No. 259: Walmart’s Next Acquisition

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Over the weekend, 2PM released the first executive member brief. It covered quite a bit of ground in an in-depth report on Walmart v Amazon eCommerce called Walmart Ventures.

Here is a small excerpt:

The competition between Walmart and Amazon has never been stiffer. Consumerism has always been about the heart, until Amazon made it about efficiency and logic. But for items as intimate as what you wear and what you sleep on, is logic enough?

Walmart is betting on the heart again by focusing on brand affinity, representation, and reinvigorating consumer faith. By using eCommerce as the tip of the spear, their brick and mortar presence will innovate along with it.

It’s no secret that I tend to believe in Marc Lore’s vision for a modern Walmart. In my recent report, I focused on Walmart’s brand-equity growth by means of DNVB acquisition (Modcloth, Moosejaw, Bonobos, etc). And 2PM Executive Member Taylor Holiday called me on it:

Solid stuff as always Web. The question I have that this post ignores a little is related to logistics power. You touch briefly on the convenience element that Amazon focuses on and I wonder how Walmart will seek to combat this? The thing I believe would be super super interesting would be Walmart could combine the DNVB style slick brand launch with convenience of a logistics super power. Imagine Allswell style brand with Same Day Delivery. Now that would be interesting.

Taylor Holiday, Managing Partner of Common Thread

In my report, I made two tables available: (1) Walmart’s existing acquisitions and (2) Walmart’s target acquisitions. To Taylor’s point, in discussing Walmart’s appetite for acquiring sexy DNVB’s (or building them from scratch), it’s easy to overlook that they’ve also acquired Parcel (2017). Walmart is working on building that logistics super power. And if they can’t finish the job, another $1B+ acquisition is on the way.

Walmart on Parcel’s acquisition: 

New York City is the top market for both Jet and Walmart.com, and because of the density of the area – along with the proximity of our fulfillment centers – it’s the perfect place for high-impact innovation. Born and bred in New York City, Parcel has developed unique expertise delivering to customers in a distinctly challenging and essential market. This acquisition allows us to continue testing ways to offer fast delivery while lowering our operating costs. We plan to leverage Parcel for last-mile delivery to customers in New York City – including same-day delivery – for both general merchandise as well as fresh and frozen groceries from Walmart and Jet.

As further proof that logistics is on the minds of Walmart executives, look no further than last night’s Oscar’s campaign.

The star of each 60-second spot is the same as for Walmart’s current ad campaign – the retailer’s signature blue shipping box – a nod to corporate priorities in the battle to catch Amazon in e-commerce. 

Jack Neff, AdAge

And if I had to project Walmart’s war room strategy, a Postmates acquisition comes to mind. Nationally, it’s one of the most trusted of the last mile platforms and it’s proven that it can operate in many of America’s largest markets. Couple this with the company’s recent emphasis on grocery delivery and you’re looking at quite a bit of shared virtue. Walmart’s grocery business is of its highest priorities.

Assuming that Parcel’s acquisition was a test, the Postmates acquisition could be the beneficiary of Walmart’s single-market experiment. After DoorDash’s recent $535M raise, this is an acquisition that makes sense for the gritty and resourceful Basti Lehmann and company. And it’s a purchase that is in Walmart’s price range. Paging Marc Lore.

Read more of the issue here. 

 

No. 253: Seven city-dwellers who should root for Amazon

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Amazon’s HQ2 campaign is a Rorschach test for your personal politics. But as with anything in politics, there will always be an upside to accompany the downside and vice versa. Here’s what a recent policy article in CNN had to say about the Disturbing part of Amazon’s HQ2 Campaign:

But, there’s one part of Amazon’s HQ2 competition that is deeply disturbing — pitting city against city in a wasteful and economically unproductive bidding war for tax and other incentives. As one of the world’s most valuable companies, Amazon does not need — and should not be going after — taxpayer dollars that could be better used on schools, parks, transit, housing or other much needed public goods.

Perhaps there is truth in this. But in accepting that one of these cities will be home to 50,000 new jobs at an average salary of ~ $100,000, there are tremendous positives to consider. Here are the seven people that you know who will love the HQ2 in their city:

The urban homeowner | Face it, Amazon is likely to move to an area where the housing market is affordable-yet-appreciating. This person’s home will appreciate with the influx of upper-middle class homeowners and the investments into their city to support thousands of white collar professionals.

The residential developer | We all know a person who spends their days buying abandoned multi-units at Sheriff’s auctions and turning them into $2,000 per month rentals. If this friend can find the cash flow to do it, her business will expand quite a bit.

The city’s income tax department head | This one is self explanatory. Salaries in excess of $100,000 are very important to growing cities, as these citizens are less likely to receive tax returns. An influx of this demo means more money to spend on infrastructure.

The area’s MLS team owner | Big three sports rarely have economic crises. But for a Major League Soccer club, adding hundreds if not thousands of new season ticket holders and general fans could make their investment more viable.

The elite independent school administrator | With urbanization comes a stark reality, most urban schooling systems are failing. And charter schools in most of the top 20 cities aren’t much better off. Given the demographic of a well-off millennial, the ones with kids will likely invest in private school education.

The local state school college graduate | Congratulations to this young person for increasing their odds of finding that great, technical job right out of school.

The branding agency senior manager | What most don’t know about Amazon is that they are one of the largest advertising businesses in America. By some estimates, Jeff Bezo’s ad business is larger than that of Twitter’s and Snapchat’s. Expect Amazon to poach talent from local agencies as they continue their takeover of the digital advertising market.

Amazon’s campaign for a new home city is a risky bet for the policy-maker who determines the incentive package. But if Amazon delivers the goods, as promised, one local government will be set for the next 5-7 years. It just so happens that delivering is what Bezos does best.

See more of the issue here.