Business of Fashion has a long article on Walmart online boss Marc Lore and how he approaches online fashion and the positioning of Jet.com and those recent acquisitions for Walmart’s online portfolio.
Let’s look at a few of his statements from last week’s Shoptalk conference:
“There’s a lot we can learn from that brand, and there is an opportunity to acquire brands like Modcloth that are sort of vertically integrated, [and have] great margins and unique product that is not found anywhere else,” said Lore.
So, with ModCloth we have a partially vertically integrated niche player. This is a perfectly fine strategy. In fact, it is one of few viable strategies in a world of growing marketplace players (aggregators) like Amazon. It is thus interesting, that Lore is explicitly pointing this out. (Especially his “not found anywhere else”, which gets to the crux of it.)
Amazon, meanwhile, is set to become the largest apparel retailer in the US, bafflingly (Look at how they present fashion. No, really, look at it and weep.):
But can Jet.com still catch up to Amazon’s considerable head start? The juggernaut is set to become the largest apparel retailer in the US this year, according to Cowen and Company.
So, what is Jet.com, Walmarts online division which just bought that vertically integrated player, going to do? Exactly, competing on price! Genius!
Jet.com is focused on price efficiency, while Amazon is focused on speed efficiency. Amazon’s massive, vertically integrated logistics infrastructure is much more developed than Jet.com’s.
And yes, there is Walmart’s size:
Jet.com has always been a multi-brand retailer, but it now has access to a vastly wider array of products in Walmart’s inventory. ”Walmart is able to buy in truckload quantities and bring them into warehouses [at] over 4,000 points of distribution,” said Lore, adding that “leveraging the power of a centralised fulfillment network, leveraging better buying and being able to move that product in full truckloads” should not be underestimated. It’s especially useful for groceries which, along with apparel, is one of the fastest-growing categories online, and one that Amazon is inching into itself.
There is some truth to this. But here’s the problem: As with other stuff before at Walmart, this logistics infrastructure was not built for e-commerce. Hence, it solves different needs.
Wal-Mart Stores Inc. is one of a growing number of big-box retailers building out their supply chains with distribution centers designed to meet the demands of online shopping. The company expects to open four such giant facilities this quarter, as it aims to triple online sales by 2018, to $35 billion from $12 billion last year.
Building fulfillment centers designed to cater to e-commerce, which demands the ability to handle a large number of small orders, can help retailers conduct more profitable online sales, said Brian Kilcourse, managing partner at RSR Research LLC, a retail technology consulting firm.
So, yes, the size of Walmart helps with certain things. But it is not as much a help as some may imply. (Or otherwise there never would have been a reason to buy Jet.com and Marc Lore and team in the first place.)
Business of Fashion:
[Sucharita Mulpuru, chief retail strategist at Shoptalk] sees value in the ModCloth acquisition for its private label offering, customer data, established relationships with suppliers and pricing relevance, “particularly in the contemporary space,” she said. “ModCloth doesn’t have a lot of premium [brands] that, say, a Shopbop [owned by Amazon] has.” Walmart and Jet.com’s audience is more likely to contain new customers.
Like Jet.com/Walmart’s other acquisitions, ModCloth will continue to be run independently. And how does that vertically integrated player compete with Amazon best? Yes, on price. We got that already. But how do we get those low prices to the customers? Exactly, with brick-and-mortar stores! Someone needs to spend that precious Walmart money somehow, baby!
Under Walmart’s umbrella, ModCloth will have more working capital, be able to open more stores faster, take advantage of back-end efficiencies such as credit card processing rates and have the “opportunity to now smartly expand the assortment in a much more segmented way,” said Kaness. And ModCloth will gain access to Jet.com and Walmart’s customer base — the latter of which is already one of the biggest plus-size retailers in the country.
Lore said ModCloth’s private label was the “most interesting” portions of the business. The retailer can now take advantage of its parent company’s relationships with vendors and supply chain backend integration to find new efficiencies.
Over the last two years since Kaness joined, ModCloth has expanded exclusive product from less than ten percent to over 50 percent, launched the branded ModCloth collection and “built out other programs around proprietary product.”
So, to summarize:
- The most interesting part of ModCloth, Jet.com’s most recent acquision, are its private labels.
- ModCloth will now gain access to Jet.com & Walmart customers.
- Those and more customers will be awed by low prices.
- Walmart’s logistics infrastructure, which the retail giant realized in 2015 is not perfectly suited for e-commerce, is a big advantage for the group.
But wait, there is more. Jet.com -low prices, remember- is apparently ‘geared for a more premium, higher-end customer’ compared to Walmart:
Lore said Monday that many of the footwear and apparel brands on-boarded through Jet.com’s recent acquisitions are not as interested in Walmart. “Jet.com is geared for a more premium, higher-end customer. The brands feel comfortable there and it’s just building relationships. Hopefully over time proving that we can take some of these brands over to Walmart,” he said.
I got nothing on this one.
Look, maybe all this will work out just fine. Walmart is huge and hence has buying power with manufacturers and capital to just buy companies and on it goes. You need (a lot of) money to get to a level in e-commerce most just can’t get to. Hence the competition looks different up there. Walmart can potentially play a game less than a handful of companies worldwide(!) can play today. This will take not just capital but also a sense of where one wants to go with all of this.
Maybe a traditional holding with a lot of different companies going for different online markets with diverging strategies will work best for Walmart.
But pretending that there is some coherent thematic parenthesis to what Lore and company are doing right now is making a fool of oneself.
* ModCloth Is the Newest Entry to Walmart’s ‘Online Retail Holding Without Strategy’
* It’s the First of Many to Come: Walmart Acquires ShoeBuy For Jet.com
* Walmart Built Ecommerce Strategy for Themselves, Not Users
* Walmart’s Tech Incubator ‘Store No. 8’ Sounds Not That Appealing to Startups
* Walmart Still Doesn’t Understand Amazon Prime, Kills ShippingPass Without Substitute