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Retail giant's new deal adds to Net arsenal

Wal-Mart’s Luvocracy buy seen as pre-emptive strike

By Cyd King

This article was published August 4, 2014 at 2:22 a.m.

Wal-Mart's recent purchase of the social marketplace Luvocracy is viewed by some as a talent raid of the website's creator and team, as well as a means of squeezing out the competition in areas where the retailer's research and development group, @WalmartLabs, is lacking.

In a deal announced last week, San Bruno, Calif.-based @WalmartLabs acquired Luvocracy, a Pinterest-like site that allowed members to share their shopping tastes with friends and others on items such as apparel and home wares. The site was still up but not operational as of Friday. A note on the site said it is no longer taking new members.

Terms of the deal were not released, and officials at Luvocracy did not answer a request for information.

"Luvocracy was one of the first companies to enable the entire social shopping experience -- from discovery to commerce -- to occur within the four walls of its app," Ben Galbraith, vice president of global products for @WalmartLabs, said in a blog post on the day of the acquisition. Not only could members make suggestions on goods, users also could buy products directly from the site.

Some 65 percent of Wal-Mart's U.S. customers have smartphones, and 85 percent are under the age of 35.

Luvocracy, based in San Francisco, is the 15th start up that Wal-Mart has acquired since February 2010 and the fourth so far this year.

"These acquisitions are bold moves by Wal-Mart -- an attempt to keep pace with the nimble, creative, hyper-speed of the Internet," said Max Goldberg, president of Max Goldberg & Associates. The Los Angeles-area branding and marketing consultancy lists Paramount Pictures, DreamWorks and Warner Bros. as clients.

The fact that Wal-Mart has chosen to acquire numerous companies in areas where it has deficiencies in its e-commerce group speaks volumes about what it's trying to do, he said.

"The key will be how well the retail giant is able to integrate the ideas that come out of these acquisitions into their websites," he said. "Will the size and bureaucracy of the company stymie people used to working in fast, flexible environments or will it embrace and rapidly employ their ideas?"

Wal-Mart is expected to take on 16 of Luvocracy's 20 employees, including CEO Nathan Stoll, who founded the San Francisco-based website in 2011 after selling his social search company, Aardvark, to Google in 2010.

Others joining @Walmart Labs are vice president of Design Brooke Thompson, previously a senior director of design at Yahoo; vice president of engineering Ajay Agrawal, a former senior vice president of engineering at Blurb who had roles at eBay, Microsoft and Oracle; and creative director Christine Martinez, a Pinterest "Power Pinner" with more than 5 million followers and founder of LAMA, an e-commerce boutique.

Chris Petersen, president of Integrated Marketing Solutions in Omaha, Neb., characterized the Luvocracy acquisition as a "two-for-one deal." It pulls in the Luvocracy brain trust and eliminates Luvocracy as competition.

"Despite all of its cash, Wal-Mart is like most traditional store-based retailers -- they are lacking the kind of talent needed for social and e-commerce," Peterson added. "The immediate shutdown of Luvocracy's website after purchase makes perfect sense. The purchase was all about critical talent acquisition needed for innovation at @WalmartLabs."

Peterson said Wal-Mart can't buy them all, but it is targeting tech industry leaders who have the talent to help the retailer build on its own capabilities. With its nationwide network of stores and fulfillment centers, the world's largest retailer has distribution covered. The retailer's only chance of fending off Amazon is to ramp up its e-commerce.

"They need outside talent to get up to speed quickly," Peterson said.

Other buys this year include Stylr, Adchemy and Yumprint. Stylr, a mobile app that allowed shoppers to find the clothes they desired in stores nearby, was shut down, and its founders, Stanford University graduates Eytan Daniyalzade and Berk Atikoglu, also went to work for @WalmartLabs.com.

SundayMonday Business on 08/04/2014

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Nodmcm says... August 4, 2014 at 2:43 p.m.

Wal-Mart is the world's largest retailer. But Wal-Mart's website does not seem as friendly and easy-to-use as, for example, Amazon's. The history of Wal-Mart, begun by Mr. Sam Walton, is one of innovation and experimentation to get things "just right." Many of us will never forget the first 'Discount City' that we shopped in many years ago. Even today, many of us consider Wal-Mart an old, dear friend. Yet due to the changes occasioned by the internet and social media, it seems that our 'old friend' perhaps needs to 'get with' the modern, technological era. So let us hope that this acquisition by Wal-Mart will help position Wal-Mart to move forward. Sometimes, very large corporations become bound by inertia and they lose the innovative, competitive spirit which made them so huge and successful. It is hard for these massive organizations to embrace change, much like a huge ship in the ocean takes seemingly forever to turn. This acquisition is hopeful evidence of the 'captain' of Wal-Mart easing the 'big ship' into a turn toward the modern, internet-based world of retailing which only promises to get bigger and bigger over time. Good luck, old friend.

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