Dive Brief:

• Target, which last week announced that it will display and sell bedding from startup Casper Mattress on its site and in stores, almost bought the company outright, Recode reports.

• The retailer offered $1 billion, but discussions broke down, unnamed sources told Recode. In lieu of acquisition, Target might lead an upcoming investment round in Casper, according to Recode. A Target spokesperson declined to comment to Retail Dive on the report.

• Target has a long history of working with premium and trendy designers and brands. Through its TechStarts partnership, the company has also invested money and mentorship in startups.

Dive Insight:

It's no surprise that retail giants like Target and Wal-Mart might eye investments and acquisitions in order to swiftly bulk up on technology, talent and/or product offerings. But while Wal-Mart Stores Inc. has been on a Pac-Man-like streak of e-commerce acquisitions since its purchase last year of Jet, Target has proceeded with more caution.

That caution could partly explain why Target didn't go all in on Casper Mattress. "With only 5% of mattresses currently being sold online in the United States, I suspect this is more about bringing Casper mattresses into Target’s stores than an investment by Target in a pure play internet retailer," Nick Egelanian, president of retail development consulting firm SiteWorks International, said in an email to Retail Dive. 

Target reportedly also looked at buying Jet, but found the company over-priced. Target similarly contemplated acquiring online consumer product bulk sales company Boxed, according to an earlier report from The Wall Street Journal. Instead, Target is piloting its own answer to Boxed and Amazon Pantry, dubbed Target Restock. 

Meanwhile, late last year Wal-Mart bought online shoe retailer Shoebuy, in a challenge to Amazon's Zappos, for $70 million. So far this year Wal-Mart has paid $51 million in cash for online outdoor retailer Moosejaw and another $40 million to $60 million for vintage-inspired online women’s apparel Modcloth. Wal-Mart is also reportedly in discussions to add once pure-play menswear site Bonobos. This comes as the massive retailer paid $9 million for the web address alone of now-defunct Canadian online shoe retailer Shoes.com, which it plans to redirect to its Shoebuy site.

So far, Wal-Mart continues running those businesses as operations distinct from its own, in light of their widely differing branding and pricing. "I think if Jet starts to acquire more niche players like Modcloth, I could see them consolidating there, but I would probably see them mostly separate — not directly into their main labels," Kelly-Jo Sands, EVP Marketing Technology of Marketing firm Ansira, told Retail Dive. "In customers' minds, Modcloth is a niche, vintage play. To bring it into Wal-Mart stores means that it's no longer this online retailer that offers really unique things." And people shopping at Wal-Mart wouldn't likely tolerate the higher prices at Modcloth, either, according to Sands.

Target, on the other hand, has shown that it can launch collaborations with fashion designers and top brands, forging a "cheap chic" reputation that those brands actually welcome as an opportunity to reach more shoppers. The retailer launched the idea in the 1980s precisely because it realized, in the midst of a bruising price war with Wal-Mart Stores, that competing on price alone was insufficient, Mark Cohen, professor and director of Retail Studies at Columbia Business School, previously told Retail Dive. Partnerships with online companies may be a bit trickier. For instance, selling and promoting men's care products​ from the Harry’s brand, which Target partnered with last year, could lead some customers to turn to Harry’s online subscription services rather than to Target for future sales. 

But the contrasting strategy from Target doesn't mean that the general merchandiser won't be taking on whole companies, Target Chief Information and Digital Officer Michael McNamara told the Journal: “Thinking about possible mergers and acquisitions is something we do every day as a regular course of business,” he said.