Partnerships / Acquisitions

Nordstrom, Walmart And The Startup Snap-Up Strategy

It’s a tale as old as time, or at least as old as the internet. Retailers, both traditional and digital-first, must increasingly cater to customers on digital channels or risk losing business to bigger, more digitally accessible brands like Amazon.

That gives a distinct advantage to players that built their business on an online platform compared to those that have been around for years, decades and even centuries and now must adjust to the changing world. Digital native brands were born for this, while their predecessors played by a different set of rules and are now hustling to keep up in a game they barely recognize.

Amazon’s one-click ordering is a formidable opponent. How does a brick-and-mortar retailer used to doing business in a fixed location offer consumers the at-their-fingertips experience they so clearly crave?

Different brands are following different strategies to keep pace. One such strategy is for traditional retailers to absorb newer, more tech-savvy companies to up their digital ante.

Nordstrom, for instance, announced Thursday, March 8, that it closed acquisition deals with startup retail tech companies BevyUp and MessageYes.

BevyUp makes a digital selling tool that puts “a sales associate in your customers’ pockets,” while MessageYes leverages mobile messaging to deliver personalized product recommendations that get smarter the more customers interact with it.

Nordstrom has always taken pride in forging customer connections and initiating style conversations. As customer expectations shift, those connections and conversations must be built in new ways in a new landscape: The conversation can now happen anytime, anywhere. That’s why Nordstrom’s Technology SVP Brian Gill told GeekWire that the acquisitions would reinforce the retailer’s existing strategy.

“We’re about 100 years deep on priding ourselves on a high degree of personal service, being a brand that really creates a relationship with the customer,” Gill said.

“With these acquisitions, what we’re looking at is companies that are really going to help us do that in a way that enhances and amplifies what we’ve done historically. But it really helps us do it in a way that reaches customers more where they are in the modern day — meaning more through digital channels.”

Of course, Nordstrom isn’t the first or only company to turn to tech startups for help.

Walmart has been snapping up startups left and right. It all started with a $3 billion acquisition of Jet.com in 2016. After that, the big box retailer gobbled up ShoeBuy, Moosejaw, Bonobos, Parcel, Hayneedle and ModCloth. Marc Lore, CEO of Walmart eCommerce U.S., said in October 2017 that specialist positioning would serve customers better than mass production.

“We’ve empowered the leaders of these companies to basically run the category across the entire entity,” Lore said.

Meanwhile, Kroger and others are vying for the affections of Boxed, the high-profile eCommerce startup offering wholesale bulk ordering online. Boxed said yesterday, March 8, that it would not accept Kroger’s $400 million offer and would instead pursue new funding to remain private, according to Bloomberg Technology.

However, that likely won’t stop Kroger and others from searching for a partner to fill that niche, as the grocery wars continue to foist innovation upon supermarkets whether they like it or not. Many grocers have already acquired meal kit startups (or built their own) for this exact reason. For instance, Albertsons grabbed Plated for $200 million last fall.

The convenience of mostly prepped meals either delivered to their doors or ready to grab and go at the grocery store clearly resonated with consumers and everyone seems to want a bite of it — though the market for meal kits seems to have passed the saturation point at some point in the last couple of months.

Across retail, the mentality seems to be, “If you can’t build it, buy it” — and with the rate things are changing, maybe the “grab and go” acquisition method is the best way for traditional retailers to quickly add and deliver the features their customers want.

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