Posted 4/12/2010 - 11:53:12 AM
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What are these?
NEW YORK— Around this time last year, an industry executive shared with me his competitive mindset: “If you’re not number one, you’re done.”
It was a blunt, if purposely exaggerated, observation that conveyed all-too-real concerns at a time when the economy was in a freefall.
The statement emphasized the precarious position of secondary vendors as retailers slash inventories and narrow assortments to their most productive, biggest-volume resources.
More so, it was a declaration that no one, not even market-share leaders, can take anything for granted in this new economy.
Such a scenario surged to the surface last year when Walmart said it would trim suppliers and brands to focus on top-tier resources with which the retailer could deal more efficiently and, presumably, at steeper volume discounts. Other national retailers have dangled similar proposals, but Walmart is the acid test here.
Throw in Walmart’s recent deal with sourcing agent Li & Fung to increase its direct-import, private-label offering, and it has all been a bit unnerving for the housewares industry. Many Walmart suppliers wonder if and when they’ll get the call that they’re out; others who’ve yet to sell the retailer might feel hopeless about the prospects of ever making a call.
Not so fast.
Walmart already is discovering consumers are balking because of the absence of well-known brands, mainly in consumables, they had become accustomed to finding in the stores but didn’t make the grade under Walmart’s new math. It was enough to persuade the retailer to make room quickly to return some castoff brands and products to the shelves.
Few would dare debate Walmart on the finer points of mass retailing efficiency. And who could blame the most efficient company on the planet, confronted with growth maturity during a shaky economy, for trying to squeeze a couple more margin points from its supply chain by streamlining assortments?
The long-term gain can become shallow, however, if it strips some of the merchandising soul from the shelves to the point of turning away avid customers. Shopper loyalty is as fragile as ever, and even Walmart— the most dominant number one of them all— can’t take anything for granted in this new economy.
This doesn’t mean housewares suppliers on the fringe of Walmart’s buying strategy can relax now. Walmart still prefers fat-free inventories fulfilled at a moment’s notice by fewer suppliers.
If you’re going to make Walmart’s mix as a secondary resource, you’ll need to do it with a compelling, differentiated package of product, branding, marketing, merchandising support, manufacturing capacity, supply-chain dexterity, sustainability, social responsibility and, of course, margin-packed, price competitiveness. All of the above. Mastering two or three or four won’t cut it.
However, where chances seemed bleak for all but the first-and second-tier Walmart suppliers a few months ago, perhaps the door has been cracked open again. Thank the consumer for reminding the retailer that choice might be just as valued as the lowest price.
Credit the suppliers that have earned their place atop the shrinking vendor lists at Walmart. These suppliers deserve to stay there as long as they continue to deliver the goods— in every sense.
Let’s hope, though, Walmart doesn’t slam the door on existing or prospective suppliers simply because they don’t hit pre-determined volume thresholds calculated inside accounting offices before customers have had a chance to chime in.
If that happens, many companies might be done before they get a reasonable chance to even dream about becoming number one.
