How to Leverage your Business Model at Walmart

How to Leverage your Business Model at Walmart

In this article, I will outline two overarching competition segments within Walmart’s supplier community, and strategies for CPG companies to consider for success within each segment. The two segments I would like to explore are 1) Brands 2) Private Label

Brands

As consumers increasingly adopt private label products, and as brand life-cycles continue to shrink, brands today need to consider several aspects when approaching the world’s largest retailer. The first aspect is timing. Brands usually have one opportunity to work with Walmart. If a brand enters Walmart prematurely, and does not achieve the consumer demand Walmart expects, its relationship with Walmart will be short-lived. The second aspect is product & innovation pipeline. Is there an innovative portfolio of products that are achieving a groundswell in rest of market that your brand has queued up to continually present to Walmart? Brands with “one hit wonders” that do not leverage their initial innovation/consumer base to develop more products are short-lived, and lack upside for themselves and Walmart. Branded suppliers need to have a Walmart-specific strategy for sustainable long-term growth that continually fits into their larger long-term channel strategy. The third aspect is having a well-coordinated Walmart launch strategy. If a brand’s timing is correct, and it has a portfolio of products achieving a groundswell in rest of market, it should consider utilizing that leverage, coupled with a Walmart-specific marketing spend, to gain in-store features, coordinate in-store demo’s, WMT-specific Ibotta campaigns, and partake in all of Walmart’s omni-channel platforms & programs. Timing, innovation pipeline, and product launch support are three basic areas branded suppliers must organize & execute in order to ensure continued success at Walmart. Branded suppliers often under-estimate the ROI in hiring retailer-specific teams that understand the intricacies of each retailer, and how to purposefully position brands for long-term success in Walmart.

Private Label Suppliers

Walmart is the largest retailer in the world, and has one of the most robust private label strategies in the retail industry. Walmart’s private label product volumes attract the best of the best in the private label space. On top of this leverage, Walmart understands costs intimately. Private label suppliers leverage their business models to bring high quality products, at best-in-market prices, dependably. The two primary constraints these private label suppliers face are 1) their supply chain model 2) their administrative infrastructure.

As we’ve established, Walmart warrants the toughest competitive environment in the private label space. Companies compete on costs and execution, and ultimately, their business models dictate their success. A private label supplier’s supply chain is a crucial piece of its business model, it can either be an asset that can be leveraged to gain additional SKU’s in Walmart, or a significant liability. Companies utilizing an overseas supply chain have high risk (especially in the current political environment), long lead times, and high holding costs. These companies can offer low final delivered costs, but lack flexibility and responsiveness to Walmart’s demands, and have trouble optimizing profitability as they continually manage a never-ending bull whip effect (explanatory graph below). Long lead times, high risk, and lack of flexibility are three elements that are “weeding out” private label suppliers in today’s competitive private label environment.



Additionally, many companies that compete in the private label space approach Walmart without understanding the administrative infrastructure that is required. These companies again: can place low final delivered costs on bids, but ultimately, time & time again cannot succeed. Private label suppliers need an infrastructure dedicated to making contact with the necessary private label souring teams, understanding bid timelines, and executing the extremely demanding bidding process. If and when bids are awarded, the real work starts: Everything from negotiating a supplier contract, to building and publishing items via a Global Data Synchronization Network to Walmart’s Retail Link system, to building and integrating a Walmart-specific supply chain to cover 4,700 stores nationwide, to managing raw materials & production in coordination with Walmart’s required timelines & demand, to the 8-10 week daily process of aligning on packaging art files, to ensuring all regulatory requirements are met. Before a single penny is earned, the 4-8-month daily requirements are non-stop, and private label suppliers that under-estimate the time to cost advantage of hiring/installing a dedicated Walmart team in an effort to place competitive bids do not succeed.












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