Was ModCloth a Good Deal for Walmart?

Walmart subsidiary Jet.com recently bought online women’s clothing retailer ModCloth for between $40 and $60 million - nearly half what ModCloth raised from investors since its founding in 2002.

But L2 research suggests that the deal is no better for Jet than for ModCloth.

Jet has made several apparel acquisitions in the past year, including home goods maker Hayneedle, shoe vendor Shoebuy, and outdoor apparel seller Moosejaw – suggesting that like Amazon, the e-tailer is trying to expand beyond CPG.

Sucharita Mulpuru, chief retail strategist at Shoptalk, told Business of Fashion that she saw value in ModCloth’s private label offering, customer data, established relationships with suppliers and pricing relevance, “particularly in the contemporary space.”

Read: Can Jet.com Take a Bite Out of Amazon Fashion?

However, L2 research suggests that this acquisition is unlikely to pay off.

Even Amazon has struggled with fashion, and given that Walmart consumers are typically less affluent, the fashion goods seller might not be the best fit for the retailer’s demographics – meaning that Jet will also be unable to help ModCloth scale.

While ModCloth’s price point is certainly less premium than the high fashion brands that Amazon has targeted for partnerships, with most dresses hovering around $70, the prices are not necessarily low enough to be in the range of affordability for Walmart customers.

Death of Pureplay Retail: U.S. E-Commerce Sales, Billions

Turning to Jet reflects ModCloth’s continued faith in e-commerce to drive sales.

The brand grew more slowly than competitors due to its late embrace of brick-and-mortar, according to L2’s Death of Pureplay Retail report, which makes the case that pureplay e-commerce brands have less viability than those integrating stores into their distribution footprint.

The study compares the growth trajectory of ModCloth and Birchbox: while Birchbox leapt to experiment with physical stores, ModCloth focused for years on pureplay online distribution, limiting its potential.

Source: L2

Related: Retail Seeks to Redefine Itself

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