Earlier this summer, when Amazon and Walmart scooped up Whole Foods and Bonobos, speculation swirled around these two retail behemoths each striving to become the ultimate shopping destination — both on and offline. Today's news of a Walmart/Google partnership confirms that the competition is heating up.
Foursquare is an independent location intelligence company without inside knowledge on either purchase. Yet we can make informed recommendations about which brands Amazon and Walmart should target next using our proprietary data-driven insights*. Our analysis is driven by the unique perspective we have based on our location intelligence and our understanding of how people move through more than 105M locations around the globe.
As background, here's what we see from a strategy standpoint:
- Amazon prefers brands that foster an even deeper relationship with its current shopping base. Additionally, Amazon invests in challenger brands that are smaller and more upscale than in-market competitors.
- Walmart, as a counterpoint, is playing catch-up in e-commerce, and so is looking to broaden its consumer reach and digital footprint, and develop delivery efficiencies.
- Both companies are interested in attacking verticals that have proved resistant to e-commerce penetration.
- Both companies want to refine and experiment with a “showrooming" strategy, and by that we mean relying on a limited amount of retail locations as a showcase that facilitates on-the-spot or later online purchases (Bonobos being a great example of this). They are also both interested in the same consumer: high-net-worth GenX and Millennials.
We can pinpoint attractive demographics by retail chain, always aggregated and anonymously, with insights from our foot traffic panel. Based on our understanding of these groups, these would be Amazon and Walmart's smart next targets.
Amazon wants to connect with the right shoppers IRL
Amazon's latest acquistion, Whole Foods, and Nordstrom have an overlapping customer set: Foursquare's data shows that Nordstrom shoppers are almost 2X more likely to shop at Whole Foods than the average consumer. So an Amazon-owned Nordstrom chain would deepen Amazon's relationships with its expanding core base.
Though Nordstrom has a strong presence within the high-growth, e-commerce-resistant industry of department stores, Nordstrom Rack is not the category leader in the discount category; that honor goes to T.J. Maxx. We found that Nordstrom Rack has actually lost more than 2% of its visit share to competitive discount retailers in the last two years. Amazon's ability to slash prices further could lift the competitor brand, and give Amazon a strong foothold into the brick-and-mortar discount market. Imagine if everyday was Amazon Prime day at Nordstrom Rack…
Walmart wants to capture new, Millennial shoppers
Walmart uses acquisition to capture new customers, which they can find at Nordstrom and Nordstrom Rack: these consumers aren't frequent Walmart-goers. According to Foursquare's foot traffic data, they are about 55% less likely to go to Walmart than the average American. What Nordstrom does have is a bona-fide track record as well as a healthy concentration of Millennials and females, a nice addition for Walmart to balance out the the purchase of Bonobos, which has a wider male reach.
Walmart has to pursue familiar verticals that have deep online footholds. And Nordstrom has seen tremendous success versus comparable retailers in developing its e-commerce presence. (Behind the scenes, Nordstrom and Walmart-owned Bonobos are already bedfellows; Nordstrom was a strong investor in Bonobos as far back as 2012.) A Nordstrom purchase would help Walmart further develop the expertise to combat Amazon.
Amazon and Walmart to fight over Warby Parker?
Amazon is looking for Warby's big spenders
Why would Amazon want Warby Parker? Well, Amazon could learn from Warby's showroom experiments (Warby Parker has 46 boutiques and an aggressive plan to open 25 more). Amazon's acquisition would improve Warby Parker's distribution and reduce their shipping costs — fueling growth and padding pockets, too.
Consider Warby's 55% Millennial consumer base, which over-indexes at luxury brands including Bloomingdales, Williams Sonoma and Lululemon according to Foursquare data. Moreover, Warby Parker has similar demographics and significant customer overlap with Whole Foods, again increasing the customer touch points that Amazon deeply values. Foursquare data shows that 80% of Warby Parker customers also shop at Whole Foods.
Walmart wants to lure Warby ladies into its big box stores
Walmart makes two types of investments: private label (like Bonobos) and multi-brand specialty retailers (like ShoeBuy). The former is a play to capture Millennials, and the purchase of Warby Parker would do just that once again: according to Foursquare data, 55% of Warby shoppers are Millennial. It's a similar hand to what Walmart played for Bonobos, but on a bigger scale. Warby Parker showrooms have nearly 10x the foot traffic of Bonobos, with a broader geographic presence and a base that's half female (51%).
Though we'd expect Walmart to keep Warby as a stand-alone brand, if Walmart ever needed an infusion of new shoppers and/or Millennials into its stores, one way to do so — and quickly — would be to add Warby Parker services and eyeglasses into Walmart's existing vision centers. In addition to being more than half Millennial, Warby Parker customers are 80% less likely to visit a Walmart versus the average American — so they'd be fresh eyes on Walmart's existing inventory.
Then there are targets that may be uniquely attractive to Amazon or Walmart.
Amazon to buy Lowe's?
Based on our first-party foot traffic data, we know that home improvement has been e-commerce resistant: both Home Depot and Lowe's perform well in brick and mortar with relatively consistent double-digit foot traffic growth over the past year. But we've pinned Lowe's as the target for several reasons.
Based on Foursquare data, we know that Home Depot has the largest visit share (55%), but there's low brand loyalty (nearly 90% of Home Depot shoppers also visited Lowe's in the past year). Lowe's is growing slightly faster (their share of foot traffic versus Home Depot has grown by 3% over the last 18 months) and yet they reportedly continue to suffer on margin, likely because they are so much smaller, with many fewer distribution centers. Amazon can help streamline inventory and distribution costs.
Also, Lowe's is more of a favorite with consumers versus professional contractors (this is partially reflected by the fact that Lowe's appeals more to women; according to our data, around 43% of Lowe's shoppers are women versus 39% for Home Depot). Amazon loves to win, so imagine what would happen if they cut prices and sacrificed margin to compete for marketshare, further growing their share of DIY homeowners. All together, Lowe's seamlessly fits into Amazon's playbook.
Walmart to buy Ulta Beauty?
Ulta Beauty, a public company headquartered in Illinois, with nearly 1,000 shops that sell a mix of high-priced and low-cost cosmetics and hair care items, is one of the most salient brick-and-mortar retail success stories. It's a lower-cost Sephora competitor. The brand has rapidly expanded both online and offline, while the rest of the beauty category struggles.
Walmart likely covets Ulta's customer base: This demographic shops frequently — not just at Ulta, but also at many other retail stores across several categories, including affordable chains (DSW, T.J. Maxx), as well as more luxurious retailers including Nordstrom and Neiman Marcus, based on Foursquare data. Shoppers, like the product mix itself, are a mix of high and low: luxury shoppers and deal-seekers.
Our data also shows that there are a wide swath of Ulta shoppers who are just as likely as the average consumer to visit Walmart, whereas another cosmetics brand — Sephora, for example — would be less of a willing convert to an Ulta/Walmart store. And the other half of shoppers would be new. So for Walmart, this would be the best of two worlds. Walmart can double down on its existing shopper set while gaining that new, coveted higher-end customer, too.
Lastly, the Ulta customer is attractive as one with extremely high loyalty; about 15% of Ulta visits were by high-frequency customers who visited at least 12x/year, according to Foursquare data. This customer loyalty is a large contributor to Ulta's success — share of visits from extremely loyal customers has nearly doubled YOY.
Of course, this is all speculation, supported by our data on foot traffic patterns (we know that foot traffic is just one indicator used to determine acquisition targets). But inevitably, both will acquire other interesting brands in the future. Before we have that next announcement to dissect, hope you enjoyed our target practice.
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We combined our empirical data on where different demographics and psychographics shop and our deep understanding of why brick and mortar remains important with signals that Amazon and Walmart have provided on company strategy — and came up with a set of brands that we suggest as the next potential acquisition targets. Pure e-commerce brands were purposefully excluded from consideration for this analysis since Foursquare's data is reflective of consumer behavior at brick-and-mortar stores.
Foursquare analyzes foot traffic from more than 2.5 million Americans that make up our always-on foot traffic panel. Our location-based apps Foursquare City Guide and Foursquare Swarm help us understand trends and notable societal shifts. All data is anonymized, aggregated and normalized to match the U.S. Census (removing age, gender or geographical bias). Stats and data included in this report were collected from January 2016 to June 2017.