By Travis Conway, Managing Director, SDR Ventures
On February 13, 2017, retailing giant Walmart announced the acquisition of Michigan-based outdoor retailer Moosejaw. In a deal valued at just $51 million, we can be certain that Walmart’s move is not designed for incremental sales. Moreover, the demographics of the customers of the two retailers are quite different: Sam Walton committed his life’s work to establishing a retail chain built by and for the working middle-class, whereas Moosejaw founders Robert Wolfe and David Jaffe created a zany, fun-loving culture aimed at addressing the outdoor gear needs of young, digitally connected and often more affluent customers.
While Walmart CEO Doug McMillon told analysts that “growth will disproportionately come from middle and upper income households in the years ahead,” I don’t believe his October 2016 statement was a preview of the Moosejaw acquisition, nor was it a red herring that Walmart has any plans to integrate the disparate customers of the two retailers. Furthermore, the idea that premium brands that line the digital and physical walls of Moosejaw (Patagonia, The North Face, Marmot, Arc’teryx and Black Diamond, to name a few) will find their way onto Walmart shelves is preposterous. So without an aim to grow incremental sales, an inability to integrate customers and a lack of brand and product overlap…why would Walmart make such a relatively inconsequential acquisition? And why would I, as a young, digitally connected, outdoor gearhead, be compelled to buy my gear from Walmart?
A quick lookback over Walmart’s recent M&A activity begins to paint the strategic picture behind the Moosejaw acquisition. The $3 billion August 2016 acquisition of Jet.com was the first major move by the retail giant in transforming its online sales operation – it also was the largest ecommerce retail deal, ever. With Jet.com CEO Marc Lore assuming the position of President and CEO of eCommerce U.S. for Walmart in late 2016, Marc and his team wasted no time in dishing out $70 million to acquire ShoeBuy.com, an online shoe retailer that competes with Amazon’s Zappos. In what may prove to be the most valuable deal-point in the Jet.com transaction, Lore agreed to a five-year commitment – signaling a commitment to Walmart’s ecommerce push and bolstering the additional $1.1 billion that the retail giant had budgeted for the ecommerce team to utilize for acquisitions and growth initiatives.
All this to answer the question: “Why Moosejaw?” Because Moosejaw can teach Walmart (and to a lesser extent, Jet.com and ShoeBuy.com) a few things about social marketing. Considered by many to be a pioneer of social marketing, Moosejaw has successfully embedded rich community features into its ecomm experience. In fact, “social commerce” is the cornerstone of Moosejaw’s growth strategy and the company has benefitted from higher customer conversions, a more loyal audience, a seamless experience across all channels and an increase in customer satisfaction – areas that Walmart’s “cheap and deep” differentiation could never emulate on its own.
With no shortage of competitors in the “outdoor adventure” retailing space, Moosejaw (and its newly adopted parent Walmart) faces the ongoing challenge of making itself the destination of choice. With a somewhat paradoxical customer-base that can be extremely loyal while equally vocal and short-tempered with discontent, it will be interesting to see how Walmart operates Moosejaw moving forward and whether the Moosejaw customers remain blissfully unaware of the corporate changes or if they utilize the powerful “social commerce” engine to express their discontent.
If Moosejaw were to fail going forward, the loss of the brand as a revenue source would go all but unnoticed within Walmart, but it would send shockwaves through outdoor retailers and outdoor products companies. The void would likely push incremental sales to Backcountry.com, Sierra Trading Post, REI and others.
While I’m optimistic that Lore and Moosejaw CEO Eoin Comerford will do everything in their powers to avoid the demise of Moosejaw, one only needs to look back at a running list of failed ecommerce and non-traditional acquisitions by Walmart to understand that history is not in their favor. A digital download store in 2004, a 2007 partnership with Hewlett-Packard for a video download service, Vudu in 2010, Yihaodian in 2011 and Walmart Labs all have lacked success. Perhaps the definition of success for Walmart’s ecommerce division is to extract some of the “social commerce” magic that made Moosejaw a top 50 website according to Internet Retailer and apply it to a broader market segment to propel Walmart.com, Jet.com, ShoeBuy.com and future .coms it acquires. If that’s the case, we can mark February 2017 as the month that Walmart “jumped the moose” by sacrificing one of the great pioneers in outdoor retailing.