ModCloth Gets Acquired by Walmart – Should You Be Following in Their Footsteps?
Walmart recently made headlines as online marketplace Jet.com, the retail giant’s subsidiary, acquired popular vintage-inspired retailer, ModCloth.
This is the second acquisition for Walmart this year, as the retailer makes an aggressive effort to diversify its portfolio (read: take over the world of commerce and knock Amazon off its e-commerce throne). ModCloth not only gives them access to a previously untapped market for the big box retailer, but has fared quite well as an e-commerce company on its own. In fact, Top500Guide.com data states that in 2015, as many as 54 percent of ModCloth shoppers were repeat buyers – well above the median rate of 32 percent for all Top 1000 retailers.
While Walmart is most certainly doing a little dance over their latest score, ModCloth consumers, on the other hand, are outraged. “The early reaction on social media suggests Walmart/Jet will want to keep as much distance between the brands as possible,” said Matt Nemer, Managing Director at investment Banking Firm ComCap LLC.
Judging by these tweets, that may be a great idea.
I'm still upset @ModCloth sold out to Wal-Mart. Ugh big corporations win again.— Dottie Minerva (@strawterry) March 24, 2017
Are the consumers right?
While ModCloth’s shoppers don’t have very much faith in this acquisition deal, we’d be remiss not to mention that this isn’t Walmart’s first round at the rodeo. Back in January, Walmart acquired online shoe and apparel retailer ShoeBuy.com and just a month ago, the retailer acquired mountaineering company Moosejaw. Both companies were enthusiastic about the acquisitiom and as far as we can tell, both stores’ branding have remained intact (although employees have switched over to become Walmart employees).
Is it worth it?
As a craft brand whose consumer-base means everything, you may still be wondering why ModCloth, a company with such a loyal fan-base and distinctive brand, would agree to be acquired by a behemoth like Walmart and risk losing it all. But while acquisitions can be tricky business, there are several advantages to be considered:
- Amp up your growth – by joining forces with a company who has more resources (consumer-base, brand awareness, and financial reach) than your own
- Long term financial outlook – while this is often co-opted by companies already in dire financial need, this applies to upstart craft brands as well
- Reduced market entry-barriers – your new parent company’s demographic now becomes yours to expand into
However, there are some cons as well. If done hastily, being acquired by a major company as a small craft brand leaves you open to risks:
- Financial fallout – due to loss of key customers, personnel or a long dragged out process
- Integration issues – your company cultures may clash
- Distraction from daily operations – if too much focus is put on the acquisition process and all that comes with it, you risk lagging when it comes to important aspects of the business that require your attention
Ultimately, it’s up to you to decide if being acquired is your end-goal. Just remember it’s not a decision to take lightly, so do your research first!
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