Bonobos loyalists aren’t happy with the idea, but retail consultants say the latest acquisition target of Wal-Mart Stores fits well with the retail behemoth’s push to broaden its online presence.
Wal-Mart has made no secret it’s shopping for retail category expertise in the form of online specialty acquisitions like the recently announced deals with Moosejaw, ShoeBuy and ModCLoth. Men’s clothier Bonobos is rumored to be the next deal and could cost Bentonville-based Wal-Mart at least $300 million. The specialty online retailer sells items that range in price between $100 and $1,000, significantly higher than apparel sold in Walmart U.S. stores.
Oliver Chen, analyst at Cowen & Co., said Bonobos offers a brand-loyal customer base, premium price points, fresh merchandising talent and expertise in a differentiated niche of fashion. In a note to investors Chen said a deal to acquire Bonobos gives Wal-Mart an opportunity to enter a high-margin speciality category and help it better compete with Amazon in the apparel setting.
Marc Lore, CEO of Walmart U.S. e Commerce, said acquiring key category expertise is the fastest way to grow market share for the long term. Last month he told investors Wal-Mart was continuing to look for acquisition opportunities on the heels of the ModCloth deal. When asked what categories appealed to the retailer, Lore said apparel and several others have long tails and are worth exploring.
Carol Spieckerman, CEO of Spieckerman Retail, said Bonobos is the latest in what is sure to be a string of what she calls “digital-forward niche” acquisitions for Wal-Mart.
“Just as with ModCloth and Moosejaw, Bonobos amps up Wal-Mart’s relevance in apparel without requiring adjustments to the in-store and online assortments that appeal to its core customers,” she told Talk Business & Politics. “The acquisition will expand Wal-Mart’s apparel reach and enhance its online search/discoverability while giving Wal-Mart ongoing access to valuable user and shopper data.”
She said as Wal-Mart expands its online portfolio, it is feeding new brands, products and content into its digital platforms.
Clint Lazenby, founder of #OnShelf and a supplier consultant, also likes the deal for both parties, especially Wal-Mart.
“Amazon only has a couple of soft spots with consumers. It would seem from Wal-Mart’s recent M&A strategy they identified apparel as a place they can be on the offense and have a chance to win,” Lazenby said. “It also is important to note the companies being acquired are for the most part targeted at much younger consumers providing us with insight to their focus shopper of the future.”
Continuing, he noted: “There is no telling what they can learn from the operational side of the house. Wal-Mart adapted the model of Jet and implemented a new pick up discount model recently. This is a perfect demonstration of the value of good acquisition strategy,” Lazenby added.
Chen said the deal would also hold major benefits for Bonobos. Chen said a Bonobos-Wal-Mart deal would give scale and share to Bonobos and catapult Bonobos brand awareness to the masses. He said this assumes the brand doesn’t alienate too many customers by selling out to Wal-Mart. Early reaction from the deal brought some criticism from customer comments on social media platforms that the brand identity would be lost in a Wal-Mart deal.
Lore was recently asked about negative feedback on the ModCloth deal from the retailer’s loyal customer base. He said consumers need not worry that Wal-Mart is going to tamper with the brand’s integrity. He said that is why the acquisitions operate as subsidiary companies and maintain their own leadership teams.
While Bonobos is primarily an online business the retailer has opened nearly three dozen brick and mortar showrooms where customers can get properly fitted and place orders which are delivered to them at home. These “Guideshops” are located in larger urban cities such as Atlanta, Austin, Bethesda, Boston, Chicago, Dallas, Detroit, Houston, Minneapolis, Nashville, Newport Beach, New York City, Philadelphia, San Diego, San Jose, San Francisco, Seattle, Scottsdale and Washington D.C. The website said future locations are planned in Los Angeles, Denver and Lexington, Ky.
The consultants agreed that Wal-Mart also knows how to operate physical stores and that will likely benefit Bonobos in its efforts to expand the “Guideshops” footprint.