One of my favorite quotations—which often appears in my keynotes and is in my forthcoming book—comes from marketing and leadership guru (and long-term friend) Seth Godin: “If failure is not an option then neither is success.”
With recent revelations that Walmart is losing more than $1 billion annually in its e-commerce operations and this past week’s announcement that Bonobo’s founder Andy Dunn, who has been overseeing digital brands since his company was acquired by Walmart, would soon be departing, it’s worth asking whether what Walmart initiated in 2016 is actually working.
Two and a half years ago I strongly questioned the overall thrust of Walmart’s direct-to-consumer dreams, mostly focusing on the lunacy of paying $3.3 billion for Jet.com, a business model that initially rivaled WeWork in its sheer ridiculousness. Aside from the questionable strategic rationale for its subsequent acquisitions of Bonobos, Modcloth, Eloquii, Moosejaw and Shoes.com at, shall I say, “generous” valuations, one thing seemed clear at the time: Walmart was about to set fire to a very big pile of cash.
I think by now it’s obvious that Walmart paid, at least collectively, too much for these acquisitions and that the notion of building a successful and material portfolio of upscale digitally-native vertical brands was a major stretch. Appropriately, they are pulling back on this strategy and focusing more on what they should have in the first place, namely embracing the blur and building a compelling harmonized strategy for their core business operations.
So does this mean that Walmart has failed? Or, perhaps more to the point, was this a productive failure?
It’s been clear for some time that Walmart needed to up its digital capabilities more broadly while thinking more about its stores as assets, rather than liabilities—and investing more aggressively to bridge the digital divide. Now, after several years of significant effort and investment, Walmart looks to be joining Target, Best Buy and others in the stores strike back renaissance, proving old dogs can, in fact, learn new tricks.
With the benefit of hindsight, Walmart likely could have gotten to a somewhat better place, more quickly, having spent less money to do so. But innovation is, at its heart, messy. Mark Lore, Andy Dunn and many others that injected more digital DNA into Walmart’s legacy culture seem to have had a positive and transformative impact. Walmart may well not have realized what it needed to double down on had they not seen firsthand the weaknesses in Jet’s value proposition, particularly in taking on Amazon in grocery. Seeing the challenges in scaling digitally-native vertical brands likely gave them increased confidence in getting behind their own new, more robust exclusive brand strategy (e.g. Allswell).
When I talk about being a “radical” as one of my 8 Essentials of Remarkable Retail I highlight that quitting is underrated. For retailers that mostly watched the last 20 years happen to them and now wonder what the hell is going on, it’s clear they spent too much time defending the status quo, being unwilling to experiment and take risk. Walmart, while more than a bit slow to get started, has clearly stepped up to the plate and been willing to place multiple, expensive bets on the future. More importantly, perhaps, they have also been willing to admit when they were wrong, pulling back where needed and reinvesting based upon the learnings their experiments have given them. This is huge, and will likely serve them well in the future.
So a failure? Kind of. A productive one? It’s starting to look that way.
Underperforming experiments are, in many respects, just like fashion products that have failed to find enough customers. Best to remind ourselves of the concept of “opportunity costs,” take the markdown and move on.
A version of this post recently appeared at Forbes, where I am a senior contributor.