The Supply Side: Walmart tells suppliers to expect ‘healthy tensions’ in 2016

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.
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Retail giant Wal-Mart Stores recently met with suppliers in Indianapolis for its Year Beginning Meeting telling them to expect 2016 to be a year of changes. The retail giant said it would be a mistake for suppliers to expect “business as usual.”

Steve Bratspies, chief merchandising officer for Walmart U.S., said at the meetings that the retailer expects “healthy tensions” with its partners as it seeks to improve supply chain capabilities, double down on the everyday low prices (EDLP) strategy while also delivering convenience and customization.

“Topline growth is key focus for this year. … We will ask each vendor to support Walmart and our EDLP philosophy,” he said during the meeting with suppliers. “We have work to do – we will reclaim EDLP,.” (Talk Business received a transcript from that meeting, which is the basis for this report.)

Bratspies told suppliers to focus on “right sized” packaging as the retailer continues to reduce inventory costs. He said in light of reduced corporate staff in Bentonville, there is no time to be wasted. Bratspies also said his merchant teams will expand private brand offerings and seek to improve fill rates on key items. In other words, being in-stock is a must.

“We will be maniacal about managing costs,” he said. “Every merchant has been told we will not accept any conditions that increase our costs.”

He said each vendor should participate in being aggressive with costs, “innovate and activate their brands in-store. We stall when we don’t innovate.”

Judith McKenna, chief operating officer for Walmart U.S., told suppliers to partner with their merchants, not the store managers who do not have the time to field questions from vendors.

“Be thoughtful about your time in our stores and do not send (a) third party rep during peak hours of operation,” McKenna said.

Walmart U.S. CEO Greg Foran shared similar comments citing topline growth as a major focus and adding vendor community support will be needed to reach the goal.

“Consumers expect us (Walmart and vendors) to work together to offer the best prices, every single day. And it is the right thing to do for our business and our customers,” Foran said.

He said Walmart U.S. requires a more productive and efficient business model and promised that the retailer will “lean in” on the (cost of goods sold) or its inventory to produce superior results. He reaffirmed Walmart’s $3 billion commitment to lowering prices over the next three years while also replicating winning strategies used by other retailers.

Wal-Mart Stores CEO Doug McMillon took the stage for a brief interview during which he addressed a few questions submitted by the retailer’s top 50 vendors. His responses included a few key takeaways for the suppliers. Those included the following statements.
• “We have asked you for a lot over the past year. For those of you that helped us, it is being noticed and will be remembered. If you commit to invest in your business at Walmart, you will grow with us.”

• “Walmart needs to be more important when a customer is searching for something. Our online assortment needs to grow (we want every item on your price list on Walmart.com).”

• ”Instead of using loyalty cards, we offer everyone the best prices. Instead of mining loyalty card data, we are using Walmart.com to keep up with our customer’s habits and are mining the data to make sure we are able to cover every want and need.”