In challenge to Amazon's Zappos, Wal-Mart's Jet tries on Shoebuy

Dive Brief:

E-commerce upstart Jet, through its parent Wal-Mart Stores Inc., has acquired Boston-based online shoe retailer ShoeBuy from Barry Diller’s media and internet company InterActiveCorp. for approximately $70 million; the acquisition closed on Dec. 30.
Founded in 1999, ShoeBuy carries more than 800 brands and more than a million items including footwear, apparel and accessories for women, men and children, welcoming more than 3 million unique visitors on a monthly basis.
ShoeBuy CEO Mike Sorabella, his executive team and the company's 200-plus employees will join Jet’s e-commerce organization but remain headquartered in Boston, according to a Wal-Mart blog post.

Dive Insight:

ShoeBuy was founded the same year as rival Zappos, now owned by Amazon. Though Zappos has dominated in the online footwear and apparel space, this move by Jet helps boost its appeal and furthers Wal-Mart’s aim to step up its e-commerce efforts and diversify its online customer base — the reasons behind its $3.3 billion acquisition of Jet last year.

The rationale behind Wal-Mart's massive gamble seems obvious: The brick-and-mortar retail giant — once an acknowledged leader in tech-based inventory and supplier management, at least for a time — has faltered badly online. Year-old Jet, meanwhile, has mostly wowed observers, with sales tripling over the first six months of 2016.

More than anything else, experts say, Wal-Mart landed Jet to help boost its appeal to higher-income consumers and evolve its business beyond its core customer demographic. “To move Wal-Mart upmarket is a Herculean task,” retail futurist Doug Stephens, author of the forthcoming book “Reengineering Retail: The Future of Selling in a Post-Digital World,” told Retail Dive. “Any time they do, they risk losing their most loyal customers. They’ve wound themselves in a corner by virtue of just how strong their brand essence is in the market. When you say ‘Wal-Mart,’ it brings up such clear connotations. For some people it’s what they want, and for some they want nothing to do with it. Buying Jet.com is an attempt to break free from Wal-Mart’s customer base.”

A deal like the Shoebuy acquisition is the speediest and easiest way for Wal-Mart and Jet to reach their goals, according to Profitero VP of strategy and insights Keith Anderson. The move “reflects the growing urgency to adapt through partnerships or acquisitions,” Anderson told The Boston Globe. “The pace of change is greater than the pace some of these number one and two retailers can evolve.”

Amazon's footwear and apparel efforts extend far beyond Zappos, however. As the largest online seller of apparel, its $16.3 billion apparel sales in 2015 exceeded those of the next five competitors — Macy’s, Nordstrom, Gap, Kohl’s and Victoria’s Secret parent L Brands — combined, according to an Internet Retailer report. Consumers purchased more than one million pairs of shoes on Amazon Prime Day in July, and when factoring in Amazon’s seven-brand private-label rollout earlier this year, it’s no wonder Cowen & Co. analysts expect the e-commerce company will dethrone Macy’s as the largest U.S. clothing retailer in 2017. Recent reports indicate Amazon also is poised to add athleisure and fitness lines in the months ahead.