FAYETTEVILLE - Any supplier hoping to do a lion’s share of business with global retail behemoth Wal-Mart Stores Inc. must produce ingenious products, be able to plan years in advance and communicate regularly with Wal-Mart’s buyers along the way.
These edicts were repeated time and again during the 13th annual Emerging Trends in Retailing Conference on Wednesday at the University of Arkansas’ Sam M. Walton College of Business, named for Wal-Mart’s founder. The audience of 300 was made up mostly of members of the Northwest Arkansas supplier community that services Wal-Mart accounts.
The orders from Wal-Mart headquarters are part of a long-held strategy for collaboration between the retailer’s buyers and the product companies whose brands line Wal-Mart’s shelves. It’s called joint business planning, and it’s used across all categories to accelerate sales and profits,as well as drive product innovation for both Wal-Mart and its suppliers.
A panel including five divisional merchandising managers directed conference attendees in how the managers wish to conduct business with them. Ideas for new products, for example, should come from customer insights - the intersection between the interests of the consumer and features of the product or brand.
“It’s got to start with the customer, or you will lose,” said Joe Grady, vice president and merchandising manager for candy and impulse merchandising.
And when an item hits the sweet spot in consumers’ wants and needs, then Wal-Mart, the supplier of the product and customers come together in a “win, win, win” situation, as described by Duncan Mac Naughton, Wal-Mart executive vice president and chief merchandising and marketing officer. In recent history, a new product introduced by a supplier in the Christmas lighting category brought in $65 million for Wal-Mart.
As an example of joint business planning, Mac Naughton noted the world’s largest retailer’s long and successful relationship with the world’s largest consumer products company, Procter & Gamble. Wal-Mart does roughly $10 billion in retail sales with the Cincinnati-based company, making it Wal-Mart’s biggest supplier.
The companies’ retailer/ supplier connection was stretched tight back in 2011, when Wal-Mart decided to lower prices and Procter & Gamble experienced a significant climb in costs because of high oil prices, said Jeff Schomburger, president of the global Wal-Mart team. Also, Procter & Gamble was about a year behind where Wal-Mart wanted it to be in terms of innovation, specifically in the beauty category, he said.
The supplier knuckled down quickly and, most recently, it made huge strides with a new Febreze air freshener for cars that clips onto the air vent. The product’s success was said to hinge on its use of displays with video and other elements meant to attract the eyes of customers. Procter & Gamble remains Wal-Mart’s largest vendor.
“It’s really about getting the price right and delivering on innovation,” Schomburger said.
What keeps Wal-Mart Stores Inc.’s top merchandising experts up at night? The economy, the joblessness rate and governmental mishaps as they relate to uncertainty in the minds of consumers. Al Dominguez, Wal-Mart’s vice president and merchandising manager of household paper goods and chemicals, said he fears that uncertainty breeds irrational buying decisions.
“The business world is so competitive right now that we can’t afford to make bad bets or mistakes,” he said.
Wednesday’s event was sold out.
Business, Pages 25 on 10/31/2013