Walmart has reeled in yet another e-Commerce brand as part of its recent buying spree: ModCloth. Jet.com — the first of Walmart’s recent major e-Commerce acquisitions — will acquire ModCloth for an undisclosed sum.
Although the acquisition has not been confirmed by either Walmart or ModCloth, the brands will publicly announce the move on March 17, according to an initial report from Jezebel.
Although ModCloth had raised $80 million in funding, the brand has struggled to operate profitably and has been unsuccessful in recent attempts to raise additional funding. The retailer has 350 employees in San Francisco, Los Angeles, and Pittsburgh, but in the past two and a half years the company has gone through six rounds of layoffs.
With the backing of a company like Jet.com — and by extension, Walmart — ModCloth can operate without the financial struggles of the past, and with the resources to now compete on a larger scale. Since Walmart has increased e-Commerce sales 29% in Q4 and improved online sales 21% in Q3,
ModCloth may be joining the retail giant at the right time.
“If they do it right, it helps ModCloth broaden its consumer base,” said Gabe Winslow, EVP of Media at digital and CRM agency Ansira in an interview with Retail TouchPoints. “I would be fairly certain that if you did a scrub of the two companies’ customer databases you probably won’t find a whole lot of overlap. Whether that works or not will depend on how much Walmart allows ModCloth to retain its culture and personality. The question is going to be whether ModCloth can still operate as it is, or is Walmart going to try and take the brand and pull it under their label.”
Will E-Commerce Consolidation Continue?
The ModCloth acquisition provides further evidence that the e-Commerce space will continue to consolidate, according to Stephan Schambach, Founder and CEO of mobile commerce platform provider NewStore. He noted that as growth becomes more challenging, consolidation will likely continue with midmarket players generating between $100 million and $1 billion in annual revenue.
“For retailers, it’s becoming more challenging to be profitable independently outside of Amazon and Walmart specifically, which have immense buying power and logistical prowess,” Schambach said in commentary provided to Retail TouchPoints. “Their ability to run these processes efficiently at scale is attractive for smaller companies who might be struggling to run operations profitably. Additionally, giants like Amazon and Walmart, who are building new-age conglomerates around their brand portfolios, are able to centralize a lot of the back-end operations and help younger brands and retailers focus on what they are best at, which is often on the design and branding aspects of the business. These acquisitions work best when the acquired company is left to focus on their secret sauce, and the acquirer takes care of the nuts and bolts of the business.”