By Sheldon Barry Cwinn
Most vendors that sell to Wal-Mart do not realise this but basically, selling to Wal-Mart means selling on consignment. Wal-Mart cleverly disguises this by "advancing" money to you according to your Vendor Agreement. But, make no mistake about it, your merchandise is strictly on consignment and faces the prosepect of 50/50 markdowns, being returned to you, or a combination of both. Here are some stories that you should consider......
- Touch My Monkey! The Wal-Mart buyer came to a well-established apparel manufacturer one day with a concept of doing several children's sleep sets with the theme "Touch My Monkey." This was to be a Wal-Mart private lable initiative. Dutifully the manufacturer went out and designed 12 different pieces of artwork for the "Touch My Monkey" line. Six designs were eventually approved. Then the manufacturer was beaten up in price. The entire project was to be done "as a favour" to the buyer at very low margin. Well guess what? One hundred and twenty thousand sleep sets were produced. When they got to the stores, no manager wanted to place the merchandise on sale because they found the sleep sets vulgar. Wal-Mart returned a great portion of the merchandise, and the manufacturer is no longer in business today. Moral of the story.... even if you supply private lable goods to Wal-Mart, they are there on consignment only.
- Sour Puss! The story of Vlasic Pickles is a typical Wal-Mart vendor tale of woe. Vlasic's sold a half gallon of pickles in Winn Dixie for $2.99 a jar. The pickle buyer from Wal-Mart got inspired. How could he better Winn Dixie? He approached the Vlasic company, could they produce a gallon jar of pickles that would sell at retail for $3.99? Wal-Mart would purchase over one million jars of pickles a year, and Wal-Mart would only make a nickle a jar. It would be a tesiment to Wal-Mart's "We sell for less" mentality. The jars would go into "Action Alley" the mid-aisle as the consumer walked into the store and the pickles would flyy off the shelf....err floor in this case! Know what? They did!!!!!! There was only two problems. The first was that Vlasic's couldn't get enough pickle cucumbers to satisfy Wal-Mart's order. The second, no other retailer wanted to touch Vlasic's products because they could never match Wal-Mart's price point! And, Vlasic's couldn't make enough money on the Wal-Mart order to avoid Chapter 11. The company had other problems besides the Wal-Mart one, but the Wal-Mart problem sure did not help. Vlasic's couldn't reorganize and the pickle division was acquired under banruptcy by H.J. Heinz.
- Naturally Delicious! Two partners Bob & Doug went into the business of marketing Doug's mother's all-natural salad dressings. The small company became profitable, but Bob and Doug were eking out a living. If only they could sell to Wal-Mart! That would solve all of their problems. Wal-Mart has "new vendor fairs", usually sponsored by a chamber of commerce, and held all over North America. Prospective new vendors show their wares to Wal-Mart buyers and Wal-Mart helps the smaller regional companies become vendors. Bob and Doug went to the New Vendor Fair in their area. The buyer dipped his finger into a few flavors of the delicious salad dressings. Eureka! He loved them. Just lower the price by 15% and Wal-Mart would order a ton of salad dressing. And they did! Wal-Mart buyers have thousands of miles of shelf-space to fill, so the orders just kept right on comming! Business was booming until one day. You see natural salad dressing has a shelf life. Eventually the buyer called to return thousands of bottles of dressing. The small company quickly went bankrupt.
The moral of the story is - never forget that your merchandise in a Wal-Mart store is exactly that - your merchandise. To succeed you have to get the replenishment metrics right, know about the stores you are selling through, and apply a heaping helping of good old common sense. Consignment is consignment no matter how you dress it up!
Wisdom Analytics
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