Getting a product on the shelf at Wal-Mart can be one of biggest highlights of a career. It’s been compared to finding the Holy Grail because the mass retailer can literally change the fortune of a small company with a simple three-letter word – “Yes.”
But new suppliers will be the first to say that getting on the shelf is just the beginning, because staying there can be like drinking rocket fuel by the gallon.
The City Wire recently asked a few small suppliers, service providers and former Wal-Mart employees to weigh in on the top five concerns or lessons new suppliers must learn as they do business with one of the largest companies on the planet.
In no particular order the cohort came up with the five biggest lessons new suppliers face when they sign a contract with Wal-Mart.
• Harness Retail Link
Small suppliers spend thousands of dollars getting the necessary training in Retail Link, a comprehensive data base Wal-Mart requires its suppliers to use.
Matt Walters, a senior director of Client Development for Atlas Technology Group, said Retail Link can be daunting for someone completely new, even more so for someone new to point-of-sale (POS) data. At its most granular level retail link data is by item, by store, by day. This data is available for analysis, every day. He spent 15 years with Wal-Mart before joining Atlas Technology.
Rhonda Pieracci, president of Hi Octane Corp., told The City Wire last week, after some private training in Retail Link, she now runs her reports every morning and looks forward to going over the sales results for her Arrow Signs which are sold in Wal-Mart Stores throughout the California market. Like many small suppliers, Hi Octane is a lean group with just a handful of employees, so someone has to learn the ropes of Retail Link.
Walters recommends getting the initial training from a qualified provider and then joining a Retail Link User Group (RLUG).
“As a new supplier starts doing business at Wal-Mart, one of the key questions for them to ask the buyer is what level of reporting the buyer needs from them and how often. Each buyer at Wal-Mart works differently and knowing your buyers expectations is key,” Walters said.
Mike Graen, the newly named director for the Crossmark Collaboration Center, also agreed new suppliers should reach out to RLUG groups for the help they need to grasp Retail Link functions. Graen, a former Wal-Mart marketing exec, said the No. 1 lesson he thinks new suppliers should learn is “The Customer is No. 1.”
• Asking Questions
Suppliers said the last thing they want is for Wal-Mart to perceive they are lost or clueless about a certain situation. Jason Long, CEO of Shift Marketing Group, said suppliers should be bold with their questions, but not needy.
“Wal-Mart merchants have plenty of headaches already, so as a new supplier it’s important that you choose your moments. It’s all in the approach. Think through what you’re going to say before you say it. Ask yourself, 'What is the goal of this discussion?' Be concise, smart and focused and you’ll earn the respect of your merchant over time,” Long said.
Walters said most buyers in his experience have been receptive to direct questions.
“Don’t ‘beat around the bush’ with your buyer. They appreciate short, direct, questions that can have quick answers,” he said.
When an issue becomes more complex, he said most new suppliers turn to local resources in Bentonville who specialize in certain areas. An entire cottage industry has developed around helping suppliers do business with Wal-Mart. He said there are specific firms for headquarter buying assistance, retail link data analysis, replenishment consulting, and various other aspects of working with the world's largest retailer.
Walters also encourages new suppliers to learn the Wal-Mart history and the corporate organizational structure, which are helpful once they began working directly with the retail giant.
• Ensure Supply Chain Reliability
One of the common challenges new suppliers have with Wal-Mart is estimating volumes and forecasting future demand. This is a luxury existing suppliers already have because they know category performance averages and modular distribution, Walter said.
In the beginning suppliers don’t know how many stores will carry new items or at what rate of sale they can expect. He said new suppliers need to be diligent and follow POS data trends versus forecasted volume.
Retail Link helps give suppliers some visibility, but knowing when to adjust forecasts and or supply chain settings on products is critical. Walters said it is not uncommon for Wal-Mart to represent 20% to 30% or more of a company’s total U.S. sales. This means missing a forecast at Wal-Mart can leave a small company with no inventory or excessive inventory in a hurry.
It is up to the supplier to watch their own inventory at all times to spot possible shortages because Wal-Mart has too many products and too few people to do that job for the suppliers.
Long said one of the biggest mistakes new suppliers make is the focus on sell-in versus sell-through.
“Merchants usually have a good feel for how a product is going to sell after only a few weeks. Time is short. If a new supplier isn’t driving sales velocity they can get into trouble quickly,” he said.
Long warns that in an effort to understand, new suppliers may cede brand and business decisions to the merchants, leaping at any suggestions for new business. He said new suppliers should guard against giving merchants that much control in the event it could hurt the longer-term relationship with the merchant if the product doesn’t sell.
“Retail is detail and there is a lot to understand, from supply chain flow, item set-up, modulars, in stock, it’s all important,” Graen said.
• Grasping Replenishment
Suppliers are responsible for keeping a close eye on their replenishment goals, which in a perfect world would be an easy feat given the automation of Wal-Mart’s reordering system.
One local supplier training group said the biggest complaint they hear from clients over replenishment is that they don’t know how to get through to their replenishment manager at Wal-Mart. The average replenishment manager has 75 suppliers and 700 items. So if those 700 items were in 3,500 stores, that is 2.5 million store/item combos for which they are responsible.
That said, suppliers must be diligent in reaching out to the replenishment manager when they see a change in sales patterns that can impact the availability of their product.
Walters said communication with Wal-Mart has always got to be part of the process. He said internal communication within Wal-Mart is not without its challenges as the sales team may not always want to hear about forecast updates or changes. Pushing updates internally can sometimes be the biggest hurdle.
• Always Take the Blame
New suppliers are quick to realize they need to take the blame for lots of things that go wrong early on in the relationship.
Pieracci said there is so much learn in short fashion and not knowing what you don’t know can add to the confusion at times.
“As a new supplier to Wal-Mart you are responsible for what you don’t know. Sounds tricky, right? Buyers have more daily emails then you will ever care to experience, so the need to understand the process and work flow are critical to saving everyone time," he said.
He said Wal-Mart expects its supplier to use the resources available to learn its systems.
“If you know something regarding your Wal-Mart business is inaccurate, go to your buyer upfront with a short exact description regarding the concern. Expect Wal-Mart to hold you accountable for your business with them. It is part of the culture of doing business in Bentonville,” Walters added.