E-commerce & Internet Retail

Three Retail Mergers & Acquisitions That Will Shake Up the Industry in 2017 & Beyond

  • October 27, 2017
  • Daisy McCarty
  • 7 minutes

In today’s hyper-competitive retail market, it’s no longer enough for retailers to dominate a single channel; to succeed, they must have a strong presence both online and in stores.

As a result, many retailers are turning to mergers and acquisitions (M&As) as a way to accelerate their omnichannel strategy and capture increased market share. According to a report by A.T. Kearney, 2017 will see a record number of mergers and acquisitions in the retail sector. Many of these consolidations will occur between traditional brick-and-mortar retailers and online-only retailers, such as Walmart’s acquisition of menswear site Bonobos. Here are three such M&As that are bound to shake up the retail industry in 2017 and beyond.

Ace Hardware and The Grommet

Earlier this month, Ace Hardware purchased a majority share in The Grommet, a product launch platform that helps independent innovators, also known as “Makers,” take their inventions to market.

The two companies first partnered in November 2016, bringing Grommet displays to 250 Ace Hardware stores throughout the United States.

The acquisition will strengthen Ace’s existing bond with The Grommet’s community of over three million loyal early adopters – who already visit Ace stores over 50 percent more times and spend almost three times as much as the average Ace Rewards customer. In exchange, inventors served by The Grommet will access a dedicated, highly targeted marketing and distribution pipeline to fuel sustainable growth.

“Ace’s expansive supply chain and network of 5,034 stores coupled with The Grommet’s innovative product discovery platform combine to give dreamers, inventors, innovators and Makers a sustainable, high quality path to meaningful growth, without having to bow down to the altar of Amazon,” said John Venhuizen, president and CEO of Ace Hardware Corporation.

About Ace

Ace Hardware has been serving the DIY handyman since 1924, earning its reputation as “the place with the helpful hardware folks.” Today, the company boasts more than 5,000 stores across the U.S. as well as a strong online presence.

About The Grommet

The Grommet, founded in 2008, operates an e-commerce website that has launched over 2,500 brands, including household names such as OtterBox, FitBit, IdeaPaint, GoldieBlox and Bananagrams.

"Ace’s expansive supply chain and network of 5,034 stores coupled with The Grommet’s innovative product discovery platform combine to give dreamers, inventors, innovators and Makers a sustainable, high quality path to meaningful growth, without having to bow down to the altar of Amazon."

Amazon and Whole Foods

In August, e-commerce giant Amazon made retail history when it purchased organic supermarket chain Whole Foods for $13.7 billion dollars.

The deal will give Amazon an in-store presence in upscale urban markets as part of the online retailer’s push into the brick-and-mortar space. In return, Whole Foods will be able to leverage Prime Pantry to acquire subscription customers while shedding its reputation for being a high-priced grocery retailer.

The companies plan on implementing several key initiatives that will provide a true omnichannel shopping experience for Amazon and Whole Foods customers:

  • Amazon Prime will become Whole Foods’ customer rewards program, providing Prime members with exclusive in-store savings and benefits.
  • Whole Foods’ private label products will be available through Amazon.com, AmazonFresh, Prime Pantry and Prime Now.
  • Customers will be able to have products shipped from Amazon to their local Whole Foods store for pickup.

“It’s been our mission for 39 years at Whole Foods Market to bring the highest quality food to our customers,” said John Mackey, co-founder and CEO of Whole Foods Market. “By working together with Amazon and integrating in several key areas, we can lower prices and double down on that mission and reach more people with Whole Foods Market’s high-quality, natural and organic food. As part of our commitment to quality, we’ll continue to expand our efforts to support and promote local products and suppliers. We can’t wait to start showing customers what’s possible when Whole Foods Market and Amazon innovate together.”

About Amazon

With $135.99 billion in revenue in 2016, Amazon is the third-largest retailer in the world and ranks No. 83 on Forbes’ Global 2000 list of the world’s biggest and most powerful public companies. Founded in 1994, the company also produces consumer electronics such as Kindle e-readers and is the world’s largest provider of cloud infrastructure services.

About Whole Foods

Whole Foods Market is one of the biggest names in organic groceries, marketing itself as “America’s Healthiest Grocery Store.” Founded in 1980, the company earned $15.7 billion in revenue in 2016 and has 473 stores in North America and the United Kingdom.

"By working together with Amazon and integrating in several key areas, we can lower prices and double down on that mission and reach more people with Whole Foods Market’s high-quality, natural and organic food."

PetSmart and Chewy.com

In April of 2017, PetSmart acquired Chewy.com for $3.35 billion in the largest e-commerce acquisition to date – bigger than Walmart’s deal for Jet.com.

The acquisition is critical to the long-term success of PetSmart, who, despite being the country’s largest company in the pet store industry, is struggling to keep up with its biggest competitor in terms of e-commerce sales: Petco is expected to generate nearly $660 million in revenue from online sales in 2017, compared to PetSmart’s $70 million. By acquiring Chewy, who had more than $900 million in revenue in 2016, PetSmart has found a way to seize more online market share without having to rebuild its existing operations.

For Chewy, the acquisition means a huge amount of cash in pocket to fuel its e-commerce endeavors. The executive team at Chewy is expected to remain in place to continue with its successful e-commerce growth strategy.

“PetSmart strives to be the trusted partner to pet parents and pets in every moment of their lives,” said Michael Massey, president and CEO of PetSmart. “We are focused on improving our customers’ experience in-store and online as we continue to execute against our long-term strategic initiatives. Chewy’s high-touch customer e-commerce service model and culture centered around a love of pets is the ideal complement to PetSmart’s store footprint and diverse offerings. Together, PetSmart and Chewy will provide the most convenient customer experience to a wider base of pet parents across every channel.”

About PetSmart

PetSmart, a pet food and supply retailer with over 1,400 stores, is the largest pet retailer in North America. Founded in 1986, the company specializes in the sale of pet supplies and services such as grooming, training and boarding.

About Chewy.com

With more than $900 million in revenue in 2016, Chewy.com is one of the fastest-growing e-commerce sites in the world. Founded in 2011, the company offers over 30,000 items, primarily for dogs and cats. Its primary product is pet food.

"Chewy’s high-touch customer e-commerce service model and culture centered around a love of pets is the ideal complement to PetSmart’s store footprint and diverse offerings. Together, PetSmart and Chewy will provide the most convenient customer experience to a wider base of pet parents across every channel."

Challenges of Retail Mergers & Acquisitions

One of the biggest challenges retailers face after mergers and acquisitions is figuring out how to efficiently manage their product data. Companies must make every effort to ensure:

  • Products are accurately matched
  • Prices are comparable
  • Data is correct, complete and consistent
  • Content is written in the appropriate brand voice

Because each company has its own existing standards, processes and systems, addressing these issues is a time- and resource-intensive activity, but it must be done quickly to avoid disruption in the customer experience.

OneSpace has helped retailers such as OfficeMax and Office Depot scalably standardize disparate product datasets post-M&A. Contact us to learn how.

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