Wal-Mart Stores continues to expand its e-commerce market share, grow its customer base and build on its effort to be a dominant multi-channel retailer. Doling out $70 million, Wal-Mart said Thursday (Jan. 5) it acquired Boston-based ShoeBuy, a Zappos-like e-commerce business that offers more than 800 brands and a million-plus items online including footwear, clothing and accessories.
ShoeBuy will operate as a standalone and complementary site to Walmart.com and Jet.com and the retailer said it hopes this strategic deal will provide Jet an opportunity to learn from a well-established e-commerce player in the footwear industry. ShoeBuy offers popular brands such as Uggs, North Face, Rockport and Clarks with designer merchandise from Vera Wang, Ralph Lauren and Perry Ellis. Athletic footwear from Reebok, Adidas and Under Armor is also sold on the site.
Wal-Mart said the deal with ShoeBuy brings access to a large assortment of products, strong industry relationships and rich content that will further enhance its customer experience.
Mike Sorabella and his executive team, along with roughly 200 employees, will continue to be based in Boston and operate as a subsidiary of Jet and Wal-Mart. The retail giant said ShoeBuy suppliers interested in expanding their product reach will have the option to sell on Jet.com as well.
The timing of the deal is likely not coincidental. Clothing and accessories sales have quickly gravitated online and Zappos has proven consumers will purchase shoes online and do it often. This is not Jet or Wal-Mart’s first attempt at acquiring expertise. Wal-Mart has long been a purchaser of talent and knowhow, evidenced by its $3.3 billion acquisition of Jet in August of last year. Jet itself subscribes to the “buying knowledge” method having acquired home furnishing e-tailer Hayneedle for about $90 million in March of 2016.
Wal-Mart’s top executives, CEO Doug McMillon and Walmart.com CEO Marc Lore, have each said the company is willing and able to seek out more of these types of acquisitions in the future.
“It’s a fair assumption” that Jet and Walmart will pursue more of these types of acquisitions most likely “in the categories where they are long-tail, high margin products and harder-to-crack brands,” Lore said recently in an interview with Recode.
One Wal-Mart watcher said the deal shows that Wal-Mart is interested in diversifying its e-commerce platform.
“No sooner did it digest its massive acquisition of Jet.com then along came a category-killer chaser to kick off the new year. The ShoeBuy acquisition may have already been in the works for Jet.com but the fact that it is going through signals that Walmart is taking a portfolio approach to building its digital strength,” said Carol Spieckerman, CEO of Spieckerman Retail. “ShoeBuy brings with it an impressive roster of name brands, not to mention user data, content and footwear-specific platform capabilities. In mass retail, footwear often lags other categories in terms of trend and quality. ShoeBuy rectifies this while giving Walmart a plug-and-play entry into an important category, one that shoppers have grown quite comfortable ordering online.”
Keith Anderson, senior strategist for Profitero, told Talk Business & Politics the deal to acquire ShoeBuy provides Jet a slight increase in online market share, but it’s not a huge bump, as Zappos controls a much bigger piece of the pie. He said ShoeBuy has been around a long time (since 1999) and has been through several owners, which likely suggests sluggish growth or lagging profitability. He said estimates are ShoeBuy does a few hundred million in annual sales, which makes the $70 million price tag seem like a decent value.
Anderson said the deal does give Wal-Mart might not typically have. He said in the past when Walmart has tried to experiment with more affluent brands in its own stores, the results were disappointing. By allowing ShoeBuy to retain its own site, Wal-Mart will vicariously have access to the higher-end brands and those more affluent shoppers.
Looking specifically at ShoeBuy’s site, Anderson it doesn’t look like there is any compelling technology built in. That could change as ShoeBuy will now have access to Jet.com and Walmart.com technology teams. He said Walmart has the opportunity to help ShoeBuy restructure its site and create a compelling experience around shoe shopping online – something it can’t really do on its one-stop shopping site.
Anderson said the ShoeBuy deal is also likely about the talent acquisition. He said ShoeBuy has an experienced team of technologists, marketers and merchants savvy about shoe, accessory and apparel sales online. He said as Walmart continues to invest in online abilities acquiring a company could make more sense that posting 100 jobs at a given time.
“ShoeBuy already has talent sitting at their desks, in areas that Walmart and Jet hope to glean insights and grow share, in this case the deal makes sense,” Anderson said.