Does Walmart’s role take the shine off Bonobos, other sites?
Brendan Bush used to buy just about everything from Bonobos, including his swim trunks and the suit he wore to his wedding.
But about a year ago, he stopped. The clothing company announced it had been acquired by Walmart for $310 million — and Bush hasn’t given it a cent since. It hasn’t been an easy boycott — he has yet to find a replacement for his Bonobos jeans, which are now covered in holes — but Bush, 38, who works at a technology company in Burlington, Vt., says he will not support a brand that has come under fire for its business practices.
“I don’t begrudge a company for selling itself, but there’s something particularly egregious about the Walmart deal,” he said. “I don’t like the way they treat their employees or how they’ve put smaller retailers out of business. It’s not a company I want to support.”
As Walmart aggressively buys upscale niche brands, analysts say it’s facing an uphill battle to win over younger, more affluent shoppers across the country. Although traffic at Walmart.com is growing rapidly — 34 percent since last year — the company’s forays into higherend online brands have been less successful.
Online traffic to Bonobos.com, which Walmart acquired last June, has fallen 12 percent in the past year, according to the most recent data available from ComScore, an analytics firm based in Reston.
The number of monthly visits to other sites recently bought by Walmart has also fallen from a year ago: They’re down 7 percent at outdoors goods site MooseJaw.com and 8 percent at ModCloth.com, according to ComScore data. (Both brands now also sell on Walmart’s Jet.com.)
Newer image
Walmart, which has become the world’s largest retailer by promising rockbottom prices, has made sweeping efforts in recent years to move beyond its no-frills image. It spent $3.3 billion buying Jet.com in late 2016 in hopes of winning over the site’s more affluent, big-city shoppers. It also brought on Jet founder Marc Lore — who previously started Diapers.com and Soap.com — and put him in charge of its online operations. (His pay package last year: $10.1 million.)
“If you think about Walmart’s existing market, it’s totally tapped out,” said Paula Rosenblum, managing partner of the retail advisory company RSR Research. “They need to find new customers, which is exactly why they bought a group of chains that don’t have the Walmart name on it.”
Monthly traffic to Jet.com has fallen 15 percent from a year ago and 32 percent since its $3.3 billion takeover by Walmart in September 2016. That measure has long been a way for companies to gauge their reach and visibility.
David Echegoyen, chief customer officer for Jet.com, said the company is increasing its focus on “urban and affluent” shoppers. The declining traffic numbers, he said, were a reflection of that shift in focus.
“That’s a vanity metric for the outside world; it’s not what we’re focused on,” Echegoyen said. “We’re more focused on the quality of traffic than the quantity.”
The idea, executives said at the time, was to build a collection of higher-end brands that would fall under the Jet umbrella. The company acquired specialty sites in quick succession: ShoeBuy in January; Moosejaw in February; ModCloth in March; and Bonobos in June.
It seemed like a winning strategy: “The Jet customer demographic — millennial, urban, higher-income —aligns well with the demographics of ModCloth and Bonobos,” Walmart spokesman Randy Hargrove told Business Insider last year.
Labor issues
But analysts say well-todo 20- and 30-somethings in large cities also tend to be sensitive to Walmart’s business practices. The company has long been a target of labor advocacy groups who say its low wages push some workers to turn to food stamps and other public programs to make ends meet. Walmart this year raised its starting hourly wage to $11 from $9, but it still lags behind competitors like Target (where the minimum wage is $12 an hour) and Costco ($13 an hour).
“Walmart bought Jet because they were the best thing they could acquire at the time, but I’m not sure they have the skills to navigate this new reality of increased competition and socially-conscious customers,” said Milton Pedraza, chief executive of the Luxury Institute, a New York-based market research and consulting firm. “You can buy the website. You can buy the talent. But there’s still that basic culture clash.”
Last year, Walmart rolled back its health coverage for workers at Bonobos, ModCloth and other acquisitions, resulting in higher out-of-pocket premiums and deductibles for workers. ModCloth’s former chief executive, Matt Kaness, left Walmart in March, seven months after selling his company to the Bentonville, Ark.-based retailer.
“In case there was any question that this was the same old Walmart, the company quickly went and cut workers’ benefits,” said Dan Schlademan, codirector of OUR Walmart, a nonprofit group that advocates for higher wages. “Walmart is trying to hide behind these new brands — ModCloth, Bonobos — but it’s clear that their labor practices have not changed.” (OUR Walmart has an ongoing campaign and website, ModClothIsWalmart.com, aimed at spreading the word that ModCloth is owned by Walmart.)
As a result, some longtime Bonobos customers are scouring eBay for Bonobos shirts to avoid spending money directly at Walmart, while others say they’ve asked local tailors to recreate pants that are starting to fall apart.