Wal-Mart Courts Lord & Taylor -- WSJ

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 20, 2017).

Wal-Mart Stores Inc. is near a deal to add Lord & Taylor to its website, part of a broader effort by the retail giant to build an online shopping destination that can compete with Amazon.com Inc., according to people familiar with the matter.

Wal-Mart, seeking to ramp up e-commerce sales after years of sluggish growth, wants to turn walmart.com from a discount site into an online mall that would also feature higher-end brands, the people said. For Lord & Taylor, the alliance could bring a boost in web traffic at a time when fewer shoppers are visiting department stores.

Additional brands that eventually could be included in the project include men's clothing company Bonobos and online retailer Jet.com, both of which are owned by Wal-Mart, as well as other traditional chains, one of the people said. Financial terms of the potential Lord & Taylor partnership couldn't be learned.

Last year, Wal-Mart bought Jet, placing its founder Marc Lore at the head of U.S. e-commerce operations. Then Wal-Mart made a series of smaller e-commerce purchases including Moosejaw, Bonobos and ShoeBuy, both to expand its online selection and gain access to brands built online, executives have told investors.

Now Wal-Mart aims to make walmart.com more attractive to premium brands and high-income shoppers, an area Amazon has also pursued in recent years.

Amazon didn't respond immediately to a request for comment.

Over the next year, Wal-Mart wants to "elevate the Walmart.com brands," Mr. Lore said last week. The changes include using blue branded boxes to ship walmart.com orders, redesigning the website and working on partnerships to gain access to more premium products, Mr. Lore said.

Last month, Wal-Mart said Denise Incandela will become its head of fashion for U.S. e-commerce. Ms. Incandela was most recently chief executive of shoe company Aerosoles and is the former president of digital for Ralph Lauren and chief marketing officer for Saks Fifth Ave.

Amazon has made an aggressive push in recent years to win over fashion brands. It scored a coup in June when Nike Inc. agreed to sell some of its products directly to the e-commerce company, and over the years it has reached agreements with department store stalwarts such as Calvin Klein, Kate Spade and Levi Strauss.

Amazon has also extended its reach into physical stores, buying grocer Whole Foods, and striking a deal with department store Kohl's Corp. that lets shoppers return goods bought on Amazon at 82 Kohl's locations.

Wal-Mart is framing itself as the only e-commerce operation that will be able to challenge Amazon directly, even though its website draws about half as many monthly U.S. visitors, according to the research firm comScore.

"Wal-Mart is positioning itself as a clear No. 2 in the space," said another person familiar with the discussions.

Like other department store chains, Lord & Taylor, which is owned by Hudson's Bay Co., is struggling with sluggish sales and declining foot traffic. Sales at Hudson's Bay's department store group, which includes Lord & Taylor, fell 1.6% in the three months to July 29.

Joining with Wal-Mart would help draw shoppers to Lord & Taylor's website, which attracted an average of 849,000 unique monthly U.S. visitors from February through July, according to comScore. That compares with 160 million for Amazon.com and about 79 million for Wal-Mart.com.

Smaller brands and retailers are wrestling with how to balance exclusivity with the need to grow online as Amazon and Wal-Mart get bigger, said Roshan Varma, vice president in the retail practice at AlixPartners, a consulting firm. "It's a little bit of a prisoner's dilemma. Are you going to defect or stay on your own?"

Higher-end brands have shied away from joining with Wal-Mart because of its discounter roots. But several brand executives said they need to rethink their approach to compete in a world increasingly dominated by Amazon.

Under the plan, walmart.com would give Lord & Taylor dedicated space on its website, but Lord & Taylor will continue to operate its own website. In the future, shoppers ordering from lordandtaylor.com would be able to pick up and return items at Wal-Mart's 4,700 U.S. retail stores, said one of the people familiar with Wal-Mart's impending deal with Lord & Taylor. Wal-Mart executives said in recent weeks the company is working to allow returns from third-party online sellers at U.S. stores.

The department-store chain will own the inventory and fulfill orders from the site. "The only difference," the person said, is that it happens to be on walmart.com."

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Sarah Nassauer at sarah.nassauer@wsj.com

(END) Dow Jones Newswires

October 20, 2017 02:47 ET (06:47 GMT)