Walmart’s latest e-commerce acquisition will be a takeover of menswear site Bonobos for $310 million in cash, a deal that’s been rumored for months, the brick-and-mortar retail giant announced Friday.
Unlike many startups, Bonobos, founded in 2007 by co-founders Andy Dunn (who in 2015 returned as CEO) and Brian Spaly (who founded Trunk Club and this year left the concierge service, now owned by Nordstrom) generates a profit and enjoys $150 million in annual sales, raising about $127 million to date from investors including Accel Partners, Lightspeed Venture Partners and Nordstrom.
Dunn will remain to oversee the Walmart’s collection of digitally-native vertical brands, reporting to U.S. e-commerce chief Marc Lore, according to a Walmart press release. The startup joins online shoe retailer Shoebuy (a challenge to Amazon's Zappos), online outdoor retailer Moosejaw, and vintage-inspired online women’s apparel seller Modcloth in a string of acquisitions by the brick-and-mortar retail giant under Lore since its $3.3 billion purchase of Lore’s Jet.com last year.
The payoff from Walmart's recent acquisitions, starting with Jet, has been swift: In its most recent quarter, Walmart’s e-commerce sales ballooned 63% with an attendant 69% rise in digital gross merchandise volume. But the new numbers that Wal-Mart is delivering in the digital space aren't just thanks to Jet or its widely heralded pricing algorithm. The brick-and-mortar stalwart, with Jet founder Marc Lore at the helm as its new U.S. e-commerce chief, has also been gobbling up pure-play specialty retailers at a rapid clip.
These new brands help Walmart improve the experience for existing customers and extend its reach to new customers, Ravi Jariwala, senior director of public relations at Walmart.com, told Retail Dive last month. Bonobos in particular has branched into brick and mortar, devising Bonobos Guideshops that provide opportunities to see, feel and try on clothes; Bonobos now has 35 Guideshops across the United States and in 118 Nordstrom stores and on Nordstrom.com.
“We’re seeing momentum in the business as we expand our value proposition with customers and it’s incredible to see how fast we’re moving,” Lore said in a statement Friday. “Adding innovators like Andy will continue to help us shape the future of Walmart, and the future of retail. 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.”
For Dunn's part, the acquisition is an opportunity to work with a mentor and "become the market leader in all of premium menswear," Dunn wrote in a blog post. "Marc is the best in the world at building upstart third-party brand e-commerce properties. He and I will now leverage our combined know-how and, with the biggest company in the world behind us, take on creating the leading vertical e-commerce platform."
Those new customers are in demographic groups that don't generally frequent Wal-Mart stores; the average Wal-Mart customer is less wealthy and quite a bit older than those typically shopping at Target and Amazon. The company has had difficulty in the past moving beyond that core base.
In addition to more digital sales and an expanded customer base, the startups are providing talent and technology, Keith Anderson, VP of strategy and insights at retail intelligence firm Profitero, told Retail Dive. “They have access to brands, buying teams … they have merchants and software engineers that might not move to Bentonville or Silicon Valley,” he said. “It probably has as much to do with creating a safe landing for companies that didn’t have a path forward as independent entities, but had a nice search authority.”
Indeed, as with Dunn's planned role at Walmart, Shoebuy CEO Mike Sorabella now heads up footwear for all of Wal-Mart's e-commerce, including Jet.com and Walmart.com, while Moosejaw CEO Eoin Comerford similarly runs the company's outdoor e-commerce vertical. That means that brands that may want to sell through Wal-Mart have enhanced opportunities too, with options to sell through one site or another (or more), Jariwala said.
Walmart has made it clear that the brands will continue as standalone sites, and executives from those companies have sought to ensure loyal customers that little will change. And it's not likely to, Kelly-Jo Sands, EVP of marketing technology at marketing firm Ansira, told Retail Dive. “If you tie [Wal-Mart and Modcloth] too closely together, you might see a fanatic backlash, but you might also see expectations of the prices to come down.”
The new brands are unlikely to take part in some of Lore's e-commerce solutions. To combat high last-mile delivery costs, for example, Wal-Mart now provides discounts on items bought online but picked up store. While it's very likely that many Bonobos or Modcloth customers live near a Wal-Mart store, however, offering in-store pick up could invite branding and pricing conundrums for the "always low prices" juggernaut.