Recode: Walmart faces $1B e-commerce loss, may sell ModCloth

Dive Brief:

• Walmart’s e-commerce unit is projected to lose $1 billion this year on as much as $22 billion in revenue as the retail giant races to catch up with Amazon online, according to a report released Friday by Recode that cited anonymous sources.
• As pressure mounts on the division and its head, Marc Lore, Walmart has considered selling some of its relatively recent online fashion acquisitions, namely Modcloth and Bonobos, Recode reported. A possible sale of at least ModCloth is still likely, and ModCloth, Bonobos and Eloquii are all still unprofitable, according to Recode’s sources.
• The publication tells a story of tension at Walmart, where executives at its U.S. business are “increasingly frustrated by some of the money-losing initiatives.” A Walmart spokesperson declined to comment to Retail Dive on the story’s claims.

Dive Insight:

Walmart’s e-commerce growth has been one of the key stories that media and investors have focused on since the company purchased Jet (and through the acquisition brought Lore into the fold), with the aim of hedging against Amazon’s explosive retail growth. Past hiccups in online growth have sent investors jittering, and it has won praise when posting growth of 30% or 40%. 

What often gets lost in the discussion is that Walmart makes more than half a trillion dollars a year, most of it from brick-and-mortar retail. And it is a company used to making a profit from its operations. Much as investors and others focus on Walmart’s online efforts, the company’s physical retail business is still healthy. In fact, U.S. comparable sales just hit their highest mark in nine years.

As the Recode story pointed out, for all the investment in Walmart’s burgeoning e-commerce business, it is still a small-time player compared to Amazon. 

That Walmart is considering selling off some of its online acquisitions just a couple years after making them, may come as little surprise to many retail observers, who questioned the strategy behind them at the time as they seemed at odds with the retailer’s core customer and business. (And Walmart’s acquisition of ModCloth and others have risked alienating fans of those brands.)

ModCloth and Bonobos were placed under the Jet banner, which serves a young, urban and higher-income customer base than Walmart. (Along with those two brands, Walmart also gobbled up plus-size brand Eloquii and online outdoor retailer Moosejaw, among others.) Since then, Jet has in some sense lost its independence in the organization, as the company nixed its head executive and folded it into its main e-commerce organization, which is now mostly focused on Walmart.com

Jet still helps fill a gap for Walmart, specifically with its Jetblack service, which caters to an upscale, urban population. Lore recently revealed at a shareholder’s meeting that a majority of Jetblack members spend $1,500 per month with the service.