions like Bonobos, Walmart is one of few companies that have taken on Amazon, according to Lee Peterson, executive vice president of thought leadership and marketing at WD Partners. "I've been impressed over the last year and a half," he said. "They to me were the only retailer that stepped forward and drew a line in the sand and said 'All right, Amazon, you can't have this. We're going to not make as much money, we're going to reinvest, we're going to compete."
Given that, he said, Walmart would be wise to let Bonobos stay the course. That includes keeping the pressure off a massive expansion of its guide shops. By the end of the year, the brand will operate 63 across the country.
Peterson is a big believer that Bonobos' showroom stores, which hold little inventory but a lot of interaction with the brand and store associates, is the future of physical retail. But, he worries Walmart's attachment to physical spaces will push the brand too far. "You need to be in those 100 [top malls], after that it's a crapshoot," he said. "Everything after that, I don't care who you are, is going to be risky."
Onvural said her thoughts on guide shops have evolved over time. "Does it make more sense to invest marketing dollars there? Does it make more sense to invest in short term pop-ups in this market? Does it make sense actually to invest in a brick-and-mortar location?" she says she asks herself and her teams about each market.
One of the biggest challenges Bonobos will continue to face is the balance of being an innovative brand while keeping true to its mission under Walmart's watch. And if it succeeds, it's likely to send a signal to other digitally native brands that an acquisition by legacy retail is a path worth pursuing.
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