Commentary

Walmart's Store No. 8 Will Launch And Nurture E-Com Start Ups

Walmart continues to augment its e-commerce strategy of “if you can’t beat ’em, buy ’em or incubate ’em.” Yesterday, the Bentonville, Ark.-based retailer announced the formation of Store No. 8, an internal hub meant to foster e-com innovation, in the heart of Silicon Valley.

“The initiative was announced at the Shoptalk conference … in Las Vegas by Jet.com founder and CEO of Walmart's U.S. e-commerce business. Marc Lore was a keynote speaker at Shoptalk's inaugural event last year and just a few month's later his company, Jet.com, was purchased by Walmart for more than $3 billion,” reports Laura Heller for Forbes.

“These businesses will run just like any other startups but, said Lore, ‘will be ring fenced by the rest of the organization and backed by the largest retailer in the world,’” Heller writes.

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Lore tellsBloomberg’s Spencer Soper that Walmart “has an advantage over ‘pure play’ e-commerce companies because of its large network of stores that attract shoppers for such items as fresh food.”

“‘Every day, I become more and more convinced about the omnichannel advantage,’ Lore said, referring to a sales strategy that combines online and in-store shopping,” Soper writes.

Seth Beal, previously an SVP for global marketplace and digital store operations at Walmart, and Katie Finnegan, who led Jet’s corporate development, will lead the operation.

“The new venture takes its name from an early Walmart store, built in an old bottling plant, that the company founder Sam Walton used to try out new retail strategies,” writes Michael J. de la Merced for the New York Times. “Store No. 8 is meant to foster relationships with entrepreneurs, particularly those in the fields of artificial intelligence, autonomous vehicles and other emerging technologies.” 

Walmart has been active in the space for some time, but in more of a research mode.

“Prior to establishing this venture, Walmart has been at the forefront of tapping into new technologies and innovative start-up companies through its @WalmartLabs division. Since forming in 2011, this unit has acquired over 15 companies, which have provided the retailer with access to new technologies and capabilities. These have principally operated at the intersection of ecommerce, mobile and social. ‘Store No. 8’ has a much broader remit than this in terms of the technologies which it will focus on,” writes Stewart Samuel for IDG Retail Analysis.

Meanwhile, the company “has been on an e-commerce shopping spree so far in 2017,” acquiring ShoeBuy in January and Moosejaw in February, reports Mike Murphy for MarketWatch. Then the company announced Friday that it had purchased San Francisco-based ModCloth, an online specialty retailer of fashions, shoes, handbags and accessories targeting Millennial women. 

“The company declined to specify the price on the deal … saying only that it was in the same range as its previous two purchases of online businesses. Those were $51 million and $70 million,” the AP reports.

“With each of those acquisitions, Walmart is giving the CEOs responsibility not only for their Web sites but for their specific category across the organization,” Lore said at ShopTalk, CNBC’s Krystina Gustafson reports. “That empowerment, I think, is the difference,” he continued.

“He would know firsthand,” Gustafson writes. “Walmart’s $3.3 billion purchase of Jet.com raised some eyebrows last year, as many questioned how Jet's startup culture would jibe with Wal-Mart's corporate structure.” But Lore says after some initial hesitance, employees at his Hoboken, N.J.-based operation are “fired up and having fun” and “the culture hasn't changed a bit.”

“‘Growth allows us to reach more women, grow our community, and amplify our message,’ ModCloth cofounder Susan Gregg Koger wrote on the brand's blog,” Christopher Luu reports for Refinery29. But “Koger's blog post met with both messages of support and a fair share of criticism. While many women were glad to hear that the brand would be expanding its brick-and-mortar presence … others questioned the company's alignment with Walmart,” he continues.

“Walmart hurts local communities, has a terrible track record for human rights violation in its supply chain, actively restricts the right to unionize, stands against the rights of women, and refuses to provide basic healthcare for its employees,” wrote one commenter cited by Luu. “As such, I will no longer be a customer of ModCloth.”

Time will tell if the same esprit that Lore says has replaced any initial pessimism at Jet.com will infect the designers who sell on ModCloth. 

Those “who are interested in expanding their consumer reach will now have the opportunity to serve more customers through Jet.com and our other e-commerce sites,” Walmart pointed out in the release announcing the deal.

Innovation is good. Reach is profitable.

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