Dive Brief:

• Walmart and Hudson’s Bay Co.-owned Lord & Taylor are teaming up, with the American department store reportedly setting up shop on the retail giant’s e-commerce site, the Wall Street Journal reports.

• The deal is part of a marketplace project that could also include Walmart-owned Bonobos and Jet, unnamed sources told the Journal.

• The move is part of an effort to bring in new, wealthier customers to Walmart’s website, which Walmart's U.S. e-commerce chief Marc Lore, also the founder of Jet.com, has said is a new priority. "We do not comment on rumors and speculation," a Hudson’s Bay spokesperson told Retail Dive, and a Walmart.com spokesperson declined to comment to Retail Dive on the story.

Dive Insight:

Since acquiring Jet last year, Walmart has embarked on a series of e-commerce acquisitions: In February, Walmart bought online outdoor retailer Moosejaw for $51 million in cash, in March it announced the acquisition of vintage-inspired online women’s apparel site Modcloth and in June it bought menswear site Bonobos for $310 million. This month there were rumors that Walmart is also interested in acquiring beauty subscription service Birchbox.

Most of those acquisitions were to be tied to Jet rather than Walmart stores or its website, Ravi Jariwala, senior director of public relations at Walmart.com, told Retail Dive earlier this year. While Moosejaw and Shoebuy feature brands that may be sold through Walmart as well as Jet and their standalone sites, vertically integrated Modcloth and Bonobos are destined only for Jet, Jariwala said. "The plan has been for Modcloth and Bonobos, for some of that product, to be sold through Jet because the demographics they serve are very nicely aligned."

Indeed, a close association with Walmart is a mixed bag for more upscale brands, whose customers are in demographic groups that don't generally frequent Wal-Mart stores; the average Wal-Mart customer is less wealthy and quite a bit older than those typically shopping at Target and Amazon, and the company has had difficulty in the past with moving beyond that core base. Walmart has built a formidable distribution network and has the deep pockets to help these young companies scale. But aligning too closely with Walmart could hurt a higher-end brand's ability to sustain higher price ranges.

"[Y]ou might ... see expectations of the prices to come down," Kelly-Jo Sands, EVP of marketing technology at marketing firm Ansira, told Retail Dive. "From the consumer perspective, if I hear ‘Walmart’ I’m expecting a dress to cost a whole lot less than $90. Their price point would have to come down, the way Target’s designer collections are higher than their normal brands, but not even as high as what Modcloth is getting."

Several analysts have hailed Walmart's efforts, which have resulted in steep increases in its e-commerce sales. "It is understandable why Walmart would want to build its apparel sales on the internet, as almost 30% of apparel sales are occurring on line, and Walmart is not currently participating," retail analyst Nick Egelanian, president of retail development consultants SiteWorks International, told Retail Dive in an email. 

But that doesn't mean that this particular alliance makes sense. "Walmart’s shoppers have little in common with Lord and Taylor’s shoppers," Egelanian said. "Lord and Taylor shoppers are unlikely to trust [the] Walmart brand, and the department store industry is a dying business in any case. Keep in mind that TOTAL department store industry sales this year will likely not exceed $70 billion while Walmart alone will do over $500 billion in worldwide sales this year."

Mark Cohen, professor and director of Retail Studies at Columbia Business School, agrees. "This is a strange development," he told Retail Dive in an email. "Lord & Taylor is desperately looking for a reason to exist and Walmart is desperately looking for legitimacy in the age of Amazon."

Walmart would be much better off teaming up with a value apparel seller like Ross or TJ Maxx, which, while they possess strong brand identities, have little internet visibility and enjoy stronger customer overlap with Walmart, according to Egelanian.

Instead, this partnership, if the report is true, reflects a deeper problem for Walmart, Cohen said, calling it, "another mindless step by Walmart in stitching together a crazy quilt of disconnected businesses ala Jet.com, Bonobos, etc. in an attempt to arrive at a strategy which quite obviously does not exist."