As More Buy Clothes Online, Walmart Eyes a Piece of the Action
"Founded on Fit, Focused on Style, Built on Service" -- that's the retail promise offered by Bonobos, the men's e-tailing business that's being courted by Walmart and idolized by the garment industry as a model for reviving US retail woes.
The $300m acquisition of the chain, which has more than two dozen stores or "guideshops" in key cities like Chicago, New York and Atlanta, is likely to be announced imminently, according to industry sources.
If the deal is confirmed it will not only place Bonobos 38-year-old co-founder and CEO Andy Dunn at the forefront of Walmart's online clothing battle with Amazon, but will endorse a hybrid online/bricks-and-mortar vision some hope can be retail's future.
US high streets are witnessing a Darwinian winnowing. In recent months hundreds of closures have been announced as retailers including Macy's, Sears, American Apparel and Abercrombie & Fitch have scaled back their bricks and mortar operations in the face of a shift to online shopping.
Bonobos offers an alternative. It operates a small number of stores that act as fitting rooms but do not to fulfill orders on site, only from distribution centers. Their locations carry no inventory -- customers try on its slim-fitting, fashion conscious clothes -- ranging from T-shirts and jeans to business suits and black-tie -- for fit and style, and then have their acquisitions shipped to their home from a central warehouse. The stores are as much advertisement as sales floor. Most of Bonobos's sales are done online by people who may never have visited one of their stores.
It's an e-tailing hybrid that's become popular with men, who, broadly observed, do not enjoy shopping or require the same level of consideration as their counterparts.
"I always hated shopping. It wasn't fun, even for me. But here I just want to buy out the store," said 28-year-old medical student Philip Maynard, outside a Bonobos guide-shop on 5th Avenue in Lower Manhattan. Maynard said it didn't matter to him that he couldn't walk out with his purchases.
"They have a good business online, and the stuff comes when they say its going to come, and I've never had a problem returning anything."
Bonobos, which was founded in 2007, established its reputation as retailer with jeans and chinos. After several rounds of investment, sales are reported to be around $100m, up from $40m in 2012.
The model addresses the online retailers problem of consumers not being able to try on clothes before they buy them, and the traditional retailers issue of delivering good service.
As Dunn told Business of Fashion in 2013, he'd worked at Abercrombie & Fitch folding sweaters. "You're basically the inventory manager of the store, being marginally helpful to the customers. It's more of a job about keeping clothes folded than it is about delivering service."
Bonobos true innovation may be challenging the belief that the instant gratification of walking out with a purchase is key to the retail experience. "It's not," Dunn said. "It's has been astonishing how little our customer cares."
The concept started as a Stanford MBA project involving Dunn and co-founder Brian Spaly with the goal to provide men with better-fitting clothes, and specifically to design and produce chinos that eliminate "Khaki Diaper Butt."
Dunn recognized it could be the internet company he was looking for.
As he told Coverteur : "Sometimes the future is rooted in the past, which is sort of counter-intuitive. If you think about old school menswear, it was about the tailor around the corner and that one-to-one relationship you had with that person. We are bringing that back."
They started with a show room in New York, followed by a 500 sq ft store in Boston. Dunn realized they'd hit on something. "All of a sudden, it was like, this is it, it's going to be these small, service-driven experiential stores where you have one-on-one service and where you keep out the complexity of a lot of inventory, but you can access this incredibly wide assortment."
In lower Manhattan, a store associate explained that by not worrying about back of house stuff like inventory they can focus on customer service.
"If you're fitted for one suit, then your measurements are good for all out different suits. That makes it easier -- they get sized once and don't have to come back in unless they want to. Customers may stop by every few weeks and get a couple of things, or the men who come in once a season and we just wardrobe them."
But, she cautioned, the system might not necessarily work for women, whose requirements around style and color and sizing are more intricate and nuanced. Nor will the Bonobos model solve the retail sector's larger problems, which accounts for around one in 10 American jobs, or the blight affecting the US main street or its declining system of shopping malls.
Since October, more than 89,000 retail positions have been lost. According to some estimates, the sector is on track to lose more stores this year than during the great recession of 2008, its problems accelerating even as a consumer confidence is high and unemployment low, suggesting the changes are systemic and not cyclical.
But the Bonobos deal illustrates the accelerating arms race between Amazon, valued at $423bn, and Walmart, valued at $222bn. Wall Street might love Amazon more but the Arkansas-based retailer far exceeds Amazon in earnings -- $13.6bn last year to Amazon's $2.4bn -- and it is aggressively expanding its online businesses.
Last September, Walmart completed a $3.3bn acquisition of the discount and deals-driven shopping site Jet.com. It has gone on to pay $70m for footwear online retailer ShoeBuy and $51m for outdoor e-tailer Moosejaw, and agreed the acquisition of Modcloth, a vintage-inspired womenswear producer.
Jet.com founder Marc Lore, now president and chief executive officer of Walmart's e-commerce arm, rationalized that smaller brands would gain visibility on the larger platforms. "So suddenly what was a certain size business now, overnight, becomes that much bigger," he told WWD. Amazon, meanwhile, has been pumping up its high-end online offerings, making deals with brands including Levi Strauss & Co.
Meanwhile, "real" shops are suffering. Outside Bonobos of 5th Avenue, Philip Maynard explained that he used to shop at J Crew and Brooks Brothers but had since switched. "I love the stuff and its perfect for me," showing off a pair chinos. "It's fashionable and work-appropriate. It's half tech and half friendly and approachable."