The Supply Side: The ‘Adventure’ Of Doing Business With Wal-Mart

Editor’s note: The Supply Side section of The City Wire focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by The City Wire and sponsored by Propak Logistics.

It’s never been more difficult to get items on retail shelves in brick and mortar stores like Wal-Mart. Part of that is a function of e-commerce competition which pushes traffic and associated sales out of the stores.

Bill May, a former Wal-Mart buyer and merchandise manager for three decades, said there are several changes at work in the retail sector that make it challenging to get new products to physical retail shelves. May, co-founder of New Horizon Enterprises in Rogers, spoke recently at Selling to the Masses CGP School in Bentonville where he shared with prospective suppliers his insight on what it takes to get and stay on Wal-Mart shelves.

First, it’s not for the faint of heart, according to May. He said Wal-Mart buyers are not interested in “me too” items. He said retail consolidation, chain closures and the explosion of e-commerce options have buyers constantly seeking innovative products. But when they add one product it often comes at the expense of another.

If an item doesn’t sell, the price is marked down and suppliers are charged for losses according to the buyer/supplier terms. Unless sales improve, that product won’t be renewed once the contract expires.

Experts across the supplier consulting segment have told The City Wire that there is often a misconception that if they get into the store the product will sell itself. That’s a bad assumption, according to long-time supplier Jan Long, CEO of Mr. Canary.

CONSTANT LEARNING
Long’s bird feeders have been in Wal-Mart stores since 1998. At one point her “Mr. Canary” was on the shelf in 1,700 stores, but within three years she was down to roughly 480 stores. Long said she made a trip to Bentonville and met with a consultant who walked through a local supercenter with her.

The consultant, a retired Wal-Mart executive, told her to look at all the competition and how they had improved their product and packaging over the years. He then asked her if she knew anything about birding in Norway.

Long said she quickly replied, “No, do you ?” To which he nonchalantly answered, “It’s not my business,” she shared.

“That hit me like a ton of bricks. Here I was pouting about my loss of stores and doing nothing to improve my product. It was a major wake-up call for me that forced me to totally revamp the packaging and cut the shelf space in half. That was huge because it has opened lots of new possibilities,” Long told The City Wire in a 2013 interview. That same year, Long’s Mr. Canary bird feeders were accepted into more than 2,700 stores Wal-Mart Stores across the country.

Long said doing business with Wal-Mart has been hard and demanding at times, but she’s become a better business owner because of it. She said the learnings have transpired into improved business with other retailers as well.

Last week, Long told The City Wire that her store count will be 2,900 this fall, up from 2,700 last year after what she calls a “great year,” but not without its challenges. Long said she has a new buyer with whom she’s excited to work, but a recent attempt to try a Mother’s Day promotion in 1,200 stores went awry. Orders were shipped in mid-April for feeders that would be displayed in hanging end caps, which are not her usual shelf space. She said in some stores the products were late getting to the floor in part because they were not going to the normal shelf location. The products didn’t make it to the end caps until the week of Mother’s Day, which was disappointing.

On the bright side, Long said she made the Mother’s Day Tag on the product removable so that the feeders could remain in the end caps after the holiday, but there is labor involved in removing the tags.

“Doing business with Wal-Mart is always an adventure, but everyone on my team continues to help me and the business is growing. My buyer team is now working with me to add another product after sharing my concerns about being on the top shelf which is nearly unreachable for smaller ladies – a big user of my bird feeders. The buyer told me the top shelves were being lowered this next year and my products will be lowered on the display modular. That’s just one example of how willing Wal-Mart has been to work with me,” Long said.

Long said people are always asking her how she got the bird feeders in Wal-Mart. She said it took a lot of due diligence, but no more so than staying on the shelf.

MINIMUM PREREQUISITES
May said there are minimum prerequisites that must be met before a potential supplier can get a purchase order from a Wal-Mart buyer. He said everyone who sells product to Wal-Mart Stores must be registered with Dun & Bradstreet. The registration itself is free, but ancillary costs on an annual basis can range between $500 and $1,000. If a credit history file needs to be built around a new company, the cost for fast-tracking can range from $1,000 to $12,000 depending on the levels of services selected.

Product suppliers also must carry product liability insurance ranging from $2 million to $10 million in policy coverages depending on levels of potential product liability. For instance, most food falls in Category I with a $2 million to $4 million coverage requirement. Baby food and toys fall in Category II requiring $5 million in coverage. The $10 million level at Category III includes items like chainsaws, medicines and propane.

May said a factory identification number also must be affixed to every item making its way into a retailer, so the item’s origin can be traced if need be. He said those suppliers with products consisting of one of a long list of any chemicals must also pass through another compliance regulatory hoop of WERC — Warehousing Education and Research Council.

May said all items in retail stores like Wal-Mart or Sam’s Club must also go through a syncing process performed by third party providers like Data Sync or 1 Sync that ensure there is consistency in the items and that the UPC case codes correctly link traceability back to the manufacturer.

There is also Retail Link, a database to which suppliers are given access that details the sales of their items down to the store level. It also allows them to track inventory. Using Retail Link is a requirement to do business with Wal-Mart.

May said new suppliers often have to get training on how to use Retail Link because it’s essential to see how a product is doing on the shelf. Those services are provided by third party firms such as VendorMasters and 8th & Walton, both located in Bentonville.

Lastly, May said packaging and pricing are two other big components that potential suppliers must fully understand before they sit down with a buyer.

HIGHER STANDARDS
May said standards have been raised across the retail sector in recent years and are much higher than when he began in the business three decades ago.

“Product quality, competitiveness of an item, accurate pricing, proof that it is already selling are all things a buyer is looking for today at the first meeting with a potential supplier,” he said.

May said buyers are not willing to take much risk with products given the costs associated with adding them to the shelf. He said the higher standards are a good thing for consumers because products have to be safe.

“The last thing a retailer can afford to do is kill a customer,” May said.