Ecommerce Pure-Plays Win Attention from Brick-and-Mortar Retailers

Author: eMarketer Retail

Ecommerce upstarts won plenty of attention on Tuesday as PetSmart agreed to acquire online pet supplies retailer Chewy.  The deal came on the heels of a report that Walmart is in talks to acquire online menswear retailer Bonobos.

The news shows the increasing pressure that brick-and-mortar retailers are under to acquire successful ecommerce models and ecommerce-tested executive teams.

PetSmart, which was taken private in 2014, didn't disclose the terms of its deal to acquire Chewy, but Recode put the price at $3.35 billion, which it said would be the biggest ecommerce purchase ever, outstripping Walmart's purchase of Jet.com for $3.3 billion last year.

Meanwhile, the Wall Street Journal reported that Walmart is in talks to acquire  Bonobos for $300 million. While the brand is a pure-play ecommerce seller, it has opened dozens of "guideshops" where shoppers can check for fit.

Ecommerce sales continue to grow at double-digit levels, and eMarketer estimates that the pace will remain above or near 14% through 2021.

Meanwhile, overall retail sales (including ecommerce) are expected to edge up just 3.5% this year, and even less in subsequent years. Strings of physical stores have closed over the past 18 months, but the closings are far from done.  In fact, the pace may pick up as the sector comes to terms with an oversupply of locations in the US.

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Even segments that once thought they might be immune to ecommerce pressures, such as luxury goods, are finding that they must up their ecommerce game. 

Online sales of pet products were once the butt of jokes, as early competitors won massive valuations, only to be obliterated by the dotcom bust in the early 2000s. Founded in 2011, Chewy.com was born long after those early failures. Recode reported that Chewy had nearly $900 million in revenue last year. Co-founder Ryan Day will remain CEO of Chewy after the PetSmart acquisition, PetSmart said.

While the state of physical retail has been grim, the Chewy deal is a reminder that many retailers see a continued need to have a presence both online and off.