Criticism, concern expressed about Wal-Mart’s new in-store merchandising policy

by Kim Souza (ksouza@talkbusiness.net) 14,042 views 

Reaction to Wal-Mart Stores changing the in-store merchandising policy was swift and typically brutal, especially on social media. The retailer defends its decision by saying it will be good for customers.

The Bentonville-based retail giant announced last week plans to consolidate the number of approved in-store merchandisers down to five companies that will have to sign an agreement with the retailer which mandates how much they can charge for their services to suppliers. It’s a process already practiced by some retailers and grocers. The five approved providers are Premium, Acosta, Anderson, Crossmark and SAS Retail. All but SAS Retail operate large offices in Northwest Arkansas though they are based elsewhere.

Walmart U.S. is ending its business relationship with all other companies who provide in-store merchandising by the end of the year. Three of the largest companies providing that line of work for roughly 80% of Wal-Mart business have been Crossmark, Acosta, and Advantage, according to people familiar with the issue. Each of the three companies have large offices in Northwest Arkansas. While Crossmark and Acosta made the cut, Advantage is not one of the approved providers outlined in the recent memo from Walmart U.S. CMO Steve Bratspies.

Premium recently signed a multi-year lease on their newer offices near Pinnacle Hills and Anderson expanded its footprint in Northwest Arkansas in 2012 with a larger office Bentonville.

Following are some of the Facebook comments about the change.

• That does it. My husband will be out of a job because of WM greed. We do all our shopping there but no more. I bet we won’t be the only ones.

• I am another Advantage employee that will be losing my job after 15 years. This was all put out for bid, the top 5 companies willing to pay the most get to stay. Now these reps will become glorified WM employees and have to bow down each time they walk through the door. No thank you!

• Won’t last long. Those companies are NOT the best 5. I promise you that.

• At this point Sam Walton has turned over so many times in his grave his ashes have ground into next to nothing! Just another example of greed by control. As long as these practices are in place I will boycott your stores and do all in my power to convince others as well. As an Advantage Solutions employee I find it rather interesting that we tend to be much friendlier and helpful to your customers than your own employees are.

Wal-Mart sent the following statement to Talk Business & Politics when asked about the largely negative response to the change: “We are always looking for ways to deliver value, improve our stores and provide the best possible experience for our customers. Through this program, we are streamlining the service providers who perform merchandising tasks and activities in our stores. Providers will be provided access to Walmart best practices and standard operating procedures, ensuring a simplified process for our stores and a more consistent experience for our customers.”

The retailer has said the amount of work in the stores is not changing, only the protocol about who can do it, how it must happen, and how much can be charged for the work. For example, new employees will be needed because the five service providers are not allowed to use the same people to merchandise in Wal-Mart who do the same service for a competitor.

There will be an undetermined number of jobs cut around the country by companies that did not make the cut. Anna Bajerski from the Chicago area noted she has been with Advantage for 13 years and that will end in January. She and others from around the country also said via social media that using just five in-store merchandisers will not work because Wal-Mart has laid off too many people and relied heavily on in-store merchandisers.

Neil Frank, a senior analyst with Neuberger Berman who covers Advantage, Acosta and Crossmark, told Talk Business & Politics he was surprised Advantage didn’t make the cut given their long-term business with Wal-Mart. But because Wal-Mart will continue to use Advantage for its in-store demos and retailtainment program, Frank said it is possible Advantage opted out of the new program given the requirements. Frank said there is an upside for Crossmark and Acosta and the other three approved service providers, but it will come at the expense of those not making the cut.

The Wal-Mart memo also noted the companies who were chosen to continue working with Wal-Mart on in-store merchandising must sign a contract that will dictate a range the provider is allowed to charge its customers which are suppliers to Wal-Mart.

Some critics of this change have said the retailer is charging the five companies to play along. Talk Business & Politics did verify Wal-Mart will collect an activity fee from the five service providers which the retailer is charging to cover the technology upgrades to a platform that will provide data to the suppliers.

Wal-Mart has enacted similar programs in its ASDA grocery business in the United Kingdom as well as Sam’s Club with respect to in-store demos, though the U.S. program changes are somewhat different from those two prior moves. Judith McKenna, Walmart U.S. chief operating officer, and Marc Ibbotson, head of central operations for Walmart U.S., each came from the ASDA division and many of the processes carried out in the retailer’s U.S. grocery business comes from insight the two industry veterans bring to the table.

Though Walmart U.S. sought to address several questions in the original memo, Talk Business & Politics was contacted by suppliers who wondered if their own in-house merchandisers will be allowed under the new policy. The policy says larger suppliers employing their own merchandise teams will be allowed to continue working in Wal-Mart stores after they are trained by the retailer in the “one best way” and that training is verified and certified.

Smaller suppliers who have relied on their brokers or a third-party to do their modular re-sets, regular checkups and maintenance will have to use one of the five approved service providers as of Jan. 1. Supplier consultant Peggy Knight said the change will be a burden for the mom-and-pop vendor that has one item in 3,600 stores. She said the new policies, storage and slotting fees, on-time and in-full violations and other fees continue to layer-on costs that smaller suppliers have a hard time covering. She added that the smaller vendors who have already given Wal-Mart their best possible price have no margin left for added costs.

Other experts say the policy will give Wal-Mart more control and continuity in its store fleet so that displays in Plano, Texas, look the same as those in Canton, Mich. Store managers will also have more knowledge and transparency about who is in their stores and those are other goals for the retailer, according to market watchers.

Jami Dennis, CEO of Vendormasters, said perhaps Wal-Mart is trying with the new policy to take some costs of out a system that has become bloated over time. By setting the range providers can charge suppliers for in-store merchandising services, Wal-Mart will set a cap on that cost.

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