Wal-Mart Stores Inc. (NYSE:WMT) is reportedly planning to strengthen its e-commerce footprint with the acquisition of beauty product subscription service Birchbox. The nation largest retailer has already snapped ModCloth, Bonobos and Moosejaw as it continues to explore ways of bridging the gap with e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN).
Birchbox Acquisition Talks
Initial reports indicate that Wal-Mart’s e-commerce chief, Marc Lore, has already held discussions with Birchbox co-Founder and CEO, Katia Beauchamp. People with knowledge of the matter say the two companies are in the early days of discussions and it is unclear whether a deal will materialize. Birchbox has also reportedly held discussions with other suitors.
Birchbox comes into the acquisition discussions having raised more than $80 million from investors since 2010. The company also has a venture debt that is due in early 2018. However, the venture debt is not expected to affect ongoing negotiations, given that the company has multiple offers on the table for its restructuring.
Wal-Mart Acquisition Spree
Wal-Mart eyeing a deal for Birchbox does not come as a surprise given that the acquisition would strengthen its prospects in the $62.5 billion a year cosmetics/beauty industry. For just $10 a month a box, Birchbox allows women to discover new beauty products a model that has allowed it to generate more sales as most of them go on to make full priced purchases.
Birchbox generates about 35% of its revenues from full prices sales, triggered by the $10 a month subscription program. However, the company faces stiff competition with the emergence of more than a dozen clones all of which are operating under the same model.
If Wal-Mart truly wants to buy Birchbox, then it shows it is not fazed by the amount of competition at stake. A partnership should help Birchbox ramp up its edge in the space, thus better compete against Ipsy which has reportedly overtaken it when it comes to head to head market share in the U.S.
Wal-Mart acquisition spree is not expected to stop anytime soon as it continues to take the fight to Amazon as shopping patterns switch to online.
“We’re seeing what these acquisitions have done for the business,” he told the outlet then. “It’s definitely a nice surge, so we will continue to do it,” said Mr. Lore.
Wal-Mart stock was up by 0.65% in Wednesday’s trading session to end the day at $81.61 a share.