Will better brands gravitate to walmart.com?The topic is heating up as walmart.com seeks to put the pieces in place to build "an online mall" and bring Lord & Taylor, among other retailers, brands and web sites, in on the initiative. It's a maneuver by Wal-Mart to bolster its image and assortment and compete more aggressively against Amazon.Sources close to Hudson's Bay Co., which owns Lord & Taylor, indicate that Wal-Mart has yet to sign a deal with Lord & Taylor. They also said Jet.com, which is owned by Wal-Mart, is involved."This will be major exposure for Lord & Taylor," said a source close to the Hudson Bay Co.HBC also owns Saks Fifth Avenue, Hudson's Bay in Canada, Kaufhof in Germany, Saks Off 5th and Gilt, but none of these other divisions are said to be tied to the deal with Wal-Mart. Brands at Saks Fifth Avenue are too high-end for Wal-Mart customers generally; Lord & Taylor is moderate in comparison.Market sources questioned why walmart.com and Jet.com would choose to link up with Lord & Taylor, a struggling Northeast regional chain with a limited footprint, though L&T does carry many major and well-known, better and upscale brands such as Ralph Lauren, Vince Camuto, Theory and Calvin Klein.Lord & Taylor would seek the permission of brands to sell them on walmart.com and Jet.com."I clearly support an aggressive department store trying to find initiatives that can provide them rational growth in the future,” said Morris Goldfarb, chairman and chief executive officer of G-III Apparel Corp., whose directly owned and licensed brands include Calvin Klein, Donna Karan, DKNY, Tommy Hilfiger, Karl Lagerfeld, Andrew Marc and Vilebrequin. He said that he can’t freely distribute brands he licenses to Wal-Mart, and that decision rests with the licensor. “Some of the brands we do own we’ll experiment with,” he said. He added he would be willing to try it if it’s something that works for the growth of Lord & Taylor and doesn’t hurt any other retailer or the leverage of the brand.But others won't play ball."Absolutely not. We are not going to sell walmart.com," said a ceo of an upscale fashion brand selling Lord & Taylor, Saks Fifth Avenue and other retailers, who requested anonymity. "I don't want to be in Wal-Mart. We are actually keeping our distribution limited — not expanding it."Whether to sell walmart.com "is a conversation we have had internally," said one vendor that sells L&T and other upscale department stores. "With so much uncertainty out there, you have to ask yourself, ten years down the road, what retailers do we know will still be out there? The only ones for sure are Amazon and Wal-Mart."With business challenging from the retailers' perspective, "everyone has to incorporate Wal-Mart and Amazon in their business, for the long-term. All brands need to get over their distribution exclusivity thing. It's a thing of the past. Product is going to be everywhere at the end of the day. Customers want everything accessible, however they can get it."If walmart.com added brands from Lord & Taylor without receiving permission, "You could cut them off," the vendor added. "Is there going to be resistance by some brands? Probably. But we can sell our stuff to Nordstrom, Saks, Lord & Taylor and some web sites and there's really nothing that prevents those retailers from reselling those products on the Amazon marketplace, on walmart.com, or to a gray market."It is believed that the partnership between Lord & Taylor and Wal-Mart would go beyond a simple affiliate relationship where walmart.com would just be a conduit to link onto Lord & Taylor.com. Instead, walmart.com would display many of the brands sold at L&T, with photos, descriptions and prices, as they appear on lordandtaylor.com. Orders would be made on the walmart.com site while L&T handles the packaging and distribution of what's purchased. The orders would either get mailed to the customer's home, or they could be picked up at a Wal-Mart or Lord & Taylor store. Wal-Mart and Jet would get a small percentage of the revenues.Another source said the envisioned partnership would connect the Jet and Lord & Taylor’s web sites through an application programming interface, or API. That would allow Jet to seamlessly display goods from the Lord & Taylor site and check out the customer, while Lord & Taylor fulfills the order. Jet, like Wal-Mart, would take a cut of the overall sale.Lord & Taylor is already listed as a "top brand" on Jet.com's women’s apparel page, although it’s not clear exactly how the goods made their way to the site. The offering is small, with just 10 pieces, primarily jewelry, perhaps a good size for a test run. Clicking through the Lord & Taylor prompt leads to, among other items, a pair of $35 sterling silver rhodium cubic zirconia earnings. At checkout, they register as fulfilled by a “Jet Trusted Partner.”"The potential hookup between Lord & Taylor and Wal-Mart speaks to the acceleration in retailer-to-retailer platform partnerships in the digital space," said Carol Spieckerman, president of Spieckerman Retail. "As part of that, Wal-Mart is fully leveraging its platform power to attract brands that before would have taken a pass."Wal-Mart’s recent higher-end brand acquisitions are giving others permission to jump into partnership with the retailer," Spieckerman said, referring to the Bentonville, Ark.-based giant's purchase of digitally native brands such as Shoebuy, Moosejaw, Bonobos and Modcloth. So far, there's been no indication that any of these brands will offer their products on walmart.com. Rather, brands seem more willing to sell on Jet.com, which Wal-Mart acquired last year for $3.3 billion. "Going forward, business model and channel diversification will be retailers’ primary growth engines and online marketplaces will expand exponentially as a result."Although many may criticize the high-low aspect of such a deal, Lord & Taylor would be hard pressed to find an alternative collaboration that offers the same level of search relevance, awareness and potential digital traffic," Spieckerman said. "Even without the e-commerce aspects inherent with the deal, retailers are realizing that digital presence is critical to driving traffic to stores. Not such strange bedfellows when you look at all the benefits."Wal-Mart declined to comment but it has already taken some steps to be fashionable. As reported first by WWD, Wal-Mart last month hired Denise Incandela, a veteran of upscale digital businesses, as senior vice president of fashion for Wal-Mart’s U.S. e-commerce sites, which include walmart.com, Jet.com and Shoes.com. She started her new job on Oct. 2 and is based at the Hoboken, N.J., headquarters of Jet.com.“Fashion is a critical category for our e-commerce business given its importance to our customers,” said Scott Hilton, chief revenue officer for Wal-Mart’s U.S. e-commerce business, last month. Incandela "brings incredible leadership that will significantly enhance our efforts to create a specialty shopping experience for our millions of shoppers."Wal-Mart bought Jet last year, and named its founder Marc Lore as head of U.S. e-commerce operations. Wal-Mart also recently purchased the Moosejaw, Bonobos and ShoeBuy e-commerce firms, while Amazon has succeeded in bringing such labels as Nike and Levi's to its site.With Hudson's Bay Co. and Wal-Mart not yet commenting on the partnership, there was plenty of speculation on how it would take form, such as whether both walmart.com and Jet.com would be in on the deal. They first learned of the potential partnership through media reports, including The Wall Street Journal, which was first out with the report."People are confused," said the source close to HBC."Mark Lore is trying everything possible to beat Amazon at their game.He has the ability to approach lord and Taylor and other management to propose these kinds of ideas," said one retail analyst who wanted to maintain anonymity.The source said ultimately HBC could sell L&T. "Divesting Lord & Taylor would make sense. It doesn't make any money."Other sources said that HBC could trigger a bigger move to improve its balance sheet, such as creating a real estate investment trust, or REIT. It's been on the backburner for a while at HBC, and financial sources indicate the timing would make sense considering the depressed value of retail stocks and low interest rates, giving better value on the real estate. HBC has put many of its properties in real estate joint ventures with Simon and the RioCan Real Estate Investment Trust. HBC does own valuable real estate including the Saks Fifth Avenue and Lord & Taylor flagships in Manhattan, as well as several suburban units including L&T stores in Westchester, N.Y., and Stamford, Conn.
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