Retail Channels

Walmart doesn't want to be a house of brands

Bonobos didn't fit into Walmart's flywheel. Here's what that says about the retailer's ecommerce strategy.

bonobos store

Walmart sold Bonobos for $75M. (Courtesy photo)

Welcome to Dealboard. In this weekly feature, The Current is providing a look at the mergers, acquisitions and venture capital deals making waves in ecommerce, CPG and retail.

In 2017, Walmart bought digitally native apparel brand Bonobos for $310 million. At the time, the acquisition was seen as a landmark for a generation of brands that brought Silicon Valley savvy to the consumer goods market, and created a whole new playbook called DTC that helped many more brands launch in the process. In the 2017 announcement about the deal, CEO Andy Dunn talked about how Bonobos aimed “to give men a completely different product and shopping experience: better fitting, higher quality clothing, in new and imaginative ways.” The then-10-year-old brand centered a focus on not just the products that consumers bought, but how they shopped for them. With Dunn at the helm of a stable of digitally native vertical brands at Walmart, this approach would “help shepherd in the next era of retail,” he said.

Fast-forward to 2023. On April 13, Walmart announced a deal to sell WHP Global and Express for $75 million. The deal, which includes a provision that will allow Express to license Bonobos, comes after Walmart sold several other DTC brands it acquired in that period, including outdoor retailer Moosejaw, digital fashion retailer Modcloth and intimates retailer Bare Necessities.

So, what changed, and why did Walmart sell at a steep discount?

In search of a reason for this rollback, we could go into a long rumination about the evolution of direct-to-consumer brands, the state of venture capital, the pitfalls of post-acquisition integration and even the economic headwinds of the moment.

But if you’ve followed Walmart’s moves closely over the last two years, a simpler truth seems clear: Walmart changed strategy, and Bonobos was no longer a fit.

When the Bonobos deal was announced in 2017, Walmart ecommerce was still in test-and-learn mode. The nation’s largest retailer recognized that digital shopping was growing, and it needed new tools in the race against Amazon and fast-gaining Target. At the time, several building blocks were in place, with a digital marketplace launched in 2010 and significant investment. With the $3.3 billion acquisition of in 2016, Walmart brought on both additional platform capabilities and a leader of ecommerce in Marc Lore. From there, it went on an acquisition spree that included the brands noted above, as well as India-based ecommerce giant Flipkart.

Under this strategy, Walmart had a number of different brands under its roof. Distributed across categories, each still existed as a standalone entity. But as Dunn’s role showed, Walmart could learn from each. It wasn’t clear how the brands would ultimately be integrated into the retailer’s stores and offerings, but the additional labels at the least provided a base layer for a new digital push.

Then the pandemic arrived. Walmart ecommerce entered build mode. Out of necessity, Walmart ecommerce had to transform from an experiment to a juggernaut. Over the two years of 2020 and 2021, It expanded in-store pickup capabilities and delivery, launched a membership program in Walmart+ and grew a fulfillment network that enabled it to more quickly reach a wider swath of the 90% of the U.S. population that executives famously say lives within 10 miles of its stores.

When the dust settled, Walmart emerged with a massive ecommerce business in place, having more than doubled sales from $30.28 billion in 2019 to $67.39 billion in 2021, according to Insider Intelligence. It was also a very different ecommerce business from 2019. On earnings calls, executives were not talking about acquisitions. Instead, they were now talking about Walmart’s flywheel, which put a marketplace and logistics at the center to unlock advantages on price and introduce more advertising opportunities.

The house of brands was no longer Bonobos and Modcloth. Instead, it was the retail media business Walmart Connect, the data analytics business Walmart Luminate and the white-label last-mile delivery service Walmart GoLocal.

Like Amazon before it, Walmart found that the key to ecommerce growth was not owning a portfolio of omnichannel labels like Bonobos, but building out services that could power new and high-growth digital businesses.

The brands, each with their own sites and stores, were not the engine of growth; rather, it was the infrastructure that merchandised and delivered items from Walmart's digital shelf.

walmart appWalmart's revamped app. (Courtesy photo)

As this strategy emerged, new priorities did, too. Lore also left in 2021. There were also signs that the retailer learned plenty from the companies it acquired. The fall relaunch of a new line of intimates and sleepwear called Joyspun may have looked right at home on Bare Necessities.

In the meantime, Walmart didn’t do much to integrate Bonobos into its plans.

“Other than learning from and experimenting with Bonobos, Walmart ultimately didn’t really know what to do with the brand and didn’t have all that much ambition to develop it,” wrote GlobalData Managing Director Neil Saunders. “With the focus now firmly on driving the marketplace and on investing in the non-food proposition in stores, Bonobos is even less relevant to Walmart’s future goals.”

Today, Walmart continues to acquire companies and roll out a host of innovation-minded experiments, but all of these tend to roll back up to the dual goals of making it easier and more delightful to shop on, and adding more efficiency and automation to the supply chain that moves goods. The next set of expansion for Walmart seems likely to run through additional business verticals that can be added to the flywheel such as fintech and healthcare – not additional consumer categories like electronics and home goods. The prize, executives said this month, is increased profits as a result of the high-margin returns that internet-based businesses produce.

The new DTC era

This is usually the point when many commentators declare that DTC is dead. After all, Bonobos is just the latest in a series of sales by Walmart. Take them all together, it would be easy to form a narrative about how DTC brands can't make the jump to mass retail. But before you start writing the obituary, let’s be clear: Walmart's gradual sell-off of late-2010s acquisitions doesn’t mean the retailer is done with digitally native brands. In fact, Walmart's aisles are likely to keep looking more and more like your Instagram feed. Even a cursory scan of recent headlines shows that the retailer continues to add products from startups to its assortment. Just recently, it introduced drinkware brand Reduce, cereal darling Magic Spoon, temporary tattoo brand Inkbox and eco-friendly home goods brand Grove Collaborative. Another result of the pandemic-prompted shift in shopping is that digitally native brands are finding opportunities to increase sales by introducing products through retail channels, and Walmart will continue to be a prime destination of this expansion, especially as the retailer seeks to keep aggressively growing its marketplace.

But introducing a brand to the assortment through a wholesale or third-party relationship is much different from owning and operating standalone stores. In the end, the goal of a marketplace-based flywheel strategy is to spur more sales on, not Bonobos. Put another way: Walmart already has its own stores. It doesn't need to bring others into the fold. It does, however, need the products that brands offer, especially as they continue to find new avenues to meet consumer tastes and build loyalty.

Grove Collaborative is expanding at Walmart. (Courtesy photo)

Going forward, Bonobos may in fact find more success under WHP Global. The firm’s business is built around acquiring consumer brands, and continuing to build them out as standalone labels with a focus on digital growth. After years of neglect in Walmart boardrooms, that’s likely what Bonobos needs. The brand continues to deliver “double-digit sales growth,” an announcement noted, and the licensing deal with Express may give it a path to expansion through an already-well-known mall retailer with 540 locations. It also may benefit from shared resources at WHP. Bonobos joins a portfolio of 10 brands, and it may continue to grow.

While the deal is making headlines now, this Walmart discount ultimately likely won’t hurt Bonobos’ legacy. The menswear brand continues to be in the first sentence of brands that are credited with developing the DTC tactics that changed retail in the last decade. That will continue to enable brands like Magic Spoon and Inkbox to start quickly, even if growth now ultimately comes through a diversified channel strategy by selling through platforms like Walmart. While the two companies couldn’t make a long-term partnership work together, it’s still true that, in retail’s current construction, you don’t have Walmart’s current strategy without Bonobos.

Here are a few more deals of this week’s commerce deals of note:

Kintra Fibers, a materials science company that developed bio-based polyester, raised $8 million in a round led by H&M Group. Participants included FWD, Fashion for Good, New York Ventures, TRE Ventures, Tech Council Ventures and FAB Ventures, as well as angel investors.

Cure, a functional hydration brand, raised $5.6 million in a Series A financing. The round was led by Lerer Hippeau, with participation from Valedor Partners, Simple Food Ventures, Great Oaks Venture Capital, Joyance Partners, Silas Capital and tennis star Kim Clijsters. The female-founded electrolyte brand plans to expand to more retail doors, and grow its team.

The Razor Group, an ecommerce aggregator, acquired German competitor The Stryze Group. Along with the deal, Stryze's largest shareholder Upper90 joined The Razor Group’s second close of a Series C, bringing the round to €80m.

Colavita acquired O Olive Oil & Vinegar. The brand will be led by Paolo Colavita, who is currently VP of West Coast operations for Colavita. The teams aim to expand the brand to more U.S. and global markets. Terms were not disclosed.

Subscribe to The Current Newsletter

Trending in Retail Channels


US imports expected to fall 22% in first half of 2023: NRF

Labor disputes on the West Coast could cause further disruption heading into peak season.

aerial view of boat on water
Photo by Venti Views on Unsplash

When the first half of 2023 is complete, imports are expected to dip 22% below last year.

That’s according to new data from the Global Port Tracker, which is compiled monthly by the National Retail Federation and Hackett Associates.

Keep reading...Show less

Latest from Retail Channels