While the legendary Sears is fighting to survive, Walmart is buying up brands, seizing the e-commerce, and concocting insane expansion plans into the entertainment business.
Sears Holdings Corporation, the owner of the retail giants Sears and Kmart, asked for bankruptcy protection from creditors on Monday, having been on a downward spiral for the past seven years. Sears is more than 5 billion dollars in debt and pays 440 million dollars a year solely for interest.
Although Sears Holdings plans to keep the business going and the profitable stores open, history has shown that a lot of the companies that ask for bankruptcy protection go out of business anyway. Based on statistics, a mere 10% of those manage to reorganize successfully – others close shop in the process.
Sears, that has been in business for 125 years and was the world’s biggest retail chain until the late 1980s, gave up its throne to Walmart back in the day. This is why it is especially interesting to see what Walmart is doing, in the light of Sears’ difficulties. And it is interesting indeed. Facing difficulties, Sears has had to sell brands and real estate; Walmart, however, breasts the current completely differently, buying up brands and real estate. And as if that was not enough, last week Walmart announced – ironically, at the same time as Sears started talking about bankruptcy protection – their astounding plan of mixing retail business and streaming. Namely, Walmart plans to collaborate with MGM studios on the streaming channel Vudu, and start producing new shows.
This is a somewhat bewildering step by Walmart. Why now? The retail chain bought Vudu back in 2010 when Netflix was still looking for their place, and Amazon had not yet started producing original content. Now that entering the streaming platform is much more difficult, due to the level of quality and major head start of the competitors, Walmart finally woke up.
What is Walmart counting on?
Unlike with Netflix and Amazon Prime, Vudu’s upkeep comes from advertising, so it is mostly free for the consumer. Walmart plans to reach wider audiences. Their advertising strategy is intriguing: Vudu’s commercials won’t interrupt the customer from watching the content; instead, they can click on the advertisement, and the information gets sent to their e-mail address. Also, thanks to customer data, Walmart can do targeted advertising.
If the plan works, it could pay up for Walmart to invest in the entertainment business. Then again, the video market is already overpopulated, and there are way too many streaming services competing for people’s time and attention. And there’s more to come. Last week, WarnerMedia (CNN’s holding company), that belongs to AT&T, also announced that they’ll be launching their own streaming channel by the end of 2019.
Racking up brands, Walmart style
Shouldn’t Walmart be focusing on its strengths instead at a time when bust clouds are covering retail businesses? Its retail sale has grown quite a bit this year, even in the harsh competition with Amazon. In the last quarter, Walmart announced the biggest sales growth of the decade in the USA. E-sales had grown 40%. Walmart is known for its price concessions; its customers are the low- and medium-income Americans. That is why the retail giant’s second strategy is all the more surprising – buying up brands and growing their digital portfolio.
For instance, last year Walmart purchased the men’s apparel e-company Bonobos (310 million dollars), women’s apparel online retailer ModCloth (75 million dollars), outdoor recreation apparel and gear retailer Moosejaw (51 million dollars), the e-shop ShoeBuy (70 million dollars), and the furniture e-store Hayneedle (90 million dollars). In addition, as of August 2016, Walmart owns the e-shop Jet.com, which they paid 3.3 billion dollars for. And even that is not all. This May, Walmart bid against Amazon in an auction for the majority holding of the Indian e-store platform Flipkart. Entry to the lucrative Indian market cost Walmart a whopping 16 billion dollars.
Some of the purchases have caused excitement amongst the customers. For example, many fans of ModCloth and Bonobos protested because they think that Walmart is destroying the exclusivity of those brands. However, Walmart has decided to swim against the current. It manages the higher price range brands by continuing with their original sales strategy – customers can try the clothes on, and pay for the items at the store, but they have to order them from online.
It seems Walmart is doing some serious shopping. And if you look at its big plans with Vudu, as well as buying the e-shop platforms and e-businesses, it is clear that Walmart is going after Amazon itself. On the one hand, it makes you wonder if the competitors aren’t too far ahead already; but on the other hand, a wide scope might be the tactically solid move for Walmart to avoid the same fate as Sears and Kmart.