Walmart Inc.’s planned sale of Modcloth marks both a retreat and an advance — proof the massive retailer is learning some new tricks as it charges toward a more digital future.
Once upon a time, Walmart could have bought Amazon with pocket change. But like most of retail, it missed the first wave of the web revolution and found itself not just losing market share online, but missing the next retail wave, too.
After a few false starts, Walmart made a concerted effort to change that with the $3.3 billion acquisition of Jet.com in 2016, which brought both a new digital business and the expertise of Marc Lore, who now leads the retailer’s e-commerce effort. The Jet deal was followed by a series of others, including Shoebuy, outdoor site Moosejaw and, in March 2017, ModCloth. Bonobos came later that year and intimates firm Bare Necessities was added in 2018.
But while Walmart started off with the notion that it would scale by building a multibrand direct-to-consumer business, it now is focusing on names that can work across its various properties — including walmart.com and potentially its stores — and stand on their own.
“For brands that we’ve acquired or incubated, our focus will be deploying them to maximize the omnimedia opportunity,” said Walmart spokesman Ravi Jariwala. “We’ve got a lot of different ways that we can maximize the opportunities for these brands.”
ModCloth somehow never made the transition as its products were sold largely through the brand’s own web site.
So, after just two years, Walmart moved to unwind the investment.
That shows that the retailer has picked up a little of the Silicon Valley pivot and is more ready than ever to fail fast, learning from its mistakes and following the market.
It’s a new skill for Walmart and one the fashion industry at large is still trying to pick up.
It’s worked so far for the discount giant.
Even though Jet.com has not grown into a powerhouse on its own right and has largely been absorbed into walmart.com, the company overall has some of its spring back. Walmart’s stock, which rose 1.6 percent to $118.16 on Friday, has handily outperformed the Dow Jones Industrial Average since the Jet deal and picked up more than $100 billion in market capitalization.
That’s a big enough gain to see past the quick, disappointing turn at ModCloth, which has sales in the neighborhood of $150 million. There are questions still around some of the other brands Walmart acquired in its direct-to-consumer push, such as Bonobos, but no other divestitures appear imminent.
And instead of giving off a once bitten, twice shy vibe, Walmart seems to be leaning in.
“We’re going to evolve both our omniretail strategy and certainly our M&A approach,” Walmart’s Jariwala said.
The company has something of a portfolio of brands and businesses now. And Jariwala said, “Acquisitions will continue to play an important role in how we build that portfolio.”
Walmart’s web business is only becoming more important, having grown 40 percent last year followed by more gains in the first half.
Now the company just has to be nimble enough — and, yes, maybe fail fast enough — to figure out how to make money at it.
Morgan Stanley analyst Simeon Gutman estimated that Walmart will lose $1.7 billion on its e-commerce business this year on top of $1.4 billion last year.