Wal-Mart Threatens Suppliers to Gain Their Promotion Dollars

[marmar]

via ReclaimDemocracy!:




Walmart Threatens Suppliers to Gain Their Promotion Dollars
"Project Impact" may take away shelf space from non-compliant companies

By Jack Neff
First published by Advertising Age, July 20, 2009


Batavia, Ohio -- Walmart has launched an aggressive push to have marketers divert their consumer media and marketing budgets into the giant retailer's growing ad budget and in-store marketing programs, using a simultaneous push to clear underperforming brands off its shelves as extra leverage.

The implied threat for marketers that don't go along with demands for more marketing funds is an increased risk of delisting.

In recent months, the country's largest retailer has been quietly rolling out a system -- the cost-supplement initiative -- that marketers and industry consultants say directs marketers to divert money proportionate to their share of sales to Walmart marketing programs. Walmart is looking for a share not just of trade-promotion funds but also consumer-ad dollars. The vehicles Walmart wants funded include co-branded TV and other media ads, in-store TV and banner ads on Walmart.com.

Bold play

It's probably the boldest retailer grab for suppliers' consumer-marketing funds ever, if only because the amounts involved are so huge. Some package-goods companies do more than 30% of their U.S. business at the retailer. Complying with Walmart's guidelines would, in theory, mean a company the size of Procter & Gamble Co. diverting around $1 billion in U.S. media dollars into Walmart's media budget or marketing and merchandising vehicles -- a sum roughly equivalent to what Walmart spent on all of its own measured media last year, according to TNS Media Intelligence. ......(more)

The complete piece is at: http://reclaimdemocracy.org/walmart/2009/threatens_suppliers_for_marketing_dollars.php

[RB TexLa]

1. If they can afford to not be on Wal-Mart's shelves then just say no.

[jmowreader]

15. And that's the crux of the problem

Very few consumer goods manufacturers can afford to write off Walmart--you can't afford to lose the business.

If you want REAL entertainment, go to a heavy truck dealer. I had to pick up a driver from a Cummins dealership, and when I got there they were talking about how they hated Walmart, how they would never shop there, how they'd divorce their wives if they shopped there. Truckers are generally not liberals, so I asked what the source of their consternation was. Turns out they weren't the only ones pissed off about having to pay Walmart $50 for the privilege of being unloaded. It's the only company I know of that charges lumper fees when they don't contract with a lumper service.

[Parche]

2. fuk walmart

and big companies that try to hurt the consumer.......:grr: :hi:

[Arctic Dave]

3. Tell wm to piss up a rope and merchandise with another company.

If wm doesn't have selection people will go elsewere.

[Mind_your_head]

10. No that's not true......in many communities there is "no place ELSE to go"

Wallyworld is almost all some communities have now. All the local/alternative places have been forced out of business.

wm has worked itself into such a place that it's got the nation by the b*lls and wm KNOWS it! (unfortunately)

[MichiganVote]

4. This is nothing new. They're the biggest pricks out there when it comes to suppliers.

[madrchsod]

5. i can buy arm and hammer laundry soap

cheaper at the dollar store than at walmart. laundry soap is usually more than the dollar stores or around here-menards building supply. coke,pepsi,7-up products are always more expensive than the dollar stores or the major food chains discounts. there`s just a few products that are cheaper at walmart.

[bridgit]

6. I'm surprised it took them this long to think of it, vendors do back flips trying to be seen...

by walmart buyers. The tiniest retail numbers in a conglom such as walmart can still translate into smoking a fatty on a beach in the Cayman's for someone that has a different and therefore new .50Ct lint roller, day glow pokemon diary, or scented candle from China. It's really a form of nutty, unhinged pay-per-click by edict...that smacks of extortion and shakedown = classic walmart

[sutz12]

11. This long? They've been doing this for years..

They have always shifted costs and burdens onto suppliers. Sure, most companies try to do that, but Wallie has the most leverage, and they are not reluctant in using it.

[bridgit]

12. I understand what you're saying but not according to the OP & Ad Age as of 7/20/09

In this rebooting of the econ there is a great scramble for ever-tighter consumer dollars; product positioning and Ad campaigns will be more key than ever. They've been shifting costs onto their employees for years no doubt; onto municipal, county and federal entities for that matter - but be looking for this kind of wriggling intrusion going forward cause American corporatism is looking with snake-eyed earnest for more ways to squeeze blood out of their turnip

[lpbk2713]

7. I noticed something tonight at my local grocery store.

This post talks about 'shelf space' and it reminded me. I noticed the amount of shelf space occupied by Frito-Lay chips was probably about 10 to 1 compared to the space occupied by Wise chips and I usually like Wise chips better. I have to wonder what kind of under-the-table deals Frito-Lay has going on with the grocer to make it work out that way.

[jmowreader]

16. Why do you think the deals are "under the table"?

Retailers sell their shelf space to manufacturers. I don't think there's anything nefarious about it. Grocery really isnt a high-margin business and they have to do SOMETHING to make the nut.

[DBoon]

8. Walmart is the reason anti-trust laws exist

unfortunately, they haven't been enforced much in oh, about 30 years

[Wolf-Were]

9. My mom works at Wal-Fart

and they are nothing but asses to her when my dad was in the hospital they would not give her a few days off in a row to be with him. This happening pissed me off so I told the manager off and she got 3 days off it's a shame it had to come to that.

[Canuckistanian]

13. So they basically push the crap that no one wants to buy?

And then get suppliers to help pay for it? Good deal for Walmart.

I don't know why suppliers put up with their crap. They hold a guns to suppliers' heads to get them to lower costs, even advising them to offshore like mad to reduce costs.

I have enormous respect for those companies that DO tell Walmart to take a flying leap, such as Snapper, the lawnmower company:

"The Man Who Said No to Wal-Mart"
http://www.fastcompany.com/magazine/102/open_snapper.html

[jmowreader]

17. I didn't like the way the Snapper guy told off Walmart

Here's how I would have approached it: when Lee Scott asked "are you ready to go large," I would have answered:

"I'm ready to go large. In fact, in my market segment I already am large. But I don't think you are.

"We've been selling lawn mowers to Walmart for two years. John Deere's been selling to Home Depot and Troy-bilt to Lowe's for about the same period of time. But the difference between our three companies couldn't be greater.

"Take price. Like Snapper, John Deere has a broad network of independent dealers. Unlike Snapper, John Deere's mowers cost the same at Home Depot as they do at an independent. John Deere set up their Home Depot business so a Home Depot store is essentially a second showroom for an independent. The tractor costs the same at either place, it's serviced through the independent, the independent is not hurt but rather helped by the synergy. Snapper ships mowers directly to Walmart, bypassing the independent, and Walmart demands lower prices every year. Strangely enough, the company that sells me the steel I make the decks from doesn't sell it to me for less every year. It goes up in price, so if I want to retain your business I have to cut my profits.

"I know what you're about to say: manufacture in China. Forget it. We'd put a lot of people out of work if we did that, our product would get worse and we take pride in manufacturing in the United States.

"Now let's talk about the way you treat our product. Go to Home Depot and try to buy a John Deere mower. It's assembled. It's been tested. There's gas in it. You know it'll run when you get it home. They have employees who've been trained on their products. Buy a Snapper from Walmart and it's still in the box. Okay, we know it will start because we tested it before we shipped it, but you know how much training a Walmart associate gets on our mowers? "Oh, it's over there." I sell five hundred dollar lawn mowers. No one spends $500 without asking questions, and your people can't answer them.

"And for all those reasons, I must say goodbye. Palletize my mowers and send them back by Friday. We have dealers who need them."

[unblock]

18. nice read. most suppliers put up with their crap because they see big orders and think big $$$

most suppliers think they've hit the jackpot when wal-mart comes a-knocking. i mean, what supplier wouldn't want 50%, 100%, or 200% more business, right? and certainly, there are plenty of suppliers who make a fortune doing business with wal-mart. but you have to play their game, and play it just right.

and the snapper guy is absolutely correct, that even still, over time, wal-mart figures out ways to squeeze suppliers' profits and turn them into wal-mart profits. as with bill gates and other money-aggregators, their real genius is in figuring out how to make the money wind up in their pockets rather than someone else's. once upon a time, retailers took a small profit for being a mere distributor of goods and their suppliers got the real profit or not depending on their own business. wal-mart flipped this by becoming such a powerful behemoth. now if it smells profit anywhere in the system, it goes after it with a vengeance, and damn the consequences.

if you're a supplier, once you've signed up with wal-mart, you're usually hooked. snapper was very much the exception. it's one thing to say no to wal-mart when it means passing up an opportunity to double your business. it's quite another thing entirely to say no to wal-mart when it means losing half your existing business.

and customers, of course, should know all this as well. when wal-mart "shops for you" by selecting suppliers, you should know that it does so largely on the basis of which supplier lets wal-mart get the most profit. beyond a (very low) minimum threshold, it's not about quality, it's about profit for wal-mart. people might even realize this but never question what it means. for example, it may very well be possible that there's a better supplier out there who can offer a cheaper product but who refuses to let wal-mart take 90% of it. wal-mart will put the more expensive product on its shelves instead. so it's not at all true that wal-mart is always cheaper. but good luck these days figuring out what the alternative is and where to get it....

[HopeHoops]

14. FUCK WALMART!

Pure evil.

[Wednesdays]

19. K&R

:kick: