Walmart is launching online bedding, cosmetic brands in bid for upscale shoppers

Walmart is preparing to introduce two stand-alone online brands in an attempt to capture the upscale shoppers that have long eluded the retail giant.

The merchandiser plans to launch two homegrown websites — one selling luxury mattresses and bedding, the other focused on cosmetics — to compete with the success of online start-ups like Caspar, Tuft & Needle and Glossier, according to two people who spoke on the condition of anonymity because they were not authorized to discuss internal plans.

The new strategy comes as concerns grow over Walmart’s online performance. The company reported earlier this week that e-commerce sales grew 23 percent during the critical holiday season, far slower than the 50 percent the company reported in the prior three-month period. Investors responded by knocking shares down by more than 10 percent, the biggest hit to Walmart’s stock in nearly three years.

When Walmart bought the e-commerce site Jet for $3.3 billion in 2016, many considered it a transformational transaction, an opportunity to give retail giant some dot-com mojo. But this week chief executive Doug McMillon said Jet’s appeal may be more limited.

“Walmart is just a really well-known brand for value throughout the country,” McMillon said in a call with analysts. “When you get into Oklahoma, Texas and the middle of the country, it just makes a lot of sense to invest in that brand rather than investing to introduce a brand that’s less familiar.”

Walmart’s new brands aim to complement Jet by targeting upper-middle-class women in their 30s and 40s, one person said. Much of the focus is to be on two groups: “Momagers,” mothers who also manage their households and want convenience and quality; and “all the single ladies,” unmarried women who don’t want to put off investing in home furnishings.

The goal, the person said, is to create enough buzz around the two brands to eventually attract more upscale companies and customers to Jet and Walmart. Representatives for Walmart and Jet declined to comment.

Allswell, a mattress and bedding brand Walmart trademarked earlier this year, is scheduled to launch in early March. It will have its own website and will not be cross marketed on Jet or Walmart.com.

The other brand, called Co Squared, will focus on cosmetics. Walmart is in talks with Canadian model Coco Rocha to represent the brand, the people said. (Before Rocha, Walmart tried unsuccessfully to bring on Sofia Amoruso, the founder of the online women’s clothing and accessories store Nasty Gal, and Arielle Noa Charnas, a social media “superinfluencer” behind the blog Something Navy, one person said.)

Among the company’s first products, emails show, will be a “canvas kit” that includes a collection of cosmetics: primer, concealer, color correctors and setting spray.

The new brands could represent something of a course correction for Jet, which Walmart bought 16 months ago. The world’s largest retailer tapped Jet’s founder, Marc Lore, to head its ecommerce business even as it kept the two companies separate. Jet continues to be headquartered in Hoboken, N.J., while Walmart is in Bentonville, Ark.

Initially, it appeared Jet might represent the heart of Walmart’s bid for upscale customers. In short order, the company bought up number of trendy online brands, including Bonobos and ModCloth, with the intention of eventually selling them on Jet.

“The Jet customer demographic — millennial, urban, higher income — aligns well with the demographics of ModCloth and Bonobos,” Walmart spokesman Randy Hargrove told Business Insider in August.

But Walmart appears to have walked back its plans for Bonobos in recent months.

“We have no immediate plans to launch on Jet.com,” a spokeswoman for Bonobos wrote in an email. “Our focus remains growing our existing web and [brick-and-mortar] Guideshop business.”

(ModCloth, which was introduced on Jet in October, has been temporarily removed from the site because of a “spring refresh,” according to a brand spokeswoman.)

The latest strategy will test the idea of whether a collection of brands is better than a unified whole. But ultimately the goal is the same, analysts said.

“One of the reasons Walmart has acquired businesses like Jet and Bonobos is because they want to develop a premium offering that is very difficult to develop within the Walmart business,” said Neil Saunders, managing director of research firm GlobalData Retail. “But it’s very clear that these are separate vehicles — selling higher-end brands and pushing up price points, that really goes against the fundamental tenants on which Walmart was built.”

But if Walmart wants to compete online it must expand beyond the low-priced staples that have underscored the company’s strategy for decades, he said. Profit margins tend to be tighter online, and labor and shipping costs mean that it’s simply not lucrative to specialize in $4 T-shirts and $6 picture frames

“You don’t want to just push lower-priced stuff online because it doesn’t make any money,” Saunders said. “If Walmart wants to create meaningful growth, it needs to go upscale.”

The stakes are particularly high online, where Amazon has staked its claim selling $99 Prime memberships to middle- and high-income Americans. The average Amazon shopper spends $157 on the site each month, compared with $27 at Walmart, according to a 2016 survey by research firm Mizuho. (Jeffrey P. Bezos, the founder and chief executive of Amazon, owns The Washington Post.)

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