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Wal-Mart and the Last Stand of Retail

As Amazon.com has been smashing sales and stock price records, destroying entire retail verticals in the process, traditional brick-and-mortar retailers spent the last decade battling to remain relevant, in what sometimes appears as a battle lost before it began.

Many predict 2017 will be the year when many traditional retailers close their doors for good.

As more and more smaller retailers go out of business or consolidate through mergers and acquisitions, Amazon's march to retail domination will inevitably end up with a showdown with the largest traditional retailers, headed by Wal-Mart.

Wal-Mart, the original 800-pound gorilla of retail, hasn't been sitting on the sidelines watching Amazon grow. It's been aggressively readying itself for the showdown to come: evolving its online presence with features like free 2-day shipping and discounted in-store pickup to combat Amazon Prime, leveraging its offline assets in the digital age with services like curbside pickup of groceries ordered online, and aggressively buying internet-first businesses like its blockbuster $3 billion acquisition of Jet.com.

This last prong of its strategy - acquiring retail businesses - has two benefits: it serves as a shortcut to expand Wal-Mart's online business as well as a way to expand into new customer demographics, specifically younger, city-dwelling customers.

We've blogged about the Jet.com acquisition in the past. Since the acquisition by Wal-Mart in August 2016, according to our panel of over 3 million credit/debut cards, Jet.com sales have more-or-less plateaued

Over the last few months, Wal-Mart acquired three more clothing and footwear retailers: ShoeBuy.com, Modcloth and Moosejaw. Most recently it's been reported that Wal-Mart is in advanced talks to acquire Bonobos - yet another online-first clothing retailer.

We decided to take a look at spending from those four companies in our panel of over 3 million credit and debit cards:

All four have comparable revenue and none have experienced explosive growth over the last year. In fact, only Shoebuy.com and Bonobos had more revenue in March 2017 than in the same month a year ago.

It seems that Wal-Mart's strategy is to acquire solid businesses that expose the company to desired demographics and complement its online portfolio.

And while ShoeBuy.com, Modcloth and Moosejaw all had a reported acquisition price in the range of $50-70 million, Bonobos --
which has comparable revenue in our panel -- is rumored to fetch as much as $300 million!

What if Wal-Mart wanted to acquire companies of comparable size to its recent acquisitions but ones that are on a growth spurt? In our panel, three such companies stood out as the fastest growing:

Third Love, the online bra and underwear retailer, grew 6.5X from March 2016 to March 2017.
Dia & Co, the plus size subscription-based retailer, grew 5.8X in the same period and Fashion Nova, the retailer that relies exclusively on Instagram for customer acquisition, grew 3.6X.

In a role that must be unusual for the world's largest retailer, Wal-Mart now needs to play catch-up. With its acquisition spree showing no signs of stopping, it will be interesting to see if Wal-Mart continues to focus on established e-commerce businesses or shifts to rapidly growing upstarts.

Learn more about consumer spending analytics with TXN.

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