As part of its ongoing quest to compete with Amazon, Walmart has been rapidly buying up online shopping startups. Companies like Jet.com and Shoebuy have sold to Walmart, seizing the opportunity to expand their platforms and scale more easily by taking advantage of Walmart’s powerful ecommerce reach.
Recently, Walmart acquired ModCloth, a trendy women’s online clothing retailer, for an undisclosed amount. Judging by the comments on social media, most users are pretty unhappy about it. A fifteen year-old startup, ModCloth enjoyed respect for being an independent fashion label. The brand’s refusal to use photoshop models and its wide selection of sizes has made it popular with younger and more socially conscious consumers. Much of this audience feels alienated by the company’s sale to Walmart, a corporation that has run into legal issues on gender discrimination and other labor practices.
If Walmart wants their new acquisition to succeed to its fullest potential, it’s going to have to acknowledge and leverage the social value of the ModCloth brand. The best way to do this would be to get out of its comfort zone of short-run profit and liability concerns and show a willingness to engage and improve on issues of importance to this community. This begins by regarding the community and its concerns as a partner in moving Modcloth’s future forward.
Unfortunately, Walmart does not have the greatest track-record when it comes to successfully engaging the communities of startups it acquires. In 2014, Walmart acquired Luvocracy, a three year-old startup that allowed users to discover and buy products recommended by friends, bloggers, and influencers, only to dissolve it. Casually disregarding a passionately engaged online community of one and a half million people, Walmart chose to shut down the service and hire sixteen of Luvocracy’s top employees.
While the retail conglomerate did integrate Jet.com and then Shoebuy, those platforms do not cater to an especially socially engaged demographic. These companies would not have to sacrifice their unique identity or social following in order to benefit from Walmart’s massive resources.
Modcloth is different. It has a passionate and engaged user base that places a high value on corporate responsibility, social activism, and other ideals to which it perceives Walmart not to have always demonstrated commitment. If Walmart wants to successfully grow and expand the tech startups it acquires, it must make an effort to understand the needs and concerns of the communities they serve.
We live in an age when bad reviews, negative comments, and ‘mean tweets’ can spread like wildfire and more consumers — particularly millennials — demand authenticity from the brands they do business with. Therefore, Walmart must engage Modcloth’s community and recognize that their partnership is needed over the long term if this acquisition is going to have the desired impact on its own bottom line.
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