Amazon, precipitating a retail tsunami with its purchase of Whole Foods market last week, just fired a rocket into the apparel universe, introducing Prime Wardrobe. The try-before-you-buy innovation, similar to clothing subscription boxes like Stitch Fix and Fabletics, is just one more way it’s trying to shore up its fashion weak spots.
That news follows Wal-Mart’s announcement last week that it had acquired Bonobos, the trendy e-commerce men’s fashion brand. (Earlier this year, it bought ModCloth, another Millennial darling, and Moosejaw, an e-commerce site focusing on outdoor apparel.) And last year, it added Jet.com, a massive acquisition putting it on a more equal footing with Amazon.
Observers are a little dizzy watching the tit-for-tat tactics of the two retail titans, as Amazon stretches to become more like a grocery store, and Wal-Mart aspires to be more Amazonian. “There’s such an odd symmetry,” says Mike Paglia, director of retail insights for Kantar. “And it was just bizarre the way the news all came out at the same time.”
He tells Marketing Daily that Wal-Mart’s $310 million purchase of Bonobos “sounds more like Wal-Mart is trying to acquire capabilities rather than the brand, and is looking to bolster its e-commerce capabilities, as it did with Jet.” Andy Dunn, the CEO and founder of Bonobos, which established itself as a customer-service superstar with “ninja”-level assistance, will stay on after the deal closes, reporting to Marc Lore, president and CEO of Walmart U.S. eCommerce.
The grocery battle lines between the two are also getting clearer. “Amazon wants to be a grocery retailer,” says Paglia,”and it already does well in the fulfillment of dry goods. But fresh produce and perishables have been a challenge, and the Whole Foods acquisition gives it distribution points and greater access to shoppers who overlap heavily with the Prime platform.”
And it comes at a time when Wal-Mart is powering up its e-commerce muscle, recently reporting a 63% jump in U.S. e-commerce sales. To better compete with Amazon Prime, it now offers two-day free shipping with no membership fee, an extra discount for people who pick up orders in stores and easier ways to reorder online. Amazon, in a bid to muscle in on Walmart’s demographic territory, just began offering discounted Prime membership for people on government assistance. (Those with valid Electronic Benefit Cards pay just $5.99 per month, compared to the standard annual fee of $99.)
That’s a potential threat to Walmart, as is the government’s new experiment allowing SNAP recipients to use online grocery services. “About 50% of SNAP redemptions, or $34 billion, are at super stores, the majority of which we believe are Walmart,” writes Karen Short, an analyst who follows the sector for Barclays, in her most recent report on the company.
But overall, industry experts, including Short, see the Bentonville, Ark.-based chain’s latest moves as increasing its relevance in the retail dogfight. “We believe Wal-Mart Stores has transitioned from ‘fixing’ to ‘leading,’” writes Short. “The U.S. brick-and-mortar business has made significant progress in recapturing market share, and the company is now taking a leadership role in leveraging both e-commerce and bricks and mortar. Walmart is rapidly developing an expertise in seamlessly combining the strengths of the core bricks-and-mortar business with their e- commerce efforts.”