Selling to Wal-Mart:
Hints for the Small Food Processor from Wal-Mart Buyers
By Patrick Haines
Deli Buyer for Wal-Mart
For most American manufacturers, selling their products in a mass market is part of their ultimate plan for growth and success. Wal-Mart is the largest marketer in the world, offering unparalleled access to customers. However, there are many pitfalls to avoid in order to be successful. Here are some hints to help get started.
1. Develop a great product. It all starts with this. Your product must be unique enough to be differentiated within the category, but mainstream enough to appeal to a wide market. Work hard to fine tune flavor, packaging, labeling, product size and case pack, finding the best combination to appeal to stores and to customers.
2. Sharpen your sales and marketing skills. A large chain of stores is a terrible place to get started. You will only have one chance to make a mistake in an environment like that. It is much better to establish a track record - first with individual specialty/gourmet stores, then single grocery stores, then small chains. Progressing like this will help you learn more about your product, more about the price necessary to make the item sell, more about additional promotional activity that drives volume - demo’s, radio, TV, newspaper, etc.
3. Learn and refine production, distribution, and financial skills. As your item grows in success, operational considerations like raw ingredient procurement, production efficiency and capacity constraints become more and more tricky. You must maintain your small batch quality when converting to larger production runs. Once produced, shipping costs become a large part of the finished cost of the product. Understanding shipping options and knowing how to use them is critical. As you grow, developing financial skill and relationships with capital providers (banks and other investors) is essential. Working with your smaller customers will help to understand the cash flow lag between outlays for packaging, ingredients, production expenses, distribution costs and the final payment for goods purchased. You must know your true costs. All of these skills must be honed before seriously making a bid to sell to Wal-Mart.
4. Learn about Wal-Mart Stores, Inc. No matter who your customer is, you will stand a much better chance of success if you know and understand their business. Study the business in the stores, getting to know your category inside and out. Review news articles, annual reports, and read “Made in America” by Sam Walton. This will help you understand the culture of Wal-Mart. Terminology - the language of Wal-Mart is important to understand. Examples would be to know the difference between Sam’s Club, Wal-Mart Division One stores, Expanded Food stores, Supercenters and Neighborhood Markets. Seek out suppliers from non-competing categories to pick up on other information.
5. Prepare as a Supplier. Go to the website www.walmartstores.com. This website offers lots of information about Wal-Mart, including a whole section on becoming a Wal-Mart supplier. Included are a lot of additional tips on becoming a supplier and answers to many frequently asked questions. Because of Wal-Mart’s size there are lots of steps required to become an authorized supplier. These are spelled out in detail at the website and must be understood before proceeding. This is a complicated and intimidating process, and many small business-people give up at this point. Don’t give up!
4. Understand the role of the Buyer at Wal-Mart. Once all of the above is complete, it is time to prepare to sell your product at Wal-Mart. Visit with store management to see their reaction and to gain supporters in the field. Then work to speak to the buyer for the category on the phone. Before you do, understand the role of the buyer at Wal-Mart. Here are some of the key aspects to remember:
A. The Buyer is extremely busy, having more work than time
B. He or She is graded on hitting numbers - sales, gross profit, and inventory turns
C. Each additional supplier the buyer deals with adds complexity to their job.
D. They do like developing new, innovative items
E. They expect the supplier to be totally responsible for sales, instock levels, and all aspects of the item’s success
F. The Buyer operates using Retaillink - Wal-Mart’s computer tool that shows item and store sales and profitability. This information is also available to suppliers, and it is essential that suppliers sign on to Retaillink and become proficient at using the data available.
6. Protect your interests. One thing seen many times is a Wal-Mart supplier very willingly putting their company at great risks, even bankrupting themselves. Sometimes the lure of the fast growth Wal-Mart can offer causes suppliers to layer on additional costs, lower product quality, or make cost concessions at the suggestion of a buyer, without doing the financial analysis and risk assessment associated with the decision. Be prepared to diplomatically say “no” to business that would not be in your interest. Start slow and grow your successes over time. Do not be afraid of questioning potential errors.
7. Continue to innovate, diversify, and react to change. Change is a constant. Your competitors in the food manufacturing business will recognize your success and try to emulate it. Continue to improve your product. Also, continue to grow your business outside Wal-Mart. Having more than 25% of your business with any one customer is very dangerous. Diversification will help soften the blow if business is lost without much warning. Be prepared to re-communicate the value of your product if there is a buyer change.
These hints are not all-inclusive, but should help your company avoid some of the common pitfalls that keep small food manufacturers from being as successful as possible. Good luck as you work to grow your business!