Could Acquiring Bonobos Help Wal-Mart Face Growing Competition?
Wal-Mart (NYSE:WMT) is reportedly planning to buy men’s clothing e-commerce company Bonobos for about $300 million. Although the exact details of the potential deal are not available, it is believed to be in advanced stages of talks. Bonobos is known for providing customers with the right fit, which usually leads to higher customer satisfaction. The company is reported to be profitable even with its free shipping and convenient returns policy, which would definitely be beneficial for Wal-Mart.
Wal-Mart has been on an acquisition spree since it acquired Jet.com, which transformed the company’s online operations and brought in a new team of e-commerce executives. The company’s recent acquisitions include online furniture retailer Hayneedle (acquired before the Jet.com merger), women’s online retailer ModCloth, outdoor gear seller MooseJaw and online shoe site ShoeBuy. These acquisitions should provide Wal-Mart with a diverse product portfolio, along with increased digital marketing expertise, which could help the company face growing competition from internet retailers such as Amazon (NASDAQ:AMZN).
Wal-Mart’s Is Growing Its Online Space
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Wal-Mart’s e-commerce business includes all web-initiated transactions including those through Walmart.com – such as ship-to-home, ship-to-store, pick up today, and online grocery – as well as transactions through Jet.com. E-commerce is also the backbone of the recent free two-day shipping with a $35 order available at the company’s website. Globally, on a constant currency basis, the company’s e-commerce sales and GMV increased 15.5% and 17.5%, respectively, in the fourth quarter of fiscal 2017 (ending January 2017). In fact, the company covers more than 35 million SKUs to date from a marketplace perspective.
The most striking development of 2016 was Wal-Mart’s comeback in the e-commerce space. The company added millions of items to its marketplaces, which helped it resume its online growth in 2016. In addition, the company expanded the number of locations for shoppers to pick up online orders, making the process more convenient. Wal-Mart is expanding its online selection, mainly by inviting more retailers and consumer brands to sell on Walmart.com and its international e-commerce sites. In 2016, Wal-Mart’s e-commerce sales contributed 15% of its total retail sales.
E-commerce has been on the rise in the last several years, thanks in large part to internet retailers (Amazon alone accounted for ~42% of the U.S. e-commerce sales in 2016). Accordingly, it is necessary for brick-and-mortal retailers to pick up their digital initiatives to grow further. This Bonobos acquisition, if it happens, is right in line with Wal-Mart’s strategy to expand its online business.
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