Recently, men’s retailer brand Bonobos announced it would be laying off some staff — the reason behind this is Walmart, who acquired the brand in 2017, wants to mitigate losses from its unprofitable e-commerce division.
It’s a shame when any company feels they must resort to lay-offs, but something about this situation stands out: the fact that Walmart’s e-commerce division is unprofitable. Walmart started its shift into e-commerce in 2016, going on to acquire several smaller e-commerce brands like Jet.com, Modcloth and more, hoping to adapt to the growing digital retail landscape. But it hasn’t seemed to work out. Jet.com staff was folded into existing operations and ModCloth was sold to an investor group, showing that their foray into e-commerce has turned out shaky at best.
I can’t claim to know the specific details of Walmart’s e-commerce strategy, but from an outside perspective, it almost seems like they were hoping that these acquisitions would suddenly make them into a strong digital brand. Clearly, that has not been the case. That’s not to say that this strategy can’t be effective, but in the end it’s only a piece of the puzzle, not the solution. For instance, Target is no stranger to e-commerce acquisitions, yet unlike Walmart experienced double-digit e-commerce growth for five years in a row. Even though both companies have made acquisitions to fuel their e-commerce growth, it’s clear that Target must be doing something else to distinguish itself.
For traditional companies who have been around for decades, adapting to new age models has been a challenge. But naturally, changes in technology and in our culture have led to a fundamentally different type of consumer, and tapping into new channels such as digital platforms leads to new kinds of strategies that brands may be unfamiliar with. And now in 2019, research shows that e-commerce has grown by double digits for the tenth year in a row. Brick and mortar sales may still make up the majority of retail spending, but it’s clear that e-commerce is a channel that companies must incorporate strategically into their business models.
There are a number of factors for traditional brands to consider as they shift to new age models. McKinsey includes traits such as having digital-savvy leaders or the ability to upgrade tools and resources.
Addressing each element can certainly have positive effects on a traditional retailer’s e-commerce efforts. For instance, Nike recently announced that John Donahoe, a prominent tech CEO, will now become the chief executive for the sports brand. Donahoe, who has been the leader for tech-based companies like eBay and ServiceNow, brings e-commerce expertise and a knowledge of digital innovation. This could prove to be a strong decision by Nike, and moving forward we might begin to see them make smart decisions that improve their digital efforts.
When it comes to using tools and resources to improve e-commerce, data is king. Traditional retailers that are able to build up their data analysis efforts will be able to find insights into customer behaviors that allow them to better personalize and cater shopping experiences to their shoppers. For example, clothing retailer Nordstrom spends more than 30 percent of its capital budget on technology, which has enabled them to make strides such as collecting and analyzing social data from those who follow their pages, understanding what customers want and offering it to them directly.
Just because a business has entered the e-commerce game doesn’t mean that they’ll play it well, as shown by a company like Walmart. What matters the most is that traditional companies are taking this shift seriously and giving new age models the appropriate consideration and due diligence.