What can be learned from Crescent Electric and Walmart?

What do Crescent Electric and Walmart have in common?

They both have recently made eCommerce acquisitions … and probably for the same reasons.

And both, probably, have been frustrated with the pace of their eCommerce initiative.

Consider this:

• Walmart just spent $3 billion in cash plus $300 million in stock to purchase Jet.com.
• Crescent Electric recently purchased Home Products Etc which operates EliteFixtures.com

Why?

Well. let’s start with the fact that eCommerce represents only 3% of Walmart’s sales.  Many electrical distributors can relate to this (we do not know what Crescent’s eCommerce revenues are.) It’s frustrating to invest so much and for it still to represent such a low percent of sales when everyone hears about Amazon’s success.

And Walmart’s eCommerce sales grew only 7% last quarter whereas Amazon’s grew 31% (again, distributors can relate as we hear about Grainger’s eCommerce being 46% of sales … in reality it’s more EDI … and Amazon Business at $1B … but we know it’s not all electrical!  But sales are occurring online.)

According to an article in the Wall Street Journal detailing the Jet.com acquisition and an interview on CNBC with Marc Lore from Jet.com and Doug McMillon from Walmart:

• Walmart sees the shift to online and the threat to the company’s growth (many distributors can relate to this)
• Walmart can benefit Jet’s supply chain, talent and technology expertise
• Added 400,000 Jet.com shoppers who had a different demographic (group of young, wealthy, urban shoppers) and were on pace to purchase $1 billion from Jet
• Will continue to operate both sites (but gain back-end synergies and Jet gains better buying buyer through Walmart)
• Jet.com didn’t expect to become profitable until it sold $20 billion, which was expected by 2020.
• Walmart sees eCommerce as “additive” to its offering and “serving customers the way they want to buy”
• “They acquired the expertise (people), systems, technology and an expanded offering”
• Success in eCommerce is dependent upon market scalability (need to get big fast) and that eCommerce profitability is based upon speed to market as the investment is a fixed cost, hence need to capture share “quickly” (and we’re seeing this as Amazon is starting to consistently report profitability now that it is $100 billion – plus the profitability of Amazon Web Services)
  • Marc Lore said “eCommerce is a scale game” and “need to leverage fixed cost of technology”

Consider Crescent and their acquisition:

From their press release:

• “HPE has built a proven, scalable ecommerce platform (technology expertise, people expertise, cultural understanding) recognized for its ease of use and is supported by an excellent customer service team.
• embark on an aggressive plan to grow our online presence (speed to market)
• acquisition brings us a talented ecommerce team, including HPE’s two founders and leaders
• expand our online presence rapidly and provide additional services to our current customers.”

And Crescent can bring some buying power to Elite Fixtures in the electrical and lighting segments.  EliteFixtures.com can bring other product categories, or at least access to those lines, to the communities that Crescent Electric is in (many rural communities), hence bringing additional revenue to branches.  Interestingly, Crescent has a B2B echannel as well as a B2C eChannel, so HPE / EliteFixtures can also provide support on the B2C side of the business.

EliteFixtures’ site also outlines a couple of options for eRewards programs as well as a discount center and a blog … hence services / technology / options that could bring technical, marketing and thought-process expertise to Crescent.

What can others learn?  Running a web business is different than running a distributorship.  Just like running a lighting showroom is different than running a distributorship.  Consideration needs to be given to the talent you have running it (their thought process and entrepreneurial mentality), marketing and speed.  Processes need to be reviewed, improved, standardized / institutionalized to serve the new customer experience … which is an omni-channel experience. It’s all about customer choice.

While the jury may be out for the time being if a transaction will be consummated online but, many are finding that robust, informative websites are order influencers as they provide the customer the information that they need to make a decision.

So, what can be learned from Crescent and Walmart?  Looking outside may be what you need inside.