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#GlobalShop19: Walmart's 'Netflix' strategy of building brands with physical space

Retail giant Walmart is embracing new business models with a strategy that utilises physical retail space to drive growth of the highly focused brands it is acquiring and nurturing.

Andy Dunn – senior vice president of digital consumer brands at Walmart and former CEO of menswear brand Bonobos, which was acquired by Walmart – presented a keynote session this week at Globalshop@RetailX in Chicago, telling how Bonobos grew, and how lessons from the process are being used to shape Walmart’s future.

In the session, Hitching a Rocket to an Engine: Bonobos and Walmart take off, Dunn related how online brand Bonobos began offering a fitting service in the lobby of its office building, and realised the potential of a physical presence to help it reach the next level of its growth. But while Dunn was keen to expand the fitting service and enjoy the ability to offer customers good service and experience, he wanted to avoid the reliance of traditional retail on large, expensive stores full of inventory.

The concept of ‘guide shops’ which offered the service, but with purchases despatched directly to customers at home, was born. “We realised we could open stores with… no stock, and we could put in great service and interactions. By taking out the stock you don’t have to play defence against inventory,” says Dunn.

Dunn was also tackling what was perceived as a major issue for purely online retailers: that, at the time, none of them were making a profit. “Retail… doesn’t really work without bricks and mortar. The numbers don’t add up. Internet-driven retail doesn’t really make money. The past and the future need each other to make the math work. And the consumer benefits,” he says.

In his current role, Dunn is working to shape Walmart’s future. He describes the group’s strategy as being like that of Netflix, which went from showing content created by other companies to being a major player in the creation of films and television programmes.

“Selling other people’s stuff is becoming a commoditised business. It’s a race to the bottom in terms of margin,” says Dunn. Instead, Walmart is increasingly backing brands that it has acquired an interest in.

These include womenswear brand Eloquii, which is seeking to reshape what Dunn describes as the “injustice” of an industry that treats the majority of US women as abnormally-sized, with only a fifth of ranges created in appropriate sizes; and mattress and sleep brand Allswell.

And it seems likely that more brands will follow. “For us, the future… is about building brands,” says Dunn. It is a future that looks set to continue using physical space to bridge the gap between consumer and product.