Thoughts on Walmart’s purchase of Eloquii

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Last week Walmart bought Eloquii in a bid to expand their online offerings for the $21BN plus-size women’s apparel market.

Deal Overview:

According to the recode article, Eloquii raised $42M and the rumored purchase price was $100M at about 2.5x – 3x sales.  While, this not the Billion dollar outcome VCs strive for, if this price is accurate, it appears to be a less than ideal money-back type outcome for the investors but it commands a solid multiple on sales relative to most ecommerce/brand comps out there, and an even better strategic fit for Walmart long term.

Eloquii CEO Mariah Chase was quoted as saying “When you’re a business that had raised venture capital, selling the business is not necessarily an existential question, especially as you mature, “The question really comes down to timing and partner. And for us, that all kind of gelled with Walmart.”

This “timing and partnership” was further highlighted by Walmart head of eCommerce/Digital, and creator of the OG DNVB Bonobos, Andy Dunn, as he mentioned Walmart’s desire to be able to better serve the plus-size market as well as make Walmart and their family of brands more than just a shopping portal that sells brands but a place that “builds brands and develops customer relationships”.

Walmart’s approach to strategic purchases the past few years has proven out this commitment to brand building and customer relationships within Walmart (see deals: Bonobos, Modcloth, Moosejaw, Store8, Allswell, etc.).

Brand Building is harder than it looks:

Given the influx of social media influencers and Shopify’s ease of setup it has never been easier to start a brand. But starting a brand and building a brand are very different things.

Building a brand is hard, building an authentic brand that is able to reach scale or “escape velocity” as a stand-alone company to generate the true “VC-level” returns is extremely difficult in today’s day and age of rising Customer Acquisition Cost (CAC) and increasing competition for wallet share so I think deals like this one will become more frequent.

Large Enterprise Software and Cybersecurity firms are notorious for small tuck -in acquisitions and other point solution purchases they can then attach to their broader suite of products (shout out 2014 Valuation World Cup Runner-Up Attach Rate!) and I view this deal the brand equivalent of just that.

Eloquii is a strong individual brand in a market they know extremely well that can be even better utilized in a bigger portfolio of brands with access to much greater resources while still maintaining the ability to keep its unique brand identity and ethos intact.

I have mentioned to anyone that will listen, or at least feign interest as I theorize, that I think Walmart is well on its way to becoming the Phillips Van Heusen or V.F. Corporation for the next wave of Consumer Brands.

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A Sample of PVH’s brands

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V.F. Corps family of brands (a bit outdated since they just sold Reef to Rockport)

They have the buying power, the leadership team, the data-first mentality that comes with DNVBs, the supply chain expertise, and the need to differentiate from Amazon to drive them to become the next great brand aggregator.

This deal is another step in that direction as it gives Walmart entry into a market they have so desperately wanted access to but it also gives Eloquii the ability to grow and reach scale with much greater resources at their disposal.

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