The Supply Side: Wal-Mart’s McMillon asks more of suppliers amid retail evolution

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.
–––––––––––––––––––
In the three full years Doug McMillon has been CEO of Wal-Mart Stores he’s made one thing perfectly clear to suppliers: We want the absolute lowest prices in order to deliver on the retailer’s “Everyday Low Price” mission.

McMillon spoke to suppliers in Bentonville at the retailer’s Supplier Forum on Feb. 15, which was held in conjunction with the company’s Year Beginning Meetings. McMillon once again outlined his goals around winning with customers by helping to save money and time. Talk Business & Politics received a transcript from the event which is the source for this report.

McMillon said if Sam Walton were alive today he’s confident the retail icon would be making changes to the business. He said “Wal-Mart will always win on price,” but that’s no longer good enough as consumers now demand simple and easy shopping options. Technology has made price more transparent to consumers. McMillon said as technology has improved services such as online grocery and Walmart Pay, he’s confident Wal-Mart will win in the areas of people and technology.

The objectives he outlined for suppliers include making days easier for busy families. McMillon said the retailer will focus on services to the customer as well as striving for excellence. He said the retailer needs to improve more in the latter, adding that “Wal-Mart will change how we work.” The changes will include becoming more of a digital enterprise on the front-end with the customer experience, and employed through the organization. McMillon said Wal-Mart will drive more of a tech mindset in speed, effectiveness and costs.

McMillon, as he often has preached in the past few years, again stressed the need for less bureaucracy, shorter communication lines from buyers and their supervisor, and increased focus on product and item execution. He said there will be a focus on building trust with Wall Street accomplished primarily by delivering earnings results and disciplined operations that manage expenses and capital expenditures.

He also told suppliers Wal-Mart will continue to strive to be the most trusted retailer and a leader in sustainability and social arenas. He asked suppliers to think bigger and do more with Wal-Mart as the retailer doubles down in the areas of food and consumables in order to drive traffic and build deeper relationships with consumers.

McMillion expects more turbulence in the retail sector in the coming years but reiterated the company’s efforts to win with customers, saying suppliers can help with new product innovation and rock-bottom prices. Steve Bratspies, chief merchandising officer for Walmart U.S., also spoke during the two-day forum. He too hammered home the Everyday Low Price mission, asking suppliers to be trend spotters with Walmart U.S. and then be prepared to act quickly.

Bratspies said merchandising priorities are to boost sales with the Everyday Low Price model. He said that means getting store assortment correct, looking for innovative products, and pushing for exclusive products from suppliers. He said Walmart U.S. will differentiate with its services and at the same time invest in price to be more competitive with other low cost grocers such as Aldi.

Bratspies also spoke in length about efforts to optimize inventory and reduce return costs. He said Walmart U.S. continues to work with Walmart International through consolidated sourcing offices for better pricing. Lastly, he said Walmart U.S. will continue to grow and improve non-traditional shopping – which Wal-Mart execs refer to as the multichannel experience. He said there has been a 250% increase in grocery pickup and the retailer will continue to grow that service to 500 additional stores this year.

The retail execs also talked about investing in the shopper experience. They also want to work with suppliers to maximize the number of in-store events with more product sampling, character visits in stores and product demos in general merchandise.