The Profits and Perils of Bring a Wal-Mart Vendor

When Taunya Painter worked as a senior corporate counsel for Wal-Mart ( (WMT)), she noticed that many of the small suppliers that wanted contracts with the known for pressuring suppliers to cut prices, hadn't done all their homework. Few fully understood what they would be signing and few took advantage of Wal-Mart's supplier development team, a free resource designed to help less-experienced suppliers forge enduring relationships with managers and buyers. (Other large retailers, including Home Depot ( (HD)), Best Buy ( (BBY)), and have in-house teams meant to serve similar purposes.) Painter, who worked for the mega-retailer from 2002 to 2007, says more of the entrepreneurs she dealt with might have managed to secure and renew contracts if they had familiarized themselves with these two pieces of the supplier-retailer puzzle. While there are more pieces to the puzzle, by taking the time at first to understand what the contract entails, a potential supplier can determine whether or not it even makes sense to try to become one of Wal-Mart's 57,000 U.S. suppliers. The contract, commonly known as the vendor agreement, outlines the mechanics of how the supplier and retailer will work together. The agreement generally addresses sales and delivery timeframe, arbitration, and termination rights, and liability. As a rule, Wal-Mart uses a non-negotiable boilerplate. Charley Moore, CEO and founder of legal service .com, says this means potential suppliers can study similar contracts online before meeting with the buyer. Wal-Mart generally starts out smaller suppliers in a local market, delivering goods to up to 50 stores, as a test run. If the supplier provides a high-selling product and proves reliable, it might be considered for national distribution. Bruce Zutler, CEO and co-founder of MCI Products Group, a New York-based company that specializes in new product development and overseas sourcing, recommends small suppliers think of the test-run as the time to prove they are capable. "If you have a good product and you strengthen their sales, then the buyer will stay with you," says Zutler.Broad Customer Base a Must But suppliers should know that Wal-Mart will only work with suppliers that can prove three-quarters of their business comes from entities other than Wal-Mart, per Wal-Mart policy. After proving that, the key to impressing a buyer is to show understanding of the potential market, says Theresa Barrera, vice-president of supplier diversity for Wal-Mart. "What sets some of these smaller suppliers apart is being innovative and knowing what sells in their regions." It is also up to suppliers to understand the impact of national trends on Wal-Mart and be prepared to adapt, says Excell La Fayette, director of supplier development. He, too, urges suppliers to do their research before they call. "A lot of people think Wal-Mart is kind of a free-for-all; that if they come in we'll buy anything." cooks, packages, and ships the meat for Wal-Mart's Great Value brand breakfast sausage to more than 50 stores in different regions across the country. Michael Thompson, president and CEO of the Pleasant Prairie(Wis.)-based company, says the key to landing a deal and getting the contract renewed over the companies' ongoing five-year relationship was conveying an understanding of growth opportunities and explaining what his 300-person company could do to meet Wal-Mart's needs. Beyond that, he says it is important for hopeful suppliers to remain persistent, be patient, and bring their "A-game" to the meeting with the buyer.Liable for Chargebacks Of course, even if a supplier does manage to convince Wal-Mart to sign a supplier agreement, it almost never obligates the retailer to buy anything. "I tell people not to pop the cork when the contract is signed, but pop it when the purchase order comes in," says Painter, who now runs her own law firm in Texas, specializing in domestic and international business litigation. Wal-Mart says its payment cycles vary by category, but that most suppliers are paid within 30 to 45 days. And suppliers looking to sign should also know that even if everything is done right, the state of the economy could derail chances that the relationship is profitable, at least in the short term. Nina Kaufman, a business attorney in New York who posts frequently on her blog, AskTheBusinessLawyer.com, says suppliers should be aware of how large retailers like Wal-Mart manage low sales that result in surplus inventory. Those designated "guaranteed suppliers" guarantee that their product will sell. If they don't, a provision in the contract makes them liable for chargebacks. Ultimately, understanding all aspects of the is key to landing—and renewing—a deal with Wal-Mart. Painter says getting an experienced supplier to serve as a mentor can also be invaluable. "I always suggest tapping into resources the retailer has other than the buyer," says Painter "It's important to know who are your allies in the organization."

Is your merchandise sitting in the store's back room? Here is a simple method to tell.

 

By Sheldon Cwinn

 

How to make sure your inventory is getting to the shelf.

 

Selling to Wal-Mart is unlike selling to any other retailer because it is really selling on consignment. You receive an advance on your merchandise sitting in the stores, but that is all it is an "advance". If you analyze the situation closely, you come to realise that your actual customer is each individual store, and the most successful Wal-Mart vendors have relationships with their top stores.

 

Because your merchandise is at Wal-Mart on consignment, a key factor in succeeding is making sure that your merchandise is actually on store shelves.

 

The traditional way of "seeing" whether or not your inventory is on the shelf is to look at the "store on hand" on a Store Detail Sales Report produced by Retail Link. Another way to double check is to see what merchandise has shipped out of the Distribution Center(s) and to which stores it is shipped. But the question is .... is your merchandise really making it to the store shelf ?

 

A great way to find out if the merchandise is actually on the floor is to check for phantom inventory. To do this you average each store's sales for the last 6 - 8 weeks. Then you look for stores that have below a certain sales threshold last week (often times zero) depending on the nature of your product. Next look at the "on hand qty". If there is quantity on hand and suddenly the store is not producing sales chances are that store has phantom inventory.

 

Resolving the phatom inventory issue is easy. Simply present that store manager with the facts in a friendly phone call. It is in his interest to place the merchandise on the shelf where it belongs!

Lowering the High Cost of Selling to Wal-Mart.

By Sheldon Cwinn

Walmart is a very expensive customer to have, often requiring armies of people to manage and service their vendor managed inventory model. There are new ways of lowering those costs through automation.

“Wal-Mart is not only the world’s largest company but also one of the world’s most demanding customers,” said Sheldon Cwinn, vice president of Wisdom Analytics. “In our recent survey, 92% of vendors contacted maintain that Wal-Mart is the most expensive retailer to sell to. Wisdom Analytics automates many of the repetitive tasks that take time and effort and cost vendors money. Order scripting, demand planning, spotting POS exceptions and finding opportunities at store level, category management, improving instocks, and maximizing sell thru% are all benefits derived from Wisdom Analytics. Best of all, Wisdom Analytics is software that can be afforded by any vendor. It is intuitive to use, and easy to learn.”
 

Wisdom Analytics today announced the availability of Version 4.0 of its award winning software focused on driving the cost of doing business with Wal-Mart down. Wisdom Analytics has rapidly become the most adopted software solution for vendors selling to Wal-Mart.
 

“Wisdom has many of the features of its competitors but at a fraction of the price,” says Dan Batson president of the North West Arkansas Retail Link User Group and a Wisdom Analytics user at Fuji Film. “It helps to lower the cost of selling to Wal-Mart.”
 

“I remember the day one of our Retail Link analysts left us,” says Ronnie Kornbluth, president of UFO Jeansware. “The workload became staggering for all concerned. We never wanted to be in that position again. So we skeptically at first adopted Wisdom Analytics to help us out. Now we accomplish more than ever because Wisdom has made us so much more productive and we have watched our business with Wal-Mart steadily grow. We now have a better understanding of our POS position. Wisdom is a great tool and I would highly recommend it.”
 

Wisdom Analytics 4.0 new features include order scripts that can optionally be varied by long-range weather forecasts provided for every Wal-Mart store in North America. Advanced demographics that can show you who is purchasing your products at point of sale. Wisdom Analytics 4.0 also includes new and improved facilities for order scripting, demand planning, category management, and replenishment. Wisdom Analytics includes the 18 core reports and analytics framework that has traditionally made the software so powerful and easy to use. Wisdom Analytics turns Retail Link reporting into a real time online environment. MS Excel and continually printing dozens of multi-page reports every week is a thing of the past.
 

Wisdom Analytics is sold by annual subscription that includes upgrades and support. Subscriptions start at $5,000 a year. For more information call me - Sheldon Cwinn 514-341-5000 or email me sheldon@wisdomanalytics.ca.

Why Do So Many Vendors Have It Wrong ??

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.

Vendors seldom get it right. The relationship with Wal-Mart is really a partnership. One where the vendor has a say as to where there merchandise goes in the store, and which stores their merchandise goes to. Automation with a product like Wisdom Analytics can help analyze trends at store level and can help vendors build a profile of where their merchandise should go. Factors such as long-range weather trends, demographic, and geo-analytical information is analyzed at store level. Wisdom is a fantastic tool to help you know where to place your merchandise in order to assume the least possible risk.

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! 

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How POS Analytics Make Your Business Grow With Wal-Mart

 

 
Use Automation - Make Your Business With Wal-Mart More Profitable.
 

 

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When you enter into a vendor relationship with Wal-Mart it becomes immediately clear that Wal-Mart is a very sophisticated company with lots of vendor tools. Many of the day-to-day aspects of running a complex supply chain are automated. So why shouldn’t you as a Wal-Mart vendor have the same advantages.

In a recent survey of Wal-Mart vendors conducted by Nielsen, vendors indicated that they spent 22% of their time and resources performing repetitive tasks with respect to managing data. That is an enormous overhead to assume. Consider that downloading, cutting, pasting, sorting through, grouping, filtering, compiling, disseminating and distributing Retail Link data has a high cost to your organization. There must be a more efficient way to cut costs and boost productivity. There is.....automate!

Wisdom Analytics has been created to go beyond the traditional cut and paste do-it-yourself management of Retail Link data. The entire process of data management and information reporting is completely automated thus making every vendor who adopts it immediately more productive
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