Walmart buying Modcloth? ‘Say it’s not so’ went the lament from Millennials and other assorted cool people earlier this year. After all, Modcloth is a cutting-edge, online retailer that offers funky clothes for those who consider themselves the opposite of everything the world’s biggest retailer stands for. Modcloth and Walmart could never be a fit – could they?
They may be profitable enough right now but Walmart apparently see the future of retail and they want to change so that they do not get left behind. Walmart wants to be hip. It wants to expand its customer base to include the well-heeled, and wants to convince people that it is a retailer with good values. Heady and varied goals to be sure, but the company has deep pockets and an aggressive business plan, which ironically may be what it takes to make their retail dreams come true.
The company has image problems to be sure. Perhaps with some justification, Walmart has come in for a lot of bashing in recent years. Ask people what they think of it, and inevitably some negative things will come up. ‘Walmart does not pay employees enough’, ‘Walmart is anti-union’, ‘Walmart sells poor quality goods from China’, ‘Walmart is for unattractive people who live in flyover and voted for Trump’ are some popular responses (the last one para-phrased a bit by me, but nevertheless one that reflects a prevailing sentiment). It is a big, low-priced retailer where you can typically get the lowest price on a variety of goods from Nintendo goods through to cucumbers. If you are buying on price, rather than style, Walmart is where you go. It is a philosophy that has served the company well-enough through the recession and post-recession years.
Thing is, although Walmart may be where you go to get things cheap, there is now a cadre of consumers who do not want to go anywhere at all to get the things they need. They like to buy online, and when they do they typically choose Amazon. As well, as a group they are a little different than the core Walmart shopper. A little younger, a little richer, a little more educated maybe. A lot more cool think some, and certainly too cool to be ordering from Walmart online.
Knowing what online customers want and knowing what those customers think of them, Walmart has now embarked on a strategy of buying up small, successful independent online retailers, with plans to allow them to operate under their own brand names, with Modcloth being the latest of these. Earlier this year they picked up outdoor specialty retailer Moosejaw and online shoe seller Shoebuy. Men’s retailer Bonobas is rumoured to be next on the acquisition block.
It is a risky strategy to be sure. The typical Modcloth customer, for example, is more or less the kind of person that hates Walmart and everything that it stands for. No surprise then the announcement of its sale is being met by virulence from many customers who vow to never buy from Modcloth again. Maybe they will not, but then again maybe other customers will. Maybe a little of the hipster sheen will rub off on Walmart, or maybe some customers will stick around to see what Walmart’s input brings to the party, especially since the company is retaining much of Modcloth’s marketing talent. After all, at the end of the day, Modcloth (a company that in the past has ruffle d feathers by offering wedding dresses for around $200), is just like Walmart in that both are retailers selling relatively inexpensive made-in-China clothing to a North American market, so that has to be some kind of a starting point.
Whether the experiment with this set of online retailers works or not, Walmart clearly realizes that its future growth has a lot to do with attracting and retaining a millennial clientele. To be sure that clientele wants good prices, but they also want to be thought of as having style–and they do not want to have a lot to do with bricks and mortar retailers. Buying up Modcloth shows a certain style in itself, which may be the first step in acquiring some stylish new customers.