Did Walmart’s ‘Open Call’ discover a hit made in America?
The chance to get on the shelf at Walmart is a big opportunity for any supplier but especially so for smaller companies. In efforts to find suppliers that make part or all of their products stateside, Walmart recently held a full-day event called a Made in USA "Open Call," inviting potential suppliers to Bentonville to pitch their products directly to the chain’s executives, a model not unlike ABC’s popular television series Shark Tank.
The Open Call comes in concert with Walmart’s reshoring initiative, which is meant to source $250 billion in products from the U.S. by 2023. The initiative has been both lauded as an attempt to move jobs back to the U.S. and decried as a PR move from a company that was instrumental to the outsourcing trend and the decline of U.S. manufacturing.
According to an article in The Wall Street Journal, this is the second year the company has run the Open Call event. Open calls for potential new suppliers are rare but not entirely unheard of, and while they pose opportunities, they also bring with them particular concerns.
In an interview with RetailWire, David Biernbaum, senior marketing and business development consultant at David Biernbaum & Associates, described a standard pitch process for Walmart suppliers that sounds more like an insider’s game than an Open Call.
Photo: Walmart
"[The] Best approach, by far, is to greatly improve access by hiring a knowledgeable consultant or master-broker with the proper knowledge, experience, and connectivity, who will appoint a local Walmart representative," said Mr. Biernbaum. "Otherwise, it’s not a simple process to get an appointment."
He noted that the Open Call could greatly benefit small suppliers, if they played their cards right.
"Overall, the ‘Shark Tank’ concept is great for Walmart, and even better for wannabe suppliers," said Mr. Biernbaum. "However, the overwhelming majority of wannabe suppliers are poorly equipped or prepared to make a full-point presentation to Walmart, or any other major retailer. … They are far too reliant to Walmart to do the ‘selling,’ and of course, that’s not what Walmart does."
The Wall Street Journal article offers an example of this, telling the story of Karen Posada, proprietor of a company that was unable to turn a profit on its organic pasta sauce despite having placement on Walmart’s shelves due to competition from Walmart’s private label brand and miscalculations over shipping costs.
Still, a chance at placement in Walmart is not something a small supplier would want to pass up.
"The main benefit is access that happens out of the norm, out of sequence, and out of the blue," said Mr. Biernbaum. "But again, most suppliers will go with great intentions and yet blow the opportunity, no matter how fantastic their innovation or product might be."
Discussion Questions
Will open call events like the one at Walmart proliferate as a way for retailers to find new and innovative products? What do you see as the advantages and disadvantages of this model?
Poll
BrainTrust
Dan Raftery
President, Raftery Resource Network Inc.
If I’m not mistaken, some variation on this “open audition” idea has taken place for years at Walmart. (Fellow panelists: If you know better, feel free to correct me!) The company’s push for “Made in the U.S.A.” products has probably given this process more visibility.
As David Biernbaum points out, many of the entrepreneurs invited to the “open call” probably find themselves ill-equipped to make a successful pitch — or they are so tempted by the game-changing size of an order from Walmart that they fail to do the math. It’s very tempting to ship the goods without understanding whether you can make money at the costs Walmart requires, including the costs of logistics.
Given the size of the “open call” business (compared to Walmart’s penetration of private and national brands), and the likelihood that these products will fight for shelf space in overcrowded stores, this program looks more like a feel-good effort rather than a game-changer.
Open call events bring pluses and minuses. They are a great opportunity for retailers to see new and innovative products, especially those from small companies and entrepreneurs. On the other hand, as Mr. Biernbaum says, many, if not most, small companies are not prepared to pitch, service or supply Walmart. Having worked with a number of small food companies, I have rarely found one that understands margins or the true cost of manufacturing, sales and distribution. If retailers find value in open call events, the next logical step is for them to offer step-by-step directions on how to create a pitch and detail what financial information they desire from prospective suppliers.
In retail as in most industries, innovation and new ideas are the coin of the realm. When retailers reach out on a periodic basis to have an open call, the biggest winner is the retailer.
What is taking place in the very act of an open call is that individuals have to open their Minds. At times, and with certain organizations and with certain people, acts of open-mindedness can be particularly challenging. It demands examples of curiosity, the willingness to explore a zero based budget, the ability to stretch conceptual thinking, a confidence to challenge individuals to listen to the unknown in order to find the “new-new” and a commitment to delegate responsibility to others within the organization to take on risk and make a decision.
Kudos to Walmart’s Merchandising for taking the lead in opening their minds. It will be interesting to see if other departments within the organization will learn from their Merchandising brethren.
Bringing a “Shark Tank” event in-house is a great but certainly not simple idea. In addition to the preparation efforts on the supplier side noted by Mr. Biernbaum, today’s retail buyers have very tight schedules, which is probably one reason why Walmart created this event. It clears away the web of internal meetings and creates a “sacred” space on executives’ calendars which other executives can’t touch.
I think Walmart has found some innovative products via its Open Call. It’s more than just a Shark Tank pitch. The retailer also holds informational sessions for the potential suppliers all day long covering things like packaging, financing, marketing and the basics of Supplier 101 for those brand new vendors. This is a huge benefit to those small companies looking for a blueprint to follow.
Covering this event for the past two years I have spoken with dozens of inventors, manufacturers and entrepreneurs that have pitched to Walmart. The overwhelming consensus is one of gratefulness for the opportunity to sit down with Walmart buyers.
When you look at efficiency, 600 meetings with prospective suppliers done in one day seems like a pretty good use of time when you consider the cost of sending buyer teams to trade shows where they find the bulk of their innovative items.
I don’t think Open Call really moves the needle forward a great deal for Walmart given its massive size, but it does create excitement for merchants and suppliers and it’s been a game changer for some of the lucky entrepreneurs chosen to get on the shelf.
It’s also a huge PR boost for the mega retailer, which is important in its own right given the ongoing mixed sentiment that swirls around Walmart everyday.
I agree with the other comments here. On the positive side, what a great way to tap into what’s new and hot from fresh young innovators. On the negative side, how could they possibly create the supply necessary for Walmart? Then there’s the margins. Would they even be able to do so with the cut throat margin requirements Walmart requires?
As others have said, this is a good way to find out what is new “out there” at one time rather than setting a multitude of meetings. But when all is said and done, the vendors are going to have to bite the Walmart bullet when it coms to pricing. Such is the cost of doing business with the Big Boys.