Vendors armed with data to meet future

Discount Store News, Oct, 1999

Vendors doing business with Wal-Mart have a tremendous opportunity to increase their sales but it requires sharing the retailer's definition of what constitutes a successful partnership. And that can be a challenge.

Wal-Mart's idea of partnership means achieving a level of information sharing and collaboration never before seen in retailing. Vendors are heavily involved in forecasting and planning as well as performing functions such as inventory management, data analysis, order replenishment and micromerchandising. Vendors are also expected to deploy their most talented people against the business, ensure they receive proper training in the use of Wal-Mart's systems and then they are to aggressively assess data to reduce inventories, improve in-stocks and grow sales. Some vendors are also expected to change their entire approach to global pricing.

For its part, Wal-Mart grants vendors access via its Retail Link system to the largest treasure chest of customer transaction information in existence and an expanding worldwide network of stores.

Many vendors are already prepared to address the challenge and help Wal-Mart achieve its growth plans. There are already at least 150 vendors with teams of 10 or more people located in northwest Arkansas, according to Tom Muccio, vice president in charge of Procter & Gamble's Wal-Mart team. P&G moved into a new three story building over a year ago to accommodate the growth of its Wal-Mart team that Muccio said now numbers "well over" 100 people.

"It is very challenging to service a customer such as Wal-Mart who is growing so fast," Muccio said. "They push our company's capability as they execute with speed and have a business that is so large in its size, its scope and with multiple formats."

P&C was the first vendor to locate a team near Wal-Mart's headquarters when in 1987 it sent 20 people to northwest Arkansas. The results is Wal-Mart now accounts for an estimated $4.5 billion of P&G's total sales of $38.13 billion for the fiscal year ended June 30, 1999.

Not all vendors share Muccio's view or P&G's approach. For some, Wal-Mart's definition of collaboration is simply a shifting of the costs and responsibilities traditionally born by retailers. Both points may be true, but the potential for increased sales is real for suppliers willing to leverage Wal-Mart's database.

That's the case even for small companies. Charles Weinacker's company, Pet Friendly, is not so small anymore thanks to his business with Wal-Mart. The Mobile, Ala.-based company did $11,000 worth of business with Wal-Mart in 1993; last year sales were more than $5 million. The company achieved that growth because Weinacker and partner Teresa Young use Wal-Mart's Retail Link system to manage inventories and customize assortments for different stores.

"There is no excuse for being out of stock if you are a vendor with Wal-Mart using Retail Link. I know where I am everyday with Wal-Mart," Weinacker said. "That's where they are kicking butt. They are never out of stock. Their biggest concern today is people aren't using the system," Weinacker said.

A recent expansion of Retail Link gives vendors access to a full two years of information rather the five quarters that was available previously. The additional data, assuming vendors use it, is beneficial in many ways.

"It is a tremendous benefit because the more history you can base decisions on the smarter it makes you," said Donna Hernan, a Russ/Liz Claiborne vice president. "Each Wal-Mart store tries to cater to the individual needs of its customers so the more the vendors can respond the more it is going to help the business."

Using Retail Link and exploiting the full capabilities of the information available are two different things. It is the latter which interests Wal-Mart and requires an increased level of effort from vendors. During a three-day meeting in Dallas during August, Wal-Mart's senior executives elaborated on Wal-Mart's growth and the sales potential awaiting vendors if they use Retail Link.

In addition to dedicating enough people and resources to servicing Wal-Mart, some vendors face the challenge of re-examining their cost structures and pricing.

Earlier this year, Wal-Mart adjusted its buying organization to reflect the new reality of its expanding international operations. Long time merchant J.R. Campbell was appointed president of global sourcing and oversees a team of buyers responsible for finding and developing items and categories that can drive business in each of the countries where Wal-Mart operates. The retailer also has in-country buyers. The challenge for multinational vendors is Wal-Mart's desire for a common price.

"We are trying to get them to understand what a relationship looks like across borders," said vice chairman and coo Lee Scott.

Ira Kalish, director of global retail intelligence with PriceWaterhouseCoopers, sums up the situation this way. "Many suppliers are dysfunctionally organized. They have distinct divisions focused on specific regions. Within each region, companies conceive, produce, distribute and market their products."