Walmart pushes forward private-label strategy with the launch of an online furniture brand

This isn’t the retailer’s first foray into online furniture brands: It acquired online furniture retailer Hayneedle for $90 million in 2016. By increasing its presence in the market, Walmart is staking out a competitive position against the likes of Wayfair, Target and Amazon by using the lessons from the companies it’s acquired and putting them into practice through newer private-label offerings. In addition to Hayneedle, Walmart has acquired online brands Jet.com, Bonobos, Modcloth and Moosejaw in an effort to expand its digital reach as well as learn about a younger and digitally native customer’s preferences and behavior.

“Walmart has to play in this space. They’re taking an approach from every possible angle, both acquiring brands and building new brands in-house,” said Tom Gehani, Gartner L2’s director of client strategy and research. “They acquired these companies like Bonobos, Modcloth and Hayneedle, and they’ve also started taking those design sensibilities and bringing those into new Walmart brands in their own light — a lot of the George [menswear] products look like Bonobos clothes, a lot of the furniture they’re launching looks like what’s sold through Hayneedle.”

According to Gartner L2, the online furniture and home goods market is expected to double in the next five years. Online furniture and home good sales were valued at $50 billion in the U.S. in 2018, per an eMarketer estimate. Amazon has seen 40 percent sales growth in the home category over the last two years, and Walmart lacks an organic search presence, according to Gartner data. In addition, of the 277 home categories searched on Google, Walmart showed up in only 44 percent of them, compared to Wayfair at 81 percent and Amazon at 65 percent.

By acquiring data and insights from acquired brands, Walmart can reach a new type of customer that’s typically young and urban — a contrast from Walmart’s big-box discount store model.

“With their [acquired] digital-native brands, they have so much data; they’ve been online for a while and the advantage is knowing your customer in and out,” said retail analyst Jane Hali, CEO of Jane Hali & Associates.

An objective of launching online-only brands that have a more upscale air is to attract the type of customer who wouldn’t normally shop there. Bringing in Walmart brands that look and feel like the acquired direct-to-consumer products, Walmart can broaden its customer base. Private label, however, is a competitive game, with Amazon and Target adding to new brands to suit different audiences. What used to be a secondary strategy to push product at higher margins is now a core merchandising strategy, along with brand-exclusives offered only through specific retailers.

“There is a contingent of customers, and Walmart knows this, who might not want to shop at Walmart at all,” said Gehani. “Those customers are able to be served through an acquired brand, but Walmart also wants more people to shop at Walmart, so one way they’re able to do that is start bringing products that look like Bonobos to Walmart.com directly or Walmart stores.”

In recent years, Walmart’s private-label strategy has shifted from budget to upscale products, partly enabled by its DTC acquisitions.

“They’ve likely got access to a supply chain, factory and designer partnerships that have resulted in a better aesthetic than what Walmart used to have,” said Gehani.

While Walmart is carrying some risk launching a new brand, its logistics network through its physical stores, as well as supplier and designer relationships give it an edge over competitors.

“I’m very bullish on this idea; they have incredible trust and distribution,” said Andrew Essex, CEO of Plan A and co-founder of Droga5. “It’s well-branded — it’s crisp and modern and feels like something completely new.”

Walmart’s biggest risk, said Essex, is a lack of patience and a competitive field of companies vying for the online furniture market like Amazon, Target and Wayfair. Despite these hurdles, Walmart’s scale will ensure it can hold its own among a suite of other companies vying for market share.

“The pendulum is swinging back where you have the incumbents learning from DTC unicorns and leveraging their massive hindquarters,” he said.