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Walmart takes a cue from Netflix in buying brands

Category: Finance,Retail

Just as Netflix has amped up investment in content creation, Walmart will continue investing in brands, said Andy Dunn, CEO and co-founder of Walmart-owned online clothier Bonobos.

"If you want to win, you've got to own great brands," Dunn said Tuesday on CNBC's "Squawk Alley." "It's kind of like what Netflix did. They started making their own content. And we're of the belief the same thing is going to happen in commerce."

Known for its low prices, Walmart has worked in recent years to move beyond its no-frills image and compete with the likes of Amazon. As part of that strategy, Walmart bought Jet.com for $3.3 billion in 2016 to target urban shoppers, and has invested in luxury brands, including ModCloth, Moosejaw and Bonobos.

When Walmart announced it would acquire upscale men's boutique Bonobos for $310 million last June, many fans of the digitally focused men's brand were confused — or even angry.

Dunn acknowledged the combination was strange for some. "I think when people saw the deal, there was a concept of, 'Are these strange bedfellows?'"

Ultimately, he said, the combination makes sense. In the same way that Netflix pivoted from being a budget-friendly content streaming platform to being an original content-producing machine, Walmart is investing more deeply in brands, rather than just selling pre-existing ones at low prices.

"The realization is that Walmart, my boss Mark Lore and his boss, Doug McMillan, really see around the bend. And one of the things we believe is the future is not just about platforms, it's about brands."

The partnership also props up Bonobos' omni-channel, or hybrid online and brick-and-mortar goals, Dunn said. Bonobos is internet-driven, Dunn said, meaning it uses its brick-and-mortar locations for fittings and customer service, rather than stocking inventory, and ships its products to consumers. And Walmart is making huge strides in e-commerce.

"You've got to be good at both sides, and that's part of the reason we did the partnership with Walmart ... we really believe in omni[-channel retail]. Stores aren't going away, but you really have to evolve the stores toward the next generation of hybrid online-offline," Dunn said.

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