When Selling at Wal-Mart is Bad for Business

What does it take for a company to decide that selling their product through Wal-Mart’s chain might hurt their business? This excerpt of an excerpt from Fast Company might give you a clue, as a vice-president at lawnmower company Snapper explains to Wal-Mart why he can’t continue to offer his product in their stores:

“Now, at the price I’m selling to you today, I’m not making any money on it. And if we do what you want next year, I’ll lose money. I could do that and not go out of business. But we have this independent-dealer channel. And 80% of our business is over here with them. And I can’t put them at a competitive disadvantage. If I do that, I lose everything. So this just isn’t a compatible fit.”

The Wal-Mart vice president responded with strategy and argument. Snapper is the sort of high-quality nameplate, like Levi Strauss, that Wal-Mart hopes can ultimately make it more Target-like. He suggested that Snapper find a lower-cost contract manufacturer. He suggested producing a separate, lesser-quality line with the Snapper nameplate just for Wal-Mart. Just like Levi did.

(Thanks, Danilo!)

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  1. airship says:

    Way back when Wal-Mart was just getting started, I was in the UAW. The union ran a series of articles on why Wal-Mart was evil. This is when they were promoting the fact that just about everything in the store was “Made in the USA”, which seems to have since gone by the wayside. Anyway, there was one story about a small Southern bicycle company that was about to go out of business. Wal-Mart approached them and said they’d buy thousands of bikes, provided they would cut wages to minimum, cut all benefits, and push productivity to the breaking point. So, yes, the bikes sold by Wal-Mart were ‘Made in America’ – by non-union, minimum wage slaves. Every year, Wal-Mart wanted even lower prices. Eventually the company went out of business anyway, when Wal-Mart had pushed them past the breaking point, they had already roped in their customers with rock-bottom prices, and Wal-Mart could finally make the move to an offshore supplier.

  2. RowdyRoddyPiper says:

    The one thing that he didn’t suggest is that maybe Wal-Mart pay the going rate for the product. The idea that this guy won’t put his direct channel sellers at a disadvantage to please Wal-Mart must have come as a shock.

  3. ValkRaider says:

    I also recommend reading the story “The WAL-MART you don’t know” which is under “related content” on that same site ( linked here )

  4. Ben Sherman says:

    The Pickle story is what brought the point home for me as well. It’s amazing what Wal-Mart will do to their suppliers.

  5. Mike Panic says:

    I’m glad to see that a company finally calls it like it is and says no to Wal-Mart, who is asking for a lower quality item to sell just because of the name plate on it. Proves how crappy Wal-Mart really is.

  6. etinterrapax says:

    This sort of story really pleases me. I worked for Wal-Mart in college, and now won’t even shop there (I know that this bruises them not at all, but sometimes these petty triumphs are all we have). It infuriates me that they so thoroughly control so many sectors of American retail. I used to know someone who worked for a publishing company whose backlist was essentially determined by what Wal-Mart would and wouldn’t stock. If the backlist included anything that WM found objectionable, they wouldn’t do business with the publisher at all. So all editorial choices had to be sanitized to WM’s standards. When pulling out of that sort of market for such a good reason is not a feasible option, something is very wrong with our business environment.

  7. kickslop says:

    It’s a pleasing story to read until you see Wal-Mart successfully selling some piece of crap mower replacement and Snapper bankrupt in 5 years.