Walmart will continue its buying spree of digital brands in 2018 as it aims to build and differentiate its online inventory in competing against Amazon. Marc Lore, eCommerce head of the world’s largest retailer, revealed that there’s a bigger strategy involved with Walmart’s bullish acquisitions during the Shoptalk conference in Las Vegas on last Tuesday.
“[We’re] trying to create a portfolio of these brands that give us proprietary content for a reason for [a] millennial to come shop inside the Walmart ecosystem,” Lore explained. “We’re not going out making billion-dollar acquisitions. We’re buying companies that can help accelerate us to the fundamentals.”
— Adweek (@Adweek) March 21, 2018
The retailer’s acquisitions are targeted to expand its reach into new demographics—a younger and hipper clientele of millennials. Jet was acquired for more than $3 billion in 2016, while online startups ModCloth and Bonobos were purchased in 2017 for about $50-$75 million and $310 million, respectively.
Lore said that Walmart is prepared to spend about $50 million to $300 million, or more, for future acquisitions. Since Jet appeals to affluent millennials in urban areas like New York and San Francisco, adding more digital brands to its roster makes it all the more attractive.
“We’ll continue to push the assortment,” he pointed out. “We’re working on a lot of premium partnerships right now that will augment and uplift the assortment and of course add Bonobos, Allswell [Walmart’s new bedding and mattress brand] and ModCloth to Jet as well.”
But having few digital brands with their own unique inventory is not enough for Walmart as they continue to be on the lookout for more startups. “We’re looking and talking to more companies now than we ever have,” Lore said. “We’re looking for the right opportunities.”
While the aggressive acquisition of independent brands allows Walmart to learn about merchandise expertise in specific categories, these online startups will also benefit from the retailer’s supply chain infrastructure.
“The concept is let’s cross pollinate talent. Let’s cross pollinate learnings and let’s have a common backbone and backend through Walmart’s supply chain infrastructure. This wasn’t about let’s figure out how to rip out costs. It’s about how to play offense,” Andy Dunn, founder of Bonobos and Walmart’s SVP of digital consumer brands, emphasized.
Dunn joined Lore on stage to refute reports that his colleague was being ousted following Walmart’s disappointing online growth in the last quarter of 2017. Despite the holiday shopping season, online sales growth decelerated to 23 percent from previous quarter’s 50 percent. Moreover, Walmart’s fourth-quarter results missed Wall Street’s forecast earnings, causing shares to drop by more than 10 percent.
Marc Lore, CEO of @Walmart E-Commerce discussing the slower growth during Q4 in 2017. Focus was on long term growth. Plan is to continue doing what they are doing. Goal is 100 metro markets that offer same day delivery. #shoptalk18 #ecommerce pic.twitter.com/oLl0QIVHEv
— David Taitelbaum (@DavidTaitelbaum) March 20, 2018
But Lore isn’t worried about the lackluster results. “Basically that Q4 was largely planned. We attempted to create a healthier Q4. We told The Street we’d do $11.5 billion in the year, and that’s what we did. We also said we’d have 40-percent growth this year and we recently reiterated that growth.”
He downplayed the speculations of an early exit as well, reiterating his commitment to staying for five years, and possibly more.
[Featured image via YouTube]
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