What Does Walmart Wish Suppliers Knew?
For thousands of suppliers, Walmart represents a dedicated business in itself with its own complex set of procedures and challenges. Obviously, the upside potential is tremendous. With nearly 4,700 stores in the U.S., the company’s combined selling space is estimated to be roughly 34 square miles. Most suppliers with a long-term Walmart relationship dedicate great resources to the effort. According to the latest Retailing Today Walmart Supplier Survey, over 60 percent employ 40 or more people in Northwest Arkansas to service the account.
Walmart makes efforts to be transparent about the standards it demands of its suppliers (it has a 46-page manual available online), but the nuances of working successfully with the chain’s buyers and merchandisers are more elusive. On last weekend’s 8th & Walton Saturday Morning Meeting videocast, host Derek Ridenoure interviewed two Walmart senior merchandising directors, Zach Simpson (beverages) and Darrin Robbins (automotive) to gain insights for suppliers. Mr. Ridenoure asked his guests, "What’s something you really wish suppliers knew before they ever stepped foot in the office or picked up a phone to called the buyer?"
Much of the advice dished out liberally by Mr. Robbins and Mr. Simpson sounded like Trade Partnerships 101. And in their tone, one could detect an element of frustration. Mr. Robbins, for example, appealed to reps who keep issues to themselves. "If you’ve got a problem within your business, make it heard — especially if it’s something that’s material. If you have in-stock problems that are just continually perpetuating, raise your hand. If we don’t know about it, we can’t fix it."
Another theme the two hammered home was the need for suppliers to consider their value proposition all the way through to the consumer.
Mr. Robbins describes pitches from reps introducing a "new feature" only by explaining its sales potential to the supplier.
"As the buyer you have to sit back and say, OK, that’s what it means to you. What does it mean to me?" said Mr. Robbins on the program. "And by transference through me, what does it mean to the customer? Am I just going to put this feature out there and it’s going to suck the volume out of these other suppliers? … I mean, that space is going to be productive. It’s not always about how much you sell, it’s about how much more we could sell than we could have otherwise."
Another pointer: Walmart isn’t necessarily looking for product that does well in 4000+ stores. In fact, consumer centric appeal may win over mass appeal in many local markets.
"There’s a saying that in order for us to get bigger we have to act more locally while still maintaining scale," advised Mr. Simpson. "That’s a challenge I try to instill in a lot of vendors that come in — the big guys and the little guys — 4000-store features are great and they move the needle for your organization, but I’ve got to become more relevant and I’ve got to use more precise tactics."
Discussion Questions
Do supplier reps need help envisioning the proper value proposition for their retailer customer and, consequently, through to the consumer? What tools or training would be helpful? Is localized and customer-centric planning getting too little attention from suppliers?
I would have thought these points were fairly obvious—useful, but obvious. Know your customer and their customers, have the ability to respond to their marketing needs, etc.
The gap between suppliers and retailers is turning into a gulf as retailers evolve into multi-media, technology-driven platforms; something I am taking on in an upcoming supplier boot camp. Many traditional suppliers are still stuck in the merchant-centric past and aren’t taking full advantage of the beyond-the-shelf reach that retailers now offer. Retailers tell me that they are quite frustrated by this, but it boils down to developing multi-touch-point, multi-stakeholder strategies vs. obsessing on short-term shelf placement (reps selling stuff to buyers).
There are also many new “suppliers” joining the retail scene, including technology start-ups, solution providers, service companies, and even attached industries (energy, finance, etc.). Training and positioning plans must take this into consideration. The retail ecosystem is exploding and we’re at a turning point where the new guys actually have an advantage. They aren’t bogged down by the way things used to work or attempting to cut and paste onto old models.
What Walmart is asking is for suppliers to become partners. It’s very simple. Suppliers get used to operating as an entity—pushing and selling their products. It’s a natural way business is set up and nothing wrong with it, technically. But to be of value and have longevity, you have to go outside being afraid of losing some volume. Mr. Robbins is right—a lot of issues can be resolved if suppliers raise their hands. But too many are afraid to lose the sale, not realizing that by withholding this information it makes the entity harder to trust and count on you, thereby possibly losing sales anyway.
The localized and customer-centric features are huge and need to be discussed by suppliers thoroughly before they step through the door. I also think suppliers need to provide options. A lot of times these deals do come down to price, so don’t be afraid to show Option A and Option B. At least it shows as a supplier you are thinking of Walmart’s core values and looking to be a partner and grow with organization.
It’s hard for a lot of suppliers to think this way. They have the 4,000 store number in their head and dream of supplying them all. But what’s most important to your business is longevity.
Absolutely dead on posting! Having spent time on both sides of the fence, the single most glaring “miss” is the focus on feature, not benefit. The comment that this is Trade Partnership 101 is true, but in my experience, getting the fundamentals right is a KSF! Understanding the two part value proposition, relative to the current or available competition, is critical to addressing the WMT buyer objectives. These guys run businesses—they are not old time finger merchants impressed with fluff. Step one: why is this a better mousetrap for the consumer? Step two: why will this make WMT more money than the other mousetraps?
Seems so basic….and yet missed so often.
Beyond that: doing business successfully with WMT is a matter of realism and organizational capability. Margins will most likely be thin, leaving little room for mistakes. If the organization is not adequately prepared from a systems and process perspective, it’s a nightmare. If the organization has the infrastructure in place appropriate to the requirements, it can be a fantastic relationship.
My observation is that most people in this space do not know abc about how shoppers actually behave in stores, nor does Walmart or other retailers. Everybody is trying to get up to speed on what the people that matter to THEM think. This is why there is such a dearth of progress at retail—retailers serving SELF-service shoppers do NOT understand what shoppers subconsciously go through in finding and purchasing what they want. It’s all about the cognitive 5% of the process.
Fortunately, the industry is largely SELF-service, so ignorance of shopper behavior—other than what they buy—isn’t fatal. It’s just a millstone around the necks of supply chain focused retailers.
In terms of what tools or training would be helpful, manufacturers would be well-served to better understand:
1) The business model of retailing (how they make money, what are the cost centers, how are they staffed, how are they organized, etc.).
2) Customer specific insights (how they make decisions, what they do to differentiate themselves from competition, how they view suppliers, etc.)
3) Who is my Category Manager (what motivates him/her, how s/he is incented and evaluated, what pressures or key initiatives is the person chasing, etc.).
Too often, the seller has a surface understanding of the above (if at all).
Suppliers to Walmart have a challenging situation to keep their business. It is usually a negotiation based on the analytics reflecting category performance. To reach beyond this, suppliers have to develop a longer-term perspective that brings the Walmart value proposition to the shelf. Benefits that clearly differentiate by making the consumer experience better will win. There is always room for convenience in consumer usage that make life just a bit easier!
I have helped a lot vendors that sell to Walmart rethink their sales approach and strategy. The key to being successful selling to Walmart is leading with education of the Walmart buyers before negotiating. A lot of the rumors flying about are not true but in some cases a vendor did not get the business requirements and validate those requirements before negotiating.
One other comment based on the instant poll results, specifically: “Walmart is much more demanding, 40%.” The reason that Walmart is perceived as more demanding is that Walmart leads the way on business process improvement (in most cases) due to the size of the company and the volume that they turn. So Walmart is usually changing the buying process and sales process ahead of everyone else. You can learn a lot from Walmart that can make you more competitive when selling to other retailers.
Wow, I didn’t think I’d be the first during this conversation to reference the brand manager culture inside manufacturing suppliers. In those companies, the Brand Manager title is usually seen as a stepping stone to a more elevated position in the company. Brand Managers remain in that position for only a short time—a couple of years or so—which influences their objectives and goals: Generally, they seek only to match or marginally exceed the performance of their predecessor in the position. As a result, they almost never become fluent in the language of WIIFM (What’s In It For Me?) as it applies to retailers.
This condition is exacerbated by the decline in influence of product brokers. Brokers used to be the all-important, on-the-ground professionals who remained with the brand for many years and who understood retailer WIIFM. Those days are gone, so now, lacking internal WIIFM training by their employers, Brand Managers must be trained by their customers.