The Monkeys & The Trunk...
This deal is super interesting, let me tell you why. After I was accepted to Stanford in 2016, I went to visit a class to see what all the hype was about. It just so happened that Brian Spaly, a co-founder of Bonobos and now former CEO of Trunk Club, was the guest for the day as the class covered a case on Bonobos. That opportunity to sit in on Brian first hand after his sale to Nordstrom put both Bonobos and Trunk Club on my radar. There's that.
Back to the task at hand! I have some guy friends that consider themselves clothing connoisseurs. By that I mean they are incredibly hip yet opposed to trends, deeply committed to observable quality and obsessive about fit. One is even part owner in arguably the top, high-end men's store in the Bay Area. Needless to say, though, these desires in clothing are sure to make your wallet thinner.
We go through phases right? Bell bottoms. Big baggy pants and oversized t-shirts. Capris. And now, trendsetters are demanding custom, tailored clothing and personalized styling. #masscustomization. Both Bonobos and Trunk Club were pitched as brands that cater to that particular trend. In different formats of course--one as a subscription box model and the other in an "e-tailer" or "guideshop." Still, no matter what, clothing is something we have to have. People will always buy it. There will always be options in price, quality and style. But with this Bonobos deal, I think Wal-Mart (represented in this deal by Jet.com's Marc Lore) are merging the two--the retail giant seemingly will hit both price and quality targets.
At the same time, while huge in impact, this process isn't really new. It's a necessary function that almost always corrects the market: a product is cool & trendy (read: expensive) and after a while, someone figures out how to make it available to the masses (read: affordable). Wal-Mart is doing precisely this...and it will be successful. By beefing up their e-commerce business through this purchase and the purchase of other online clothiers like Moosejaw, ModCloth and Shoebuy, Wal-Mart & Jet.com are preparing themselves to break into fashion in a way unlike ever before.
Wal-Mart's overall business model with an extremely low, efficient cost structure that keeps prices low helps them maintain the expectation of selling oceans upon oceans of product. This positions the company perfectly to use Bonobos to their advantage. If their attempt to penetrate the fashion market is through connecting with the millennial audience not only through the type of clothes we love but also through a recognizable culture brand like Bonobos, and at an affordable price, this deal is a potential home run. But it all depends on what Wal-Mart plans to do with Bonobos. We shall see...
So I'm going to make a bold prediction here. Two things:
1. The trend of the time (tailored, custom) is generally about to get a whole lot cheaper...dangerously cheaper.
2. Bonobos will be a huge money maker for Wal-Mart and maintain its value, unlike Trunk Club with Nordstrom, which has now lost half of its $350M valuation since its purchase in 2014. But really, only time will tell.
Read more on this landmark deal here.