Buy, Build or Bridge? Retail's Latest Conundrum

Amazon's acquisition of Whole Foods, Walmart's portfolio-building plays, J.C. Penney's appliance ramp-up and a host of other forays. Retailers are opting for diversification as their growth engine and departing from their cores as never before. The looming question now becomes "buy, build or bridge?" Determining when to build solutions internally or when strategic partnerships, or outright acquisition, makes more sense. Retailers that deploy all three approaches have the best insurance against obsolescence. 

Perhaps no other retailer embodies this mindset more completely than Walmart, a retailer that has been defined by DIY approaches for decades. Like many retailers, Walmart used to view outside alliances or investments as last resorts. Now, it is setting the standard for brand, category and platform acquisitiveness. It is opening its data door to outsiders. Its skunk works operation is developing next-gen retail wizardry (and making its own acquisitions). 

The traditional reasons for buying, building or bridging have been clearly established. Buying gives retailers access to assets or capabilities that are too costly, difficult or time-consuming to build or too sensitive to bridge. The recent run on same-day delivery services serves as a prime example. Building isn't always the easiest route, but it can offer more control, safety and even profitability (e.g. private brands). Bridging through partnerships allows retailers to ramp up concepts and open channels quickly leveraging established platforms. How else could Amazon have become a newfound frenemy to its competitors?

The following are a few new motives that will drive retailers’ decisions to buy, build or bridge: 

Why Buy?

Remember the days when a retailer would merge with another company (usually another retailer), and everyone would brace for the layoffs to follow? I do. It happened a lot back in the ’90s and early 2000s. Back then, retailers’ pre-digital end game was to expand brick-and-mortar scale and integrate operations, even dissolving regional retail banners that enjoyed fierce loyalty in the process. Remaining employees would be indoctrinated on the new owner’s ways. Those who balked were shown the door (initiating round two of staff reductions).

Now, acquisitions are a powerful tactic for winning the retail talent wars and retention is all the rage. In this regard, too, Walmart stands out as a leading-edge example. Following its 2016 acquisition of, Walmart immediately added Jet CEO Marc Lore to its executive team. The Jet team was kept intact and unmoved (in Hoboken, NJ) rather than folded into Walmart HQ. Multiple brand acquisitions have followed this satellite operating model, with some acquired talent assuming leadership roles within Walmart's corporate staff.  

Why Build?

Although it can seem as though retailers are abandoning self-created solutions in droves, new tech options are providing new reasons to take things in house. The greater availability of open-source tools in particular allows smaller retailers to keep up with the big guys and large retailers to craft their own concepts. Retailers tell me that some external solutions can be too elegant and generalized. One tech exec said, "Our scrappy tools are more agile and targeted to specific needs." Lack of scalability and prohibitive licensing fees provide additional incentives for retailers to take a pass on partnerships.

Why Bridge?

Even if retailers were reluctant to forge partnerships not that long ago, once they did, they tended to stick with them. Now, retailers are getting more comfortable with using bridge solutions as a runway toward building or buying. Retailers have looked to third-party partnerships with companies like Curbside and Instacart to augment their customer convenience arsenals, for example. Now, delivery companies are hot acquisition targets among retailers like Target, Walmart and, most recently, HEB. The quest for agility has driven retailers to explore partnerships with third-party platforms. Now it is emboldening them to seek out their own solutions once they find their footing. 

Striking the right balance of acquired assets, homegrown solutions and increasingly precarious partnerships will be a constant conundrum for retailers (and a moving target for suppliers). The need to employ all three will intensify as retailers seek next-gen talent, greater security, and faster ramp-ups. All at the same time.

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Carol Spieckerman