With a string of new millennial-focused apparel acquisitions, Walmart is powerfully charging toward a new demographic.
In October, the giant retailer announced the acquisition of Bare Necessities, a company selling intimates online for 20 years. Earlier that month, the company announced a $100 million deal to buy Eloquii, a four-year-old startup that makes and sells its own line of plus-sized women’s fashion, primarily through its website.
Walmart is aggressively expanding its e-commerce clout by bulking up its private-label brands to better battle with online-shopping giant Amazon. The Bentonville, Arkansas-based retailer’s string of small fashion deals is designed to help the retailer access younger, millennial customers who do not normally shop on its website.
The average Walmart shopper is in their early fifties, so these digital brand acquisitions serve as a strategy to appeal to a new generation of trendy online consumers.
Walmart’s latest efforts to attract younger shoppers include its 2017 acquisitions of Modcloth and Bonobos, two digital-first upscale fashion brands with large millennial followings. This year, Walmart also built a new mattress brand called Allswell to compete against bed-in-a-box competitors like Leesa and Casper.
“Walmart’s e-commerce ramp up is notable,” said Ivan Feinseth, chief investment officer at Tigress Financial Partners. “It continues to increase its online retail presence and reach nontraditional Walmart shoppers.”
In November, the Bentonville, Arkansas-based company reported comparable sales climbed 3.4 percent growth, stronger than the 2.9 percent expected by analysts. Walmart added it anticipates comparable sales to sustain this streak and grow “at least” 3 percent next year. Sales at Walmart’s U.S. stores rose to $80.6 billion last quarter, a 3.7 percent gain from a year ago, largely boosted by e-commerce purchases. Online sales soared 40 percent during the period.
The world’s largest retailer continues to look for ways to appeal to younger shoppers and distinguish itself from rival Amazon. As customers shop more online, Walmart is racing to capture these shoppers through an exclusive brand offering they can’t find anywhere else.
According to eMarketer, Amazon will capture 48 percent of online retail sales in the U.S. by the end of this year. Walmart will capture just 4 percent. Computer and electronics is the leading product category for Amazon, but apparel and accessories are now a close second. The categories surpassed books and music in 2017. Amazon’s U.S. apparel sales are expected total nearly $40 billion in 2018, or 15% of Amazon’s e-commerce business and 38.5% of all online apparel sales.
In the backdrop of Amazon’s explosive e-commerce growth across the country, Walmart’s competing strategy is to poach customers who wouldn’t typically shop at Walmart by offering exclusive brands that shoppers can’t find anywhere else. Walmart is focusing its acquisitions to capitalize on the booming apparel and accessories sector.
“We are laser focused on developing a portfolio of direct-to-consumer brands with a unique assortment you can’t find anywhere else,” Andy Dunn, senior vice president of digital consumer brands at Walmart said, in a blog post announcing the acquisition.
Direct-to-consumer brands are hot right now. Companies are upending traditional retail by bypassing selling products through department stores, boutiques, or other retailers. These brands are born online and sell directly to consumers via the internet. The business model has exploded by attracting millennials who naturally turn to social media and smartphones for learning about brands and shopping.
“I found out about Eloquii through Instagram like most of the other brands I shop,” said Angelique Copney, a 29-year-old Brooklyn native who prefers the convenience of shopping online to physical stores. “I love every item I’ve ordered from them and was ecstatic to finally find a pair of boots that fit my full-figured legs.”
Since its founding almost 60 years ago, Walmart’s appeal to American shoppers is defined through defeating competition by growing it’s ever expanding network of big-box stores and offering low prices that has allowed it to flourish as the biggest retailer in the United States.
Today, there is a Walmart within 10 miles of 90% of the population in the United States, leaving restricted opportunity for expansion.
Yet in the era of e-commerce, brick-and-mortar footprint can only go so far as a competing strategy. Walmart is slowly adapting its economical approach to capture a different and newer demographic in order to grow: a younger, more affluent shopper.
Bonobos, Modcloth, Bare Necessities, and Eloquii are brands that wouldn’t instinctively seem like an extension of Walmart. That appears to be the point of these acquisitions.
The average Walmart shopper is a white, 51-year-old female with an annual household income of $56,000, according to Kantar Retail. But, with it’s new fashion brands the retailer is seeking to reach younger and higher-income shoppers.
In the New York metropolitan area, where there are few Walmart stores, Walmart’s acquisitions are important to reach shoppers like Copney.
Walmart’s e-commerce push has been trying to appeal to millennials who typically shop online, but traditionally the Walmart brand does not always translate to those customers. The old-time store with a far-reaching footprint promises no-frills and low prices. In many ways, Walmart is the opposite of the very brands the company is now going after, which rely on stylish design, curated Instagram feeds, and outstanding customer service.
By embracing these brands, Walmart is shifting to meet millennials where they are: online and on their smartphones.
Millennials seek out small brands because they like the joy of discovering something new and unique through social media, according to branding experts. Where the typical Walmart shopper is interested in low-prices, millennials want to feel connected to where they shop. Moreover, much of these independent brands like Bonobos or Eloquii, appeal to millennials because of their crafted value-based missions and the inspirational backstory of ordinary founders instead of the corporate and out-of-touch executive commonplace for recognized brands like Walmart.
Walmart is transforming itself to provide customers with a seamless shopping experience whether they’re browsing online from a desktop or mobile device or in a brick-and-mortar store, all while trying to attract new customers.
“You are watching someone changing the tires while the car is moving,” said Kate Newlin, a retail branding consultant. “Walmart is attempting to rebrand itself by virtue of these tiny acquisitions.”
Walmart’s approach has been to keep the brands distinctive and continue to help build loyal followings, while providing resources to scale. For Eloquii and Bare Necessities, as with all of Walmart’s recent fashion acquisitions, the brands will continue to operate as their own standalone websites.
The brands’ online presence dovetails with Walmart’s strategy to expand its online assortment and attract higher-income shoppers.
E-commerce currently accounts for around 4% of Walmart’s total revenue, but the company has been emphasizing online growth going forward to remain competitive in the Amazon-dominated retail market. Since Walmart’s initial blockbuster acquisition of Jet.com for about $3 billion two years ago, in the largest-ever deal for an e-commerce startup, its internet-retailer acquisitions have been on the rise.
Ever since the Jet acquisition, Walmart’s online business has soared and Mark Lore who ran the company is now in charge of the entire e-commerce business at Walmart. Jet, based in Hoboken, New Jersey, has been Walmart’s conduit to expand outside its core shoppers in rural and suburban America.
Walmart’s brand repertoire has provided the brick-and-mortar giant with a diverse online product portfolio along with increased digital marketing expertise which should help the company withstand growing competition from internet retailers.
In an effort to appeal to these new customer demographics that would otherwise not be interested in shopping at Walmart, the retailer has been intentional in keeping the look and feel of these brands as unique as they were pre-acquisition.
Walmart’s strategy will be to uphold the charm of these brands that have appealed to younger shoppers, according to Newlin. Many customers who shop at the newly acquired brands don’t even know they are indirectly shopping at Walmart.
“It’s an audacious attempt but I don’t think they have another choice,” Newlin said. “The risk is what’s going to happen when customers learn the puppeteer pulling the strings of their beloved brands is Walmart?”