Walmart reportedly in talks to buy Birchbox
Birchbox would certainly be buoyed by a takeover from Walmart, considering the retail giant’s massive customer base and deep pockets. Walmart, for its part, has said its acquisition spree allows it to expand online and reach new customers — beyond the lower-income shoppers that tend to frequent its stores.
“My sense is that Walmart like other legacy brick and mortar retailers continues to have problems with making a strong linkage between end digital consumers and their brand,” Jim Fosina, CEO of Fosina Marketing Group, told Retail Dive in an email. “When you think of Walmart, you think very large retailing operations around the country — huge parking lots and 50,000-square-foot stores. The average consumer hasn’t made the link from a branding perspective between Walmart brick-and-mortar retail and Walmart.com.”
Walmart would also gain the talent and expertise found at Birchbox, which, despite its struggles, innovated the beauty box subscription model and is seeing improvements with a leaner staff. “The deal makes sense because Walmart desperately needs an operating unit that understands how to build and merchandise a subscription box program,” Fosina said. “Birchbox is a leader whose understanding both from a marketing and operational standpoint would provide Walmart a ‘new brand’ and the ‘chops’ to execute very quickly.”
But these moves could interfere with Walmart’s forte, which is super-efficiency and financial success in brick-and-mortar, a market that serves up by far the majority of retail sales.
“Walmart’s board has clearly drunk the Kool-Aid on the idea of participating in the unprofitable 8.5% of retail that is originating on the internet,” Nick Egelanian, president of retail development consultants SiteWorks International, told Retail Dive in an email. “With that understood, I suppose if you are in for a dime, you might as well be in for a dollar. So Birchbox, after Jet and Bonobos, makes sense from that point of view. To really understand this strategy, however, you need to examine the Amazon model and then determine what part or parts of it you can participate in profitably.”