Walmart makes a move with Bonobos. Checkmate?

A few hours after Amazon announced their acquisition of Whole Foods, Walmart revealed their purchase of Bonobos, the high end e-commerce retail company for $310 million dollars. Walmart’s move shows that they are definitely serious in staying competitive with Amazon.

Many are asking the questions, “Why Bonobos?” and “What are some reasons why Bonobos agreed to the acquisition?” There have been rumors that consumers of Bonobos are unhappy about the purchase because they are afraid that it may dilute the brand and decrease brand equity.

To answer the first question, “Why Bonobos?” we have to look at Amazon’s stunning performance as an online retail giant. There is not doubt about it that Amazon has dominated the e-commerce industry, capturing 53% of all e-commerce sales in the US. These numbers are tremendous as the industry is seeing a growth of 20 million online shoppers in just one year. As the market grows, Amazon’s success grows with it. The rapidly growing world of online shopping are hurting brick and mortar stores . Walmart, one of the largest brick and mortar stores, along with Target, are slowly losing customers. In order to fight back, Walmart acquired Bonobos, not just for branding purposes, but for industry insight. Walmart plans to work with Andy Dunn, cofounder and CEO of Bonobos, in Walmart’s digital operations sector.  As a successful online brand, the company is hoping to play the game with online retail and fight back.

The second question, “What are some reasons why Bonobos agreed to the acquisition?” can be answered by what Bonobos was lacking: “economies of scale.” They simply just need the financial backing and platform for their products – something Walmart could easily provide for their brand. The acquisition route allows Dunn to commit his company on providing clothing to his audience, without sacrificing quality, as fixed costs remain sustainable.

With Amazon attempting to dethrone Walmart as US’ largest grocery provider, Walmart is fighting back by acquiring several strong, formidable e-commerce channels to stand their ground. The real question is, who will win?

REFERENCES:

1. BI Intelligence. (February, 2017). Amazon accounts for 43% of US online retail sales. Retrieved from http://www.businessinsider.com/amazon-accounts-for-43-of-us-online-retail-sales-2017-2
2. Lunden, I. (June, 2017). Walmart to buy  Bonobos for $310M as it doubles down on Fashion. Retrieved from https://techcrunch.com/2017/06/16/walmart-to-buy-bonobos-for-310m-in-its-bigger-push-into-fashion-retail/?ncid=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+techcrunch%2Ffundings-exits+%28TechCrunch+%C2%BB+Fundings+%26+Exits%29
3. Merced, Mi. (June, 2017). Walmart bo Buy Bonobos, Men’s Wear Company, for $310 Million. Retrieved from https://www.nytimes.com/2017/06/16/business/walmart-bonobos-merger.html?smid=pl-share
4.  Sanders, S. (June, 2017). Wal-Mart to Buy Bonobos In Challenge to Amazong. Retrieved from http://www.npr.org/2017/06/18/533402821/wal-mart-to-buy-bonobos-in-challenge-to-amazon