Is it harder to get on the shelf at Walmart and other retailers than it used to be?
I think retailers are more risk averse than they once were; the stakes are so much higher and they don’t want to take big bets with precious space, because if your product goes in, someone else’s is going out.
If you’re a national brand with a new product and you’re spending tens of millions promoting it on TV and so on, no retailer will want to be without it. But if you’ve got an unproven product the stakes are too high for a retailer to give you too much too soon. You have to prove that you can deliver.
When should early stage companies approach Walmart?
Walmart doesn’t want to be anyone’s first customer. They don’t want to be more than 80% of anyone’s business.
Store managers at Walmart do have some power to choose what’s stocked in their stores and they are encouraged to try to support local businesses, but you must have some sales history.
Wal-Mart generally starts out smaller suppliers in a local market, delivering goods to up to 50 stores, as a test run. If the supplier provides a high-selling product and proves reliable, it might be considered for national distribution.
We tell companies that they have to be patient and sell at the local level, one DC at a time.
Why do so many new products fail?
Part of it is because the products don’t meet consumer expectations. But even if you have a good product, the fact is that most early stage companies don’t realize how difficult it is to manage business with a large retailer; they put all their emphasis - and resources - into getting on the shelf and not enough on staying there.
Where new suppliers often make mistakes is in their ability to estimate costs, if you’re shipping less than a truckload you pay much more, for example.
There’s also a relatively short time window in which to prove yourself. But if you don’t, you’re out, usually within six months.
How much money do you need?
Companies such as Walmart expect suppliers to invest appropriately. They understand you won’t have $100m to spend to support a line extension but they do expect you to support your brands.
What’s Walmart like to deal with?
Walmart is well-known as a tough negotiator but it pays on time. It’s also famous for providing suppliers with more data than other retailers about how their goods are moving through the Walmart supply chain via Retail Link. You can see real time information about each stock keeping unit (SKU).
What advice do you give start-ups looking to make it into the CPG market?
A lot of people love the idea of being a business owner, but most of the [new, start-up] companies we speak to, we advise not to move forward. When they realize how expensive it is, how risky it is, they often don’t have the stomach for it. We could rack up fees and lead them on, but we don’t want to fill them with false hope.
Why do Walmart suppliers need your help?
You’d be surprised, but from my experience in Asia, many companies don’t grasp the basics of how business is done with Walmart.
I got back to the US in 2004 and realized that over here also, there are people that have been doing business with Walmart for years and still don’t understand the basics, so I thought there was an opportunity to work with suppliers of all sizes.
For example, if you’ve always worked in a high-low environment, EDLP [every day low pricing] can be very hard to grasp. Or maybe you are getting dinged on your scorecard. We know what Walmart is looking for.
What does 8th & Walton do?
We teach a lot of classes to new and established Walmart suppliers in several areas, from how to use Retail Link, to scorecard optimization and joint business planning. We’ve also launched a new initiative called Selling to the Masses for early stage CPG companies.
We also offer services - helping suppliers produce reports, analyses or forecasts, or prepare for meetings or line reviews. We also help suppliers that want to sell products through the online stores of Walmart, Sam’s Club, Amazon, Lowe's and others.
A big part of this is our 'Saturday Morning Meeting' webcast, which we post on YouTube, where we bring people from Walmart and the supplier community into the studio to talk about current issues affecting Walmart suppliers.
Click here to find out more about 8th & Walton.
Click here to check out the Saturday Morning Meeting, which has featured guests including Tom Coughlin, former vice chairman of Wal-Mart; Darrin Robbins and Zach Simpson, senior directors of merchandising for Wal-Mart Stores; Mike Graen, director of innovations and supplier collaborations with Wal-Mart; and Michael Clark, director of retail strategy and execution with Kellogg.