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Finanzas: Wal-Mart Has No Business Getting Into This Business Model

Finanzas: Wal-Mart Has No Business Getting Into This Business Model
Junio 20, 2017

Autor/Fuente: Seeking Alpha 👤Periodista: María Luisa Ayala 🕔20.Jun 2017



  • The retailer’s area of expertise is selling low-cost goods in high volumes.
  • The acquisition of Bonobos pushes the retailer deeper into uncharted water.
  • A string of similar deals in the recent past says Wal-Mart thinks it can be a niche player.

On Friday, obscured by the dust kicked up by (NASDAQ:AMZN) after reporting it would be acquiring Whole Foods Market (NASDAQ:WFM), there was another curious (albeit much less interesting) acquisition made –discount retailer Wal-Mart Stores (NYSE:WMT) announced it would be purchasing a men’s clothing brand called Bonobos for a cool $310 million.

There are some parallels to be sure. Whole Foods is a higher-end grocery, focused on a slightly more affluent customer that’s willing to pay a bit of a premium to eat healthy. Bonobos is a higher-end clothier that’s largely been built on great customer service and a personal touch at its boutiques.

On the flipside, there’s at least one distinct difference between Amazon’s purchase of Whole Foods and Wal-Mart’s purchase of Bonobos. That is, Amazon can make a struggling Whole Foods work, whereas Wal-Mart is apt to screw up a Bonobos that’s working just fine without it.

I fear, however, the Bonobos acquisition is a microcosm of where Wal-Mart thinks it wants to go. Let’s hope it isn’t.

Unfamiliar Territory

I’ve been firm but fair with Wal-Mart in the past.

Just a couple of weeks ago I lauded the company’s effort to get more serious about its electronics opportunity, yet cautioned it wouldn’t do the retailer much good if it wasn’t willing to staff those areas appropriately. In 2013, I called the company out for refusing to recognize the impact repeatedly miserable shopping experiences can have on its growth. Though I didn’t explicitly say as much, Wal-Mart’s recent (finally) spending on e-commerce looks like it’s starting to pay off, yet its previous foray into smaller-footprint stores was now clearly a mistake.

I only make the point to make clear there’s no particular agenda or bias when I say that Wal-Mart has no business buying Bonobos, particularly if it’s expecting to replicate the Bonobos business model in other verticals.

And that is what it’s doing, at least according to Bonobos founder and chief Andy Dunn. He said of Friday’s news:

We began Bonobos ten years ago to give men a completely different product and shopping experience: better fitting, higher quality clothing, in new and imaginative ways. That will always remain our mission [as one of the company’s] digitally-native vertical brands. We are excited about applying all that we have learned to help shepherd in the next era of retail.

And one doesn’t have to look that far back in time to realize Bonobos isn’t the first specialty retailer Wal-Mart has recently acquired, presumably to continue operating them as standalone brands. It bought ModCloth in March, MooseJaw in February, Hayneedle in March of last year, and more.

What gives? Dunn added what may sum up the matter by saying “I saw Walmart acquire Jet and then ModCloth, and, I thought, they get the future of e-commerce is brands.”

He’s right to a large degree. Most goods are a commodity now, online or offline. While Wal-Mart has made inroads against Amazon in many regards, the price war they’re waging is one that will leave minimal profits for the winner. The next evolution in online is the melding of online and offline into an experience. Brand names that can do what no other player can do will facilitate that. It’s the reason MooseJaw and ModCloth and Bonobos are successes.

But, it raises the question: What exactly does Wal-Mart see in Bonobos that it can make better for itself? Unfortunately, most anything Wal-Mart could do to grow the brand will end up killing the brand.

As much as I hate to rail on the idea again, go back to Wal-Mart’s willingness to rebrand and purchase new fixtures for its electronics departments. They look great. They’re still understaffed though, and more qualified workers would arguably do more to help the company’s electronics business than a new look does.

In that same vein, I fear Wal-Mart could very well try to treat Bonobos like it treats its stores, first cutting payroll as a means of cost-control without realizing just how critical that payroll expense may be to Bonobos’ sales. Ditto for MooseJaw. Ditto for ModCloth. So far the retailer has left those businesses alone. The company doesn’t have the best track record of being consistently willing to spend where it needs to spend though.

In other words, given enough time, Wal-Mart could end up ruining a premium-minded Bonobos by trying to run it like a discount-oriented Wal-Mart store.

Looking Ahead

Maybe I’m wrong about Wal-Mart’s online ambitions of addressing the higher-end shopper. Indeed, I hope I am wrong about its strategy. I don’t think I am though. I suspect Wal-Mart actually believes it can do that business well. I suspect Wal-Mart even believes it will have enough discipline to leave those specialty retail operations — and their online operations in particular — alone rather than meddling as a means of extracting more revenue and more margins.

Whatever the case, just when it looked like Wal-Mart was getting back on track following last quarter’s 63% improvement in e-commerce sales of cheap goods, it takes another left turn into a brand-oriented business that’s out of its wheelhouse.

Maybe Wal-Mart hasn’t quite figured out what it wants to be after all. Fortunately it was only $310 million … this time.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Fuente: Seeking Alpha

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