If you are interested in Wal Mart merchandising read this article for their latest direction.
By JON SPRINGER
If there's any retailer that knows how uncomfortable the murky middle can be, it's Wal-Mart , which over the past 30 years has plowed scores of its smaller competitors there, frequently contributing to their ultimate demise.
But after a year of economic hardship for Wal-Mart shoppers — and changes in consumer behaviors learned during the recession — it's not without some irony to find the world's largest retailer in some danger of slipping into the middle itself these days. Paradoxically, this vulnerability is at least partly a by-product of Wal-Mart 's own attempt at nuanced strategic transformation, the ongoing merchandising and branding program known as Project Impact.
While Wal-Mart Stores officials express strong confidence in Project Impact, particularly for the long term — citing multiple financial and retail successes that they insist are only just beginning — disappointing sales and store traffic results in recent months have prompted the chain to tweak some tactics and reverse course on others. It has also sparked some debate among industry observers as to exactly what is ailing the Bentonville, Ark., chain and the extent to which its issues can be solved. They cite stronger competition — retailers that not only better challenge the giant on price, but also those running store formats that capitalize on Wal-Mart 's shortcomings. Changes in consumer behavior — not only the effects of high unemployment, but the recession-borne emphasis on value gaining wider applications as the economy improves — are also a factor, they say.
“ Wal-Mart is still a hugely, incredibly successful company,” Craig Johnson, president of Consumer Growth Partners, New Canaan, Conn., told SN in an interview. “But I think it's missed half a beat.”
Officially launched late in 2008, and rolled out throughout last year, Project Impact brought new methods of marketing and merchandising items at Wal-Mart , showcased in a softer, redesigned store and tied together with a brand message that shifted emphasis from price to value at Wal-Mart stores. The program was designed to capture a larger and more economically diverse shopper base — particularly the wealthier shoppers who'd begun to frequent Wal-Mart as a means to save money when economic conditions first became threatening.
Remerchandising at Wal-Mart took the form of an SKU rationalization program designed to weed out brands and sizes in categories considered to be slow growing or without the potential for Wal-Mart to dominate, and devote their space toward those categories with strong growth potential. Dubbed “Win, Play, Show,” the remerchandising focused Wal-Mart 's pricing and promotional power on key growth categories, many of which were also vital to its supermarket competitors.
It hasn't worked quite as planned, company officials confessed to analysts in a meeting earlier this month. Certain category cuts went too deep, necessitating the company to reintroduce some 400 grocery products, while in other cases, Wal-Mart wasn't aggressive enough in establishing its high-growth “Win” products, said John Fleming , chief merchandising officer.
By making choices for Win, Play and Show designations across the entire U.S. store base, Wal-Mart mistakenly implied “that all customers are the same,” added Eduardo Castro-Wright , corporate vice chairman and president of Walmart U.S. He said the chain is currently revamping the process using more demographic precision, making decisions for stores in various clusters.
A recent Nielsen Co . study suggested that retailers that hacked brands which resonated with particular shoppers stood to lose more than sales of the particular product, but often lose entire baskets and store trips as well. “If I have to go to Lunds in Minneapolis because my favorite coffee is no longer at Wal-Mart , then I'm going to be buying a lot more at Lunds now, aren't I?” said David Rogers, president of DSR Marketing, Deerfield, Ill. “The fact that Wal-Mart 's now putting 300 or 400 items back onto the shelves indicates their judgment was poor about what to take out. There's no way around that.”
Burt P. Flickinger III, managing partner of Strategic Resource Group, New York, added that many of Wal-Mart 's competitors have taken advantage of the situation by featuring brands and sizes that were cut by Wal-Mart .
Customers Under Stress
Castro-Wright said the SKU cuts were only one factor contributing to sales falling below company expectations recently. He also cited a shopper base under particular economic stress, especially in areas with high unemployment. Of Wal-Mart 's U.S. stores, he said the 25% in areas with lowest unemployment are outperforming those elsewhere by 2.5%. “Unemployment is a major part of the shortfall in sales,” he said.
The company saw benefits from many of those especially hard-hit markets leading up to the recession, Flickinger noted. “ Wal-Mart hurt itself to some extent by oversaturating its key Sun Belt states from Arizona to the Southeast,” he told SN. “Those areas were once growing in population and income but they're seeing tough economic times right now, and as a result Wal-Mart is seeing tough economic times.”
Wal-Mart has also been feeling the effects of hotter competition over the last year, as retailers adjusted pricing to compete in the recession. Wal-Mart in the meantime slowed its pace of temporary price reductions, known as price rollbacks, while it introduced its new merchandising programs in 2009, Castro-Wright said. Wal-Mart has responded this year with a “very robust” new rollback program aimed at addressing pricing gaps and, said Castro-Wright, “ensuring that we remain the undisputed price leader in the marketplace.”
The rollbacks are being supported with more prominent advertising in circulars and in stores beginning this spring, observers noted.
While some analysts predicted the return of rollbacks would accompany “price wars” between supermarkets and Wal-Mart , others said such battles on price with Wal-Mart are more likely to erupt at the level of the growing hard-discount grocers like Aldi and small discounters such as Dollar General . The growth of these formats is showing consumers that Wal-Mart can be matched and beaten on prices, sources said.
“ Wal-Mart is still a low-price leader but it's not the low-price leader,” said Flickinger, noting his firm's studies showing Aldi beating Wal-Mart on items such as canned vegetables and milk.
“As good a concept as Project Impact is, Wal-Mart is having a tougher time shifting sales than it used to, because so many of its competitors have gone out of business, and the surviving stores — particularly the hard discounters, price-impact players and wholesale clubs, have gotten very, very tough on price,” he added.
Wal-Mart 's sales and traffic woes earlier this year indicated “it was losing the customer it had gained during the recession by allowing the price gap with supermarkets to narrow,” Deborah Weinswig, an analyst at Citi Investment Research, New York, said in a note to clients. “We believe shoppers no longer consider the price savings offered by Wal-Mart to outweigh the experience and convenience of shopping the supermarkets. Wal-Mart realizes it must act now to keep the customer.”
Others said they feel Wal-Mart 's more aggressive rollbacks are serving mainly to spark store traffic. “They have a good price image and probably don't need to take their prices down,” Andrew Wolf, an analyst at BB&T Capital Markets, Richmond, Va., told SN. “What they're doing is trying to get customers in the door. They're promoting.”
Promotional Profile
David Dillon , Kroger 's chief executive officer, in a conference call this month said that Wal-Mart 's new rollback program has transformed its competitive profile, saying the company more closely resembles a high-low supermarket competitor using hot prices to draw traffic.
“ Wal-Mart is a lot more consistent with a traditional grocery-supermarket operation than it is consistent with what Wal-Mart used to do,” Dillon said. “It uses a lot more feature items. Sometimes those features are on for more than a week, but it's [still] feature items, and when you operate that way there may be items that come down in price and get a lot of publicity, but there are others that go up in price that don't get that much publicity. We see the behavior as a lot of marketing noise.”
Making a stronger emphasis to promote price seemingly comes into conflict with some of the changes Wal-Mart introduced as part of Project Impact. Emphasizing “fast, clean and friendly” stores, the retailer used more subtle signs, lower shelf heights, improved lighting and cleared merchandised pallets from the “Action Alley” aisle running alongside its grocery aisles in U.S. Supercenters.
Wal-Mart 's “Clean Action Alley” initiative has done wonders for store navigation and won acclaim from shoppers, retail observers and Wal-Mart itself: Mike Duke , president and CEO, this month said store conditions at Wal-Mart were the best in the company's history. However, Fleming acknowledged the changes to Action Alley came at the cost of a sense of “promotional intensity” inside the stores. Castro-Wright said Wal-Mart would consider reintroducing some features from Action Alley into other areas of the store — but like its merchandising initiative, do so only in certain stores.
“Project Impact is not about Action Alley,” Castro-Wright told analysts. “It is a holistic approach to how we go to market, and that is not going to change.”
Dave Marcotte of Kantar Retail, Cambridge, Mass., said he senses these changes as a harder approach from Wal-Mart to counter some of the unintended effects of Project Impact.
“The rollbacks to me indicate that they're saying, ‘We've tried the soft approach, now we're going to go hard. We're going to be the biggest, toughest guys on the block in pricing,’” Marcotte said. “That's somewhat in conflict with Project Impact. The rollbacks are great but I don't know if it will work any better. They seem to be caught in a box of their own design.”
Johnson of Consumer Growth Partners said he sees Wal-Mart 's troubles not as a result of its changes but rather as a result of changes in shopper behavior. He believes the recession has served to increase consumers' propensity to make convenience and mission-specific shopping trips while reducing their appetite for stocking up. The latter is a Wal-Mart strength; other retailers in the meantime have gone after the former occasions, knowing they tend to be weak spots for Wal-Mart .
“ Wal-Mart does a lot of things right but at the margins it's losing a fraction of these non-stock-up trips, which are being better served by other retailers,” Johnson said. “You have convenience trips well-served by Walgreens and CVS, which have sharply ramped up food offerings and morphed into convenience stores without fuel pumps. At the same time, you have retailers who are in more direct competition with Wal-Mart really stepping up their game in a challenging and margin-pressure environment. Kroger has stepped up its game, as have the strong regionals out there — H-E-B, Publix and Meijer.”
Small Competition
If there's a trait all of Wal-Mart 's competitors share, it's that their stores are smaller — and as a result tend to be easier to shop — than Wal-Mart . Some analysts have argued that consumers during the recession learned bargain-hunting behaviors they will now apply to non-price facets of their shopping experience. This again bodes well for stores that can demonstrate their value lies in a more convenient experience than Wal-Mart . Some, like Aldi, are doing so in combination with everyday low prices — and pose a real threat. “Aldi drives [ Wal-Mart ] crazy,” Marcotte said. “I don't think they know how to compete with it.”
Several sources said they feel Wal-Mart would be ultimately well-served to bolster its U.S. Supercenter business with a smaller concept store (see related story, Page 24). “Long term, we believe Wal-Mart needs to experiment with smaller formats,” Johnson said. “They need to serve the convenience and mission-specific shopping trip better.”
The continued proliferation of dollar stores and hard discounters in the meantime are also weighing on Wal-Mart , Rogers said. “Each dollar store does only $1.2 million [in sales] a year, but when you've got 25,000 of them and they're opening 5,000 a year, it starts to hurt,” he contended. “They all take a little bit from you, and it starts to add up.”
Castro-Wright in remarks at Wal-Mart 's analyst conference suggested it was alternative formats — and not mainstream supermarkets — absorbing sales “leakage” from Wal-Mart , noting that Wal-Mart 's comparable grocery sales have matched or outpaced comps in the larger grocery channel.
Wal-Mart 's message to consumers has also shifted some recently. In addition to making a stronger effort to communicate price rollbacks, the retailer is now airing television commercials featuring its truck drivers and warehouse workers demonstrating how Wal-Mart 's internal productivity efforts contribute to lower prices in store. Officials refer to this as “price transparency” and consider it an advantage for Wal-Mart as consumers become more sophisticated about shopping.
The productivity cycle — what officials called a “virtuous circle” that invests cost savings into lower prices, creating greater sales and more opportunity for leverage — remains at the heart of Wal-Mart 's strategy.
“The business model at Wal-Mart is alive and well and stronger than ever,” Duke said at the investor conference. “And even as the world changes, and customers are finding new ways to shop, the Wal-Mart business model is going to work even better.”
Tuesday, June 29, 2010
Wednesday, January 27, 2010
The world is changing (fast!)
Something to think about.....
There is a statistic from June '09 issue of Parade Magazine that states by 2019 over 40% of the work force is going to be independent contractors. This means that 40% of the population will be their own business identity.
This is a major paradigm shift for how the majority of people earn their wages.
Take a moment to reflect on this…
We all can see the world rapidly changing. But sometimes the hardest change to be made is the change we need to make inside ourselves. Predominantly, values have been focused on security and benefits. Robert Kioysaki calls this the ‘E’ Quadrant. If you’re going to be among the 40% who – whether by choice or necessity – are their own business identity, your values will shift to what Kioysaki calls the ‘B’ Quadrant. How are you getting to the ‘B’ Quadrant? He says it’s not money that will make you rich, its business skills. It’s this shift of focus to building business, investing your time into the development of yourself and others and the understanding that the number one asset a person can attain is a business. Doing so will allow your money to work hard for you, not the other way around.
I am involved in a non-profit company that teaches life skills to kids. Please visit our web page at http://jrgrillers.com to see what we are doing.
Start thinking today how you can get ready for the future.
Tuesday, November 24, 2009
Marketing a small Barbecue Business
I got this e-mail this morning which motivated me to write a response that may help others.
Hi Tom, I know you from facebook, and wanted to email you. I own and operate a small bbq catering company called Tiny's Bar-b-que and we are located in central, PA. (near penn state U.) We are fully licensed with the state and insured as a mobile food service, We operate out of a fixed up salvation army canteen truck along with two mobile smokers. I always seem to struggle marketing our business, We don't have much of a budget for advertising. We relay mostly on word of mouth, which has been working, but would like to get our name out there more. I have no other prior business experience, and the catering extends from my passion for bbq and competition bbq. I think we could greatly benefit from your knowledge and information you have to offer. We also have our own bbq sauce we get bottled and sell when we are vending, I just really need help on marketing. How to go about approaching companies about doing company parties, picking a location to setup roadside, getting our sauce into small stores, etc. Greatly appreciate any info you could share, Your book sounds very interesting. and I enjoy reading your post on facebook. If there is a way that you could help me with some info, let me know and I'd greatly appreciate it, Take care and have a great thanksgving holiday.
My response.........
Thanks for asking me about Marketing. In your e-mail you gave me a lot of questions I can start writing about on my blog which is a good thing.
So far you have the hardest part worked out--You are legal with the food police. Congratulations! That is something I have not accomplished.
I assume your food is competition quality. If so there is another major accomplishment for you. It's really a trick to have good food all day when sales are slow.
On the marketing side I will give you two ideas today and promise more to come as time permits.
Visit your local Harley Davidson dealership and talk with their marketing director. Offer to put your BBQ truck at the dealership every Saturday and other days when they have events. Most HD dealerships have events to give their customers someplace to go (a ride reason). Ask to attend their HOG meetings (I think you can even if you do not ride). HOG = Harley Owners Group. Ever dealership has a active HOG chapter. After a while these people will accept you. Then you can go on rides with them and be their personal meal provider. Many opportunities will open up for you when you connect yourself with motorcycle groups.
Find a local farmers market you can set up for a reasonable price. Be prepared to sell lots of food to go in bulk. Example a pound container of pull pork bbq for $7. You will also sell food consumed there too. Add a good hot dog to your menu if you do not have one. When I was going to the Farmers Market I was selling $200 to $250 an hour. The market was small and only lasted three hours on Wednesday and Saturday. After you go several times you will develop regular customers who will buy the same amounts each week. You will also get catering opportunities you never expected.
I found both places will also give you very important eye to eye contact with your customers. You will come to understand fast if you are producing the right food. Same people buying same thing over and over = success!
My facebook page (search ncbigtom if we are not now friends) has lots of pictures taken at both places to give you more ideas. I approve all friend requests and will follow every person that follows me on Twitter at Grillzillabrand.
Let me know if I have helped you grow your business. Remember, millions are counting on you to be successful so you can pay more taxes!
Hi Tom, I know you from facebook, and wanted to email you. I own and operate a small bbq catering company called Tiny's Bar-b-que and we are located in central, PA. (near penn state U.) We are fully licensed with the state and insured as a mobile food service, We operate out of a fixed up salvation army canteen truck along with two mobile smokers. I always seem to struggle marketing our business, We don't have much of a budget for advertising. We relay mostly on word of mouth, which has been working, but would like to get our name out there more. I have no other prior business experience, and the catering extends from my passion for bbq and competition bbq. I think we could greatly benefit from your knowledge and information you have to offer. We also have our own bbq sauce we get bottled and sell when we are vending, I just really need help on marketing. How to go about approaching companies about doing company parties, picking a location to setup roadside, getting our sauce into small stores, etc. Greatly appreciate any info you could share, Your book sounds very interesting. and I enjoy reading your post on facebook. If there is a way that you could help me with some info, let me know and I'd greatly appreciate it, Take care and have a great thanksgving holiday.
My response.........
Thanks for asking me about Marketing. In your e-mail you gave me a lot of questions I can start writing about on my blog which is a good thing.
So far you have the hardest part worked out--You are legal with the food police. Congratulations! That is something I have not accomplished.
I assume your food is competition quality. If so there is another major accomplishment for you. It's really a trick to have good food all day when sales are slow.
On the marketing side I will give you two ideas today and promise more to come as time permits.
Visit your local Harley Davidson dealership and talk with their marketing director. Offer to put your BBQ truck at the dealership every Saturday and other days when they have events. Most HD dealerships have events to give their customers someplace to go (a ride reason). Ask to attend their HOG meetings (I think you can even if you do not ride). HOG = Harley Owners Group. Ever dealership has a active HOG chapter. After a while these people will accept you. Then you can go on rides with them and be their personal meal provider. Many opportunities will open up for you when you connect yourself with motorcycle groups.
Find a local farmers market you can set up for a reasonable price. Be prepared to sell lots of food to go in bulk. Example a pound container of pull pork bbq for $7. You will also sell food consumed there too. Add a good hot dog to your menu if you do not have one. When I was going to the Farmers Market I was selling $200 to $250 an hour. The market was small and only lasted three hours on Wednesday and Saturday. After you go several times you will develop regular customers who will buy the same amounts each week. You will also get catering opportunities you never expected.
I found both places will also give you very important eye to eye contact with your customers. You will come to understand fast if you are producing the right food. Same people buying same thing over and over = success!
My facebook page (search ncbigtom if we are not now friends) has lots of pictures taken at both places to give you more ideas. I approve all friend requests and will follow every person that follows me on Twitter at Grillzillabrand.
Let me know if I have helped you grow your business. Remember, millions are counting on you to be successful so you can pay more taxes!
Thursday, November 12, 2009
Twitter is a powerful tool if you use it correctly
Twitter is becoming more popular everyday. If you are a new twitter fan then do not make these common mistakes.
1. Not setting up your Twitter page properly:
Make sure you have a decent photo that people can connect with. This is one of the first things I look for before engaging with a new person. Like you, my time is valuable and I scan photo’s because it’s easy and fast, if someone doesn’t have a decent photo I move on to the next one.
Use your name instead of your @twitter username in the name section. I like to use a persons name when sending out tweets. Having a name is a great way for people to connect with you on a first name bases.
When filing out your bio use quality words, these words are searchable through many of the 3rd party tools that integrate with Twitter. Focus more on key words then sentence structure will give others a greater chance of finding you.
2. Not following up:
Follow up with the people that tweet you and send them a tweet back. This only takes a few minutes a day and by doing this will help you build a strong following.
When someone retweets your tweet send them a thank you or compliment. Retweeting others that retweet you will help you spread quickly into other people’s followers.Check your @replies and DM’s at least once per day.
3. Trying to get a large number of followers:
When I first started using Twitter all I heard about was you need to get followers. This is true, however; I quickly discovered that the quality of followers was much more important then having huge numbers of followers.
With all the 3rd party tools out there that help you auto follow people, it’s hard to focus on the quality of followers you are following. Make sure you focus on keywords that will locate the type of people you want when using these types of programs or tools.
Using keywords and the hashtag is a great way to locate people in your niche. Use alerts and key word tracking to locate people and save time.
4. Self promoting:
I see many people sending out tweets with links that are trying to sell something. Remember, people hate to be sold but love to buy. Sometimes I see tweets with just a link with no description to what the link is, talk about a waste of time.
If you are going to send out links in your tweets you should send them out in moderation. Send out other tweets in between the tweets with links. Providing value in your tweets is the key to getting people to trust you. Don’t send out to many tweets per hour. When someone fills up my twitter page with tweets going out every 3-5 minutes it doesn’t take me long to un-follow them. Using your DM is a great way to keep the twitter stream from getting over crowded.
These are just a few of the Twitter mistakes I have either made myself or have seen others make on Twitter. Just use a little common sense and you will do just fine. Ask yourself, am I tweeting to others like I would like to be tweeted to?
1. Not setting up your Twitter page properly:
Make sure you have a decent photo that people can connect with. This is one of the first things I look for before engaging with a new person. Like you, my time is valuable and I scan photo’s because it’s easy and fast, if someone doesn’t have a decent photo I move on to the next one.
Use your name instead of your @twitter username in the name section. I like to use a persons name when sending out tweets. Having a name is a great way for people to connect with you on a first name bases.
When filing out your bio use quality words, these words are searchable through many of the 3rd party tools that integrate with Twitter. Focus more on key words then sentence structure will give others a greater chance of finding you.
2. Not following up:
Follow up with the people that tweet you and send them a tweet back. This only takes a few minutes a day and by doing this will help you build a strong following.
When someone retweets your tweet send them a thank you or compliment. Retweeting others that retweet you will help you spread quickly into other people’s followers.Check your @replies and DM’s at least once per day.
3. Trying to get a large number of followers:
When I first started using Twitter all I heard about was you need to get followers. This is true, however; I quickly discovered that the quality of followers was much more important then having huge numbers of followers.
With all the 3rd party tools out there that help you auto follow people, it’s hard to focus on the quality of followers you are following. Make sure you focus on keywords that will locate the type of people you want when using these types of programs or tools.
Using keywords and the hashtag is a great way to locate people in your niche. Use alerts and key word tracking to locate people and save time.
4. Self promoting:
I see many people sending out tweets with links that are trying to sell something. Remember, people hate to be sold but love to buy. Sometimes I see tweets with just a link with no description to what the link is, talk about a waste of time.
If you are going to send out links in your tweets you should send them out in moderation. Send out other tweets in between the tweets with links. Providing value in your tweets is the key to getting people to trust you. Don’t send out to many tweets per hour. When someone fills up my twitter page with tweets going out every 3-5 minutes it doesn’t take me long to un-follow them. Using your DM is a great way to keep the twitter stream from getting over crowded.
These are just a few of the Twitter mistakes I have either made myself or have seen others make on Twitter. Just use a little common sense and you will do just fine. Ask yourself, am I tweeting to others like I would like to be tweeted to?
Tuesday, November 10, 2009
Read this story and then I will tell you the truth
The Wal-Mart You Don't Know
By: Charles FishmanWed Dec 19, 2007
The giant retailer's low prices often come with a high cost. Wal-Mart's relentless pressure can crush the companies it does business with and force them to send jobs overseas. Are we shopping our way straight to the unemployment line?
A gallon-sized jar of whole pickles is something to behold. The jar is the size of a small aquarium. The fat green pickles, floating in swampy juice, look reptilian, their shapes exaggerated by the glass. It weighs 12 pounds, too big to carry with one hand. The gallon jar of pickles is a display of abundance and excess; it is entrancing, and also vaguely unsettling. This is the product that Wal-Mart fell in love with: Vlasic's gallon jar of pickles.
Wal-Mart priced it at $2.97--a year's supply of pickles for less than $3! "They were using it as a 'statement' item," says Pat Hunn, who calls himself the "mad scientist" of Vlasic's gallon jar. "Wal-Mart was putting it before consumers, saying, This represents what Wal-Mart's about. You can buy a stinkin' gallon of pickles for $2.97. And it's the nation's number-one brand."
Therein lies the basic conundrum of doing business with the world's largest retailer. By selling a gallon of kosher dills for less than most grocers sell a quart, Wal-Mart may have provided a ser-vice for its customers. But what did it do for Vlasic? The pickle maker had spent decades convincing customers that they should pay a premium for its brand. Now Wal-Mart was practically giving them away. And the fevered buying spree that resulted distorted every aspect of Vlasic's operations, from farm field to factory to financial statement.
Indeed, as Vlasic discovered, the real story of Wal-Mart, the story that never gets told, is the story of the pressure the biggest retailer relentlessly applies to its suppliers in the name of bringing us "every day low prices." It's the story of what that pressure does to the companies Wal-Mart does business with, to U.S. manufacturing, and to the economy as a whole. That story can be found floating in a gallon jar of pickles at Wal-Mart.
Wal-Mart is not just the world's largest retailer. It's the world's largest company--bigger than ExxonMobil, General Motors, and General Electric. The scale can be hard to absorb. Wal-Mart sold $244.5 billion worth of goods last year. It sells in three months what number-two retailer Home Depot sells in a year. And in its own category of general merchandise and groceries, Wal-Mart no longer has any real rivals. It does more business than Target, Sears, Kmart, J.C. Penney, Safeway, and Kroger combined. "Clearly," says Edward Fox, head of Southern Methodist University's J.C. Penney Center for Retailing Excellence, "Wal-Mart is more powerful than any retailer has ever been." It is, in fact, so big and so furtively powerful as to have become an entirely different order of corporate being.
Wal-Mart wields its power for just one purpose: to bring the lowest possible prices to its customers. At Wal-Mart, that goal is never reached. The retailer has a clear policy for suppliers: On basic products that don't change, the price Wal-Mart will pay, and will charge shoppers, must drop year after year. But what almost no one outside the world of Wal-Mart and its 21,000 suppliers knows is the high cost of those low prices. Wal-Mart has the power to squeeze profit-killing concessions from vendors. To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.
Of course, U.S. companies have been moving jobs offshore for decades, long before Wal-Mart was a retailing power. But there is no question that the chain is helping accelerate the loss of American jobs to low-wage countries such as China. Wal-Mart, which in the late 1980s and early 1990s trumpeted its claim to "Buy American," has doubled its imports from China in the past five years alone, buying some $12 billion in merchandise in 2002. That's nearly 10% of all Chinese exports to the United States.
One way to think of Wal-Mart is as a vast pipeline that gives non-U.S. companies direct access to the American market. "One of the things that limits or slows the growth of imports is the cost of establishing connections and networks," says Paul Krugman, the Princeton University economist. "Wal-Mart is so big and so centralized that it can all at once hook Chinese and other suppliers into its digital system. So--wham!--you have a large switch to overseas sourcing in a period quicker than under the old rules of retailing."
Steve Dobbins has been bearing the brunt of that switch. He's president and CEO of Carolina Mills, a 75-year-old North Carolina company that supplies thread, yarn, and textile finishing to apparel makers--half of which supply Wal-Mart. Carolina Mills grew steadily until 2000. But in the past three years, as its customers have gone either overseas or out of business, it has shrunk from 17 factories to 7, and from 2,600 employees to 1,200. Dobbins's customers have begun to face imported clothing sold so cheaply to Wal-Mart that they could not compete even if they paid their workers nothing.
"People ask, 'How can it be bad for things to come into the U.S. cheaply? How can it be bad to have a bargain at Wal-Mart?' Sure, it's held inflation down, and it's great to have bargains," says Dobbins. "But you can't buy anything if you're not employed. We are shopping ourselves out of jobs."
Ok, now the truth about WalMart............................
What the pickle story did not tell you is the top management at Vlastic Pickles was first greedy and second stupid. They were greedy because all they were thinking about was the multiple truck loads of pickles Walmart was going to buy and how much their bonus would increase from the relationship. Greed is a good thing in that it motivates people to increase business because of the rewards. Walmart buyers are masters at working the “psychology” of greed on vendors. That is their job and they do it very well.
Stupid because they should have known their business well enough to understand how selling Walmart a year’s crop of pickles would affect their profitability. Even I know the more a pickle is processed (cut, sliced, diced, etc) the more value you add thus the more you can sell it for. Vlastic is the pickle packer leader. Why did they not know this fact? Truth is they did but Vlastic management was looking for a short term gain and not looking at the long term results (very much the case for companies in the US). Again they were stupid and WalMart buyers are masters at taking advantage of stupid executives.
This is my point; you call on Walmart you are in control of what happens. You can say “no” in any meeting. You just have to be smart enough to know when to say it.
The #1 objective at Walmart today is to increase profits so their stock price will increase. Walmart’s current dilemma is sales growth has slowed and new store expansion will come in higher cost areas (bad for profits).
What is their plan? If I were President of Walmart I would be tapping into the major suppliers marketing/slotting funds which they use to buy shelf space with every retailer except Walmart. This money can go right to the bottom line for Walmart increasing their profits without additional capital investment.
How? Easy, just appeal to suppliers top managements greed by making a realistic projection of how much they can increase their sales and market share because there will be less product assortment in their category (read my blog about win/play/show).
Walmart controls over thirty percent of the grocery sales now. If a major vendor doubles sales at Walmart then their overall category share increases dramatically, which may result in savings thru less promotional spending with other customers. What is the down side for major suppliers? Stay tuned for my next blog post to see.
By: Charles FishmanWed Dec 19, 2007
The giant retailer's low prices often come with a high cost. Wal-Mart's relentless pressure can crush the companies it does business with and force them to send jobs overseas. Are we shopping our way straight to the unemployment line?
A gallon-sized jar of whole pickles is something to behold. The jar is the size of a small aquarium. The fat green pickles, floating in swampy juice, look reptilian, their shapes exaggerated by the glass. It weighs 12 pounds, too big to carry with one hand. The gallon jar of pickles is a display of abundance and excess; it is entrancing, and also vaguely unsettling. This is the product that Wal-Mart fell in love with: Vlasic's gallon jar of pickles.
Wal-Mart priced it at $2.97--a year's supply of pickles for less than $3! "They were using it as a 'statement' item," says Pat Hunn, who calls himself the "mad scientist" of Vlasic's gallon jar. "Wal-Mart was putting it before consumers, saying, This represents what Wal-Mart's about. You can buy a stinkin' gallon of pickles for $2.97. And it's the nation's number-one brand."
Therein lies the basic conundrum of doing business with the world's largest retailer. By selling a gallon of kosher dills for less than most grocers sell a quart, Wal-Mart may have provided a ser-vice for its customers. But what did it do for Vlasic? The pickle maker had spent decades convincing customers that they should pay a premium for its brand. Now Wal-Mart was practically giving them away. And the fevered buying spree that resulted distorted every aspect of Vlasic's operations, from farm field to factory to financial statement.
Indeed, as Vlasic discovered, the real story of Wal-Mart, the story that never gets told, is the story of the pressure the biggest retailer relentlessly applies to its suppliers in the name of bringing us "every day low prices." It's the story of what that pressure does to the companies Wal-Mart does business with, to U.S. manufacturing, and to the economy as a whole. That story can be found floating in a gallon jar of pickles at Wal-Mart.
Wal-Mart is not just the world's largest retailer. It's the world's largest company--bigger than ExxonMobil, General Motors, and General Electric. The scale can be hard to absorb. Wal-Mart sold $244.5 billion worth of goods last year. It sells in three months what number-two retailer Home Depot sells in a year. And in its own category of general merchandise and groceries, Wal-Mart no longer has any real rivals. It does more business than Target, Sears, Kmart, J.C. Penney, Safeway, and Kroger combined. "Clearly," says Edward Fox, head of Southern Methodist University's J.C. Penney Center for Retailing Excellence, "Wal-Mart is more powerful than any retailer has ever been." It is, in fact, so big and so furtively powerful as to have become an entirely different order of corporate being.
Wal-Mart wields its power for just one purpose: to bring the lowest possible prices to its customers. At Wal-Mart, that goal is never reached. The retailer has a clear policy for suppliers: On basic products that don't change, the price Wal-Mart will pay, and will charge shoppers, must drop year after year. But what almost no one outside the world of Wal-Mart and its 21,000 suppliers knows is the high cost of those low prices. Wal-Mart has the power to squeeze profit-killing concessions from vendors. To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.
Of course, U.S. companies have been moving jobs offshore for decades, long before Wal-Mart was a retailing power. But there is no question that the chain is helping accelerate the loss of American jobs to low-wage countries such as China. Wal-Mart, which in the late 1980s and early 1990s trumpeted its claim to "Buy American," has doubled its imports from China in the past five years alone, buying some $12 billion in merchandise in 2002. That's nearly 10% of all Chinese exports to the United States.
One way to think of Wal-Mart is as a vast pipeline that gives non-U.S. companies direct access to the American market. "One of the things that limits or slows the growth of imports is the cost of establishing connections and networks," says Paul Krugman, the Princeton University economist. "Wal-Mart is so big and so centralized that it can all at once hook Chinese and other suppliers into its digital system. So--wham!--you have a large switch to overseas sourcing in a period quicker than under the old rules of retailing."
Steve Dobbins has been bearing the brunt of that switch. He's president and CEO of Carolina Mills, a 75-year-old North Carolina company that supplies thread, yarn, and textile finishing to apparel makers--half of which supply Wal-Mart. Carolina Mills grew steadily until 2000. But in the past three years, as its customers have gone either overseas or out of business, it has shrunk from 17 factories to 7, and from 2,600 employees to 1,200. Dobbins's customers have begun to face imported clothing sold so cheaply to Wal-Mart that they could not compete even if they paid their workers nothing.
"People ask, 'How can it be bad for things to come into the U.S. cheaply? How can it be bad to have a bargain at Wal-Mart?' Sure, it's held inflation down, and it's great to have bargains," says Dobbins. "But you can't buy anything if you're not employed. We are shopping ourselves out of jobs."
Ok, now the truth about WalMart............................
What the pickle story did not tell you is the top management at Vlastic Pickles was first greedy and second stupid. They were greedy because all they were thinking about was the multiple truck loads of pickles Walmart was going to buy and how much their bonus would increase from the relationship. Greed is a good thing in that it motivates people to increase business because of the rewards. Walmart buyers are masters at working the “psychology” of greed on vendors. That is their job and they do it very well.
Stupid because they should have known their business well enough to understand how selling Walmart a year’s crop of pickles would affect their profitability. Even I know the more a pickle is processed (cut, sliced, diced, etc) the more value you add thus the more you can sell it for. Vlastic is the pickle packer leader. Why did they not know this fact? Truth is they did but Vlastic management was looking for a short term gain and not looking at the long term results (very much the case for companies in the US). Again they were stupid and WalMart buyers are masters at taking advantage of stupid executives.
This is my point; you call on Walmart you are in control of what happens. You can say “no” in any meeting. You just have to be smart enough to know when to say it.
The #1 objective at Walmart today is to increase profits so their stock price will increase. Walmart’s current dilemma is sales growth has slowed and new store expansion will come in higher cost areas (bad for profits).
What is their plan? If I were President of Walmart I would be tapping into the major suppliers marketing/slotting funds which they use to buy shelf space with every retailer except Walmart. This money can go right to the bottom line for Walmart increasing their profits without additional capital investment.
How? Easy, just appeal to suppliers top managements greed by making a realistic projection of how much they can increase their sales and market share because there will be less product assortment in their category (read my blog about win/play/show).
Walmart controls over thirty percent of the grocery sales now. If a major vendor doubles sales at Walmart then their overall category share increases dramatically, which may result in savings thru less promotional spending with other customers. What is the down side for major suppliers? Stay tuned for my next blog post to see.
Monday, November 9, 2009
Walmart shoppers noticing a difference on the grocery shelves
Consumers aren’t finding the variety of products they used to on Walmart shelves, as the retailer offers fewer flavors, sizes and forms of many grocery products.
Columbus, Ohio-based Retail Forward in its October WalMart World reports some indication of consumers shopping less at Walmart because they can’t find what they want. About 24 percent of shoppers reported going to Walmart less this year compared with a year ago, while 14 percent of shoppers reported going to Walmart more often, according to the WalMart World report by Jennifer Halterman, Retail Forward senior consultant. Those numbers are from Retail Forward’s Shopper-Scape surveys from December 2007 to August 2009. The Shopper Scrape survey asks 4,000 people each month about their shopping habits.
“WalMart’s SKU (stock keeping unit) rationalization and reduction efforts as part of Win, Play, Show may actually be a point of contention with shoppers; some report reduced inventory as a reason for shopping Walmart Supercenter less often,” the Wal-Mart World report stated. Shoppers filled in explanations for some reasons they go to Walmart less, including “too crowded, reduced inventory, no longer carries items I previously purchased” and “they’ve cut out a lot of items they used to carry,” according to Retail Forward’s WalMart World.
WalMart’s win, play, show strategy means it wants to be well-stocked in major brands and categories that sell well; and will play in other brands that shoppers want, but won’t offer as great a selection. WalMart will devote even less shelf space to the “show” products, items it carries because some shoppers buy those items but they aren’t the biggest sellers or perhaps aren’t national or dominate brands.
Consumers get cranky if they’re used to buying a certain item which gets discontinued. Sometimes, they will try another brand in its place, but if it’s important enough some will shop elsewhere to get what they want.
Time will tell if Win-Play-Show increases WalMart sales and profits.
Columbus, Ohio-based Retail Forward in its October WalMart World reports some indication of consumers shopping less at Walmart because they can’t find what they want. About 24 percent of shoppers reported going to Walmart less this year compared with a year ago, while 14 percent of shoppers reported going to Walmart more often, according to the WalMart World report by Jennifer Halterman, Retail Forward senior consultant. Those numbers are from Retail Forward’s Shopper-Scape surveys from December 2007 to August 2009. The Shopper Scrape survey asks 4,000 people each month about their shopping habits.
“WalMart’s SKU (stock keeping unit) rationalization and reduction efforts as part of Win, Play, Show may actually be a point of contention with shoppers; some report reduced inventory as a reason for shopping Walmart Supercenter less often,” the Wal-Mart World report stated. Shoppers filled in explanations for some reasons they go to Walmart less, including “too crowded, reduced inventory, no longer carries items I previously purchased” and “they’ve cut out a lot of items they used to carry,” according to Retail Forward’s WalMart World.
WalMart’s win, play, show strategy means it wants to be well-stocked in major brands and categories that sell well; and will play in other brands that shoppers want, but won’t offer as great a selection. WalMart will devote even less shelf space to the “show” products, items it carries because some shoppers buy those items but they aren’t the biggest sellers or perhaps aren’t national or dominate brands.
Consumers get cranky if they’re used to buying a certain item which gets discontinued. Sometimes, they will try another brand in its place, but if it’s important enough some will shop elsewhere to get what they want.
Time will tell if Win-Play-Show increases WalMart sales and profits.
Sunday, September 6, 2009
Why Wal Mart Is Important to Food Companies
If you are in the food business and you do not have distribution with Wal Mart you are missing almost 40% of the consumer grocery traffic in the south. Wal Mart’s average market share in ten southern states is 38.3% and growing. Wal Mart has taken business from every retailer in the south except Publix. The only state Wal Mart is not ranked number one is Florida (Wal Mart now ranked a weak #2). Wal Mart’s highest market share is in states with the lowest average income and poorest level of competition. In the past fourteen months Wal Mart has grown to the number one market share position in North Carolina and Virginia which were dominated by Food Lion. Current grocery market share information is listed below. Wal Mart will control 50% of grocery sales in the next few years if the current trend continues.
Wal Mart’s management has taken a “less vendor – product assortment” direction in dry grocery categories which has hurt small companies. It is impossible to get shelf space in dry grocery categories unless you are a category leader nationwide. Wal Mart’s direction is now focused on private label and market leaders only. This move so far has resulted in increased sales with less item selection. I predict this marketing plan to spread to meat, deli, and dairy soon.
Shopping at Wal Mart you will notice that all private label packaging has changed to a standard white package. This makes private label products very visible on the shelf. Wal Mart’s newest supercenters are also merchandised without the “action alley” pallet displays. Action alley was the floor space between grocery and general merchandise and an equal area on the other end of the store thru general merchandise. Both action alleys are now gone in new supercenters. End cap displays have been re-designed to give Wal Mart equal display space lost to action alley. The result is a real improvement in store appearance.
Grocery Share Of Total Business
State Wal Mart
Mississippi 56.36
Louisiana 50.09
Alabama 48.18
Kentucky 40.00
Tennessee 40.27
S. Carolina 36.25
Georgia 32.82
N. Carolina 32.19
Florida 24.80
Virginia 22.00
Wal Mart’s management has taken a “less vendor – product assortment” direction in dry grocery categories which has hurt small companies. It is impossible to get shelf space in dry grocery categories unless you are a category leader nationwide. Wal Mart’s direction is now focused on private label and market leaders only. This move so far has resulted in increased sales with less item selection. I predict this marketing plan to spread to meat, deli, and dairy soon.
Shopping at Wal Mart you will notice that all private label packaging has changed to a standard white package. This makes private label products very visible on the shelf. Wal Mart’s newest supercenters are also merchandised without the “action alley” pallet displays. Action alley was the floor space between grocery and general merchandise and an equal area on the other end of the store thru general merchandise. Both action alleys are now gone in new supercenters. End cap displays have been re-designed to give Wal Mart equal display space lost to action alley. The result is a real improvement in store appearance.
Grocery Share Of Total Business
State Wal Mart
Mississippi 56.36
Louisiana 50.09
Alabama 48.18
Kentucky 40.00
Tennessee 40.27
S. Carolina 36.25
Georgia 32.82
N. Carolina 32.19
Florida 24.80
Virginia 22.00
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