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Walmart pushes further into online retail market with new acquisition

Posted on March 22, 2017 By

It’s no secret that Walmart has grand plans to muscle in on some of Amazon’s online retail market share and it seems the US retail giant has edged closer with the acquisition of ModCloth.

The purchase of the vintage-style clothing retailer was made by Walmart’s ecommerce business Jet for an undisclosed sum, although industry sources believe ModCloth would have been lucky to get around the $80 million it had previously raised from investors.

ModCloth was founded in 2002 by husband and wife team Susan Gregg Koger and Eric Koger and has since grown rapidly to become a $150 million empire. During this time the business has evolved with a relocation to San Francisco and the raising of the afore mentioned $80 million in venture capital, allowing the business to hire Urban Outfitters executive Matt Kaness and experiment with physical stores in the US.

Despite ModCloth’s success, profits remained tight meaning investors were reluctant to put in any further cash, leading to Jet stepping in with an acquisition that allows ModCloth to stock a wider range of products in the future.

Jet is on something of a roll when it comes to acquisitions, with ModCloth its fourth in the last 12 months. In a move to establish itself as a major competitor to Amazon, Jet has used these acquisitions to add an even wider range of products to its online megastore. The company acquired online furniture seller Hayneedle for $90 million before it was acquired by Walmart for $3 billion. Since then, Jet has bought Zappos competitor ShoeBuy as well as outdoor apparel retailer Moosejaw. What makes the acquisition of ShoeBuy, Moosejaw and ModCloth especially interesting is the fact that all three companies are at least 15 years old and had trouble striking the balance between consistent revenue growth and profitability in the modern internet age.

With Jet’s typical customer young and affluent, these acquisitions have opened Walmart up to a brand new set of shoppers and resulted in a 29 per cent increase in domestic online sales during the last quarter.

Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.

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