Retailer aims to upscale e-shelves

Wal-Mart talking with Lord & Taylor

Posted: October 20, 2017 at 2:04 a.m.

Wal-Mart Stores Inc. wants to "elevate" the brands on to compete with and is working on a solution through a partnership with a New York-based department store chain.

The retailer is nearing a deal with Lord & Taylor that would give the department store a place to sell its products on The potential agreement was reported by The Wall Street Journal, which cited a person familiar with the matter as saying a deal with Lord & Taylor also would be the first step in creating an online mall at that could include additional brands.

Wal-Mart declined to comment Thursday, but retail analysts said the move would make sense for the company as it positions itself to become more attractive to premium brands and higher-income shoppers. Wal-Mart acquired for more than $3.3 billion more than a year ago. Under the direction of founder and U.S. e-commerce chief Marc Lore, the company has since added online retailers Bonobos, ModCloth, Moosejaw and to its portfolio.

"I think there is a concentrated effort on their part to up their brand level and try and move up into higher-income demographics, not only with the Lord & Taylor move, but obviously with Bonobos and then some of the other things they're doing," said Ken Perkins, president of Retail Metrics LLC. "They need to add as many potential retailers and vendors to their portfolio in terms of having a third-party market site, if you want to call it that, to draw more traffic and compete directly with Amazon."

Lore mapped out some of the basics of those strategies during last week's meeting with the investment community, saying the company wanted to "elevate the brands" over the next year so the retailer can "attract more premium sellers to the site, more premium brands."

Some of those plans already are underway. Lore pointed to a redesigned website that will be unveiled next year and the recent introduction of blue-branded boxes for shipped orders. He also said last week that the retailer was working on partnerships that would draw a more premium assortment to the website.

Lord & Taylor is a New York-based company with about 50 department stores nationwide. Most of its physical locations are located in New York, Massachusetts, Connecticut, New Jersey, Maryland, Virginia, Michigan and Illinois. Lord & Taylor is a subsidiary of Hudson's Bay Co.

Brian Yarbrough, a retail analyst with Edward Jones, said Lord & Taylor traditionally caters to higher-income customers who may not normally shop at Wal-Mart. So there's benefits to a deal as Wal-Mart attempts to expand its customer base and boost U.S. e-commerce sales.

The company said last week its U.S. e-commerce sales for the current fiscal year is expected to reach $11.5 billion. Wal-Mart projects sales growth of 40 percent to about $16 billion next year.

"It brings in a different customer demographic," Yarbrough said. "I think their plan is to get that customer to come to looking at Lord & Taylor, maybe find other things and start buying from there. Maybe they have a good experience, become customers or start going to their stores."

The agreement also makes sense for Lord & Taylor as it continues to navigate the rapidly evolving retail landscape, according to Perkins.

Like most department stores, Lord & Taylor has been affected by an industry in which shopping is shifting to and other online sellers. Hudson's Bay's department store group -- which includes Lord & Taylor and Hudson's Bay -- reported a 1.6 percent drop in sales during the previous quarter.

Perkins said securing a dedicated place on Wal-Mart's website provides an opportunity for greater visibility, which also creates a chance for additional sales. He added partnering with Wal-Mart probably isn't the department store's "first choice," but it's important to be involved with someone that's growing online, driving traffic and "has a chance in this environment against Amazon."

"I think Amazon has become so formidable that retailers really need an alternative to try and offset Amazon's dominance," Perkins said. "Wal-Mart has the deepest pockets. They have the resources and they clearly have the willingness with the acquisition of Jet last year and their willingness to add to their acquisitions and grow and take on Amazon. I think that has become much more attractive."

Business on 10/20/2017