Wal-Mart Stores Inc. took another step in bolstering its online business Friday, announcing the $310 million acquisition of men's clothing retailer Bonobos.
The New York-based online company becomes the fourth gobbled up by the Bentonville retailer this year as it transforms its e-commerce segment. Wal-Mart has previously acquired shoes and apparel company ShoeBuy.com, outdoor apparel retailer Moosejaw and women's clothier ModCloth.
The company also owns home furnishings company Hayneedle, which was acquired as part of Wal-Mart's $3.3 billion acquisition of Jet.com last August. The ShoeBuy acquisition was about $70 million, and Moosejaw was purchased for about $51 million. Wal-Mart has not said exactly what it paid for ModCloth, but said the transaction was "along the same lines" as ShoeBuy and Moosejaw.
The Bonobos deal, which is subject to regulatory approval and is expected to close later this year, is Wal-Mart's largest since Jet.com. After the acquisition closes, Bonobos founder and Chief Executive Officer Andy Dunn will move into a new role overseeing the company's digital brands. Wal-Mart said those brands -- which include Bonobos and ModCloth -- will be offered on Jet.com in addition to their current web platforms.
"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," Marc Lore, Wal-Mart's U.S. e-commerce chief, said in a statement. "Adding innovators like Andy will continue to help us shape the future of Walmart and the future of retail."
The acquisition, announced Friday morning, was quickly overshadowed by Amazon's surprising move to acquire Whole Foods Market for $13.7 billion in cash. Wal-Mart shares fell as much as 7 percent in Friday trading before closing at $75.24, down $3.67.
But Paula Rosenblum, co-founder and managing partner of RSR Research, said in an email that the Bonobos deal continued what has been a "very shrewd strategy" by Wal-Mart. Carol Spieckerman, a retail consultant and president of Spieckerman Retail, said Wal-Mart's purchase was important as it tries to boost its online market share to compete with Amazon.
"Bonobos is a continuation of Wal-Mart's apparel and fashion-focused forays," Spieckerman said. "Although grocery is getting quite a bit of attention, with Amazon leading the disruption conversation, Amazon is also determined to win in apparel. Wal-Mart is smart to stay on the apparel beat, even in light of Amazon's grocery bombshell. Wal-Mart will respond to that soon enough."
Bonobos, founded by Dunn in New York in 2007, began by selling chino pants on the Internet. The company has since expanded its assortment to include other men's clothing items like suits and dress shirts. In 2011, Bonobos also began opening brick-and-mortar locations called Bonobos Guideshops and currently has 35 store locations.
Dunn said in a blog post the "bold decision" to sell his company to Wal-Mart "bets our future on taking our core capability in building a brand in the digital age and spreading it across a wider ecosystem."
"When the idea first presented itself, my immediate thought was no way," Dunn said. "At the time we began discussions a couple months ago, we were an inch from signing another deal that would have kept us on an independent path."
But Dunn's thoughts changed after Wal-Mart's recent acquisitions and discussions with Lore. Dunn, who described Lore as a mentor, believes the Wal-Mart executive "is the most innovative and ambitious e-commerce entrepreneur on the planet" and their ideas on the future of brands in the changing retail environment meshed.
"They've created an amazing product and customer experience, and that will not change," Lore said in the statement. "In fact, Andy will be a great influence on the company, especially in leading our collection of exclusive brands offered online."
The Bonobos deal is another example of Wal-Mart's push to rethink its U.S. e-commerce strategy.
Earlier this year, the company introduced two-day free shipping with a $35 minimum purchase. More recently, Wal-Mart started a pickup discount program which offers cheaper prices on online items if customers elect to collect them in a store. The retailer also has rapidly expanded its online assortment to more than 50 million items as well.
The strategy also includes acquisitions which have given Wal-Mart more ground to stand on in high-margin categories like apparel. The brands appeal to a different segment of shopper than those who frequent Wal-Mart, giving the retailer a chance to reach customers who may not stroll through its stores.
"What Moosejaw, ModCloth, Bonobos all have in common is not only that they are apparel retailers, but they have very authentic voices with a particular group," said Laura Kennedy, an analyst with research firm Kantar Retail. "They each have a very distinct voice and I think you can argue that Wal-Mart doesn't have really deep penetration with any of those audiences."
Kennedy said it's still too early to tell if the acquisition piece of the company's online strategy will be successful. Wal-Mart reported its U.S. e-commerce sales jumped 63 percent during the first quarter of the current fiscal year, but much of the growth was because of the two-day free shipping program and other initiatives introduced by Lore.
Wal-Mart is gathering e-commerce expertise with each deal. The company continues to operate each acquisition as a stand-alone site while the leaders of each online brand have been retained and placed in charge of their respective categories across Wal-Mart's platforms.
"Ultimately, it's all just acquiring talent and capabilities to make Walmart.com, Wal-Mart e-commerce as a whole, all of these banners together run better," Kennedy said.
Business on 06/17/2017