Amazon has recently made yet another move into bricks and mortar stores, with a $13.7 billion bid for American food retailer, Whole Foods. This will make Amazon the ninth largest grocery retailer in the US, with analysts predicting it will be battling for a top three spot before 2020.
Meanwhile, across town Walmart is in the process of completing a much smaller deal…but only small by Amazon standards. The purchase of online clothing retailer Bonobos will cost Walmart around $310 million, and solidify its strategy to move into online fashion. Modcloth, Moosejaw and shoe retailer ShoeBuy, are all now Walmart companies. However, the true intention behind the Bonobos takeover may be even more strategic than it looks from the outside. Andy Dunn, the founder of Bonobos will remain with Walmart in a senior leadership position, reportedly overseeing the expansion of the digital fashion business. Dunn is regarded as a hot property in the sector, and it’s unlikely Walmart could have secured someone of that calibre without purchasing a company from them, and attaching performance bonuses that would echo a high performing entrepreneur’s earnings.
Interestingly, the impact of the two organisations trying to dominate commerce as a whole, rather than sticking to traditional retail, or e-commerce, is messy to say the least. On Wall Street, Amazon’s purchase of Whole Foods is created an incredible drop in retail stocks, and perishable food. The reason for this is the perception that if Amazon enters a sector, it will dominate and in doing so destroy the value of any business in that sector. While this assumption is relatively sensible, it is also a little bit shortsighted especially as any investment and innovation in retail should be welcomed and encouraged.
Likewise, pundits are questioning whether Walmart has the capability of growing its digital brands, and many wonder whether it will use the talent it now has on board, or do what so many retailers have done in the past – try to make online like a traditional store.
It will be an interesting battle, and while Amazon is clearly outspending Walmart in terms of acquisitions, Walmart doesn’t have to spend as much to get the same result. Purchasing digital stores, especially medium sized niche businesses, is a smart tactical move, and far cheaper than trying to take over international businesses who are already established. But it goes further than that, with medium sized enterprises attracting the right kind of talent to help Walmart grow, and the type of innovative and adaptable infrastructure that would complement it’s other brands perfectly.
The race is on, and it’s too early in the race for any speculation.