Wal-Mart seeks vendor input to repel regionals

Discount Store News, April 5, 1993 by Arthur Markowitz

BENTONVILLE, Ark. -- Wal-Mart seems to be moving cautiously on a new vendor relationship program that would require unprecedented disclosure of information and merchandising/marketing projections by its suppliers.

The requested customized business plans would help make the discounter more responsive to shoppers and efficient in its operations while reducing its vulnerability to regional and local competition.

Wal-Mart's 60-page Business Planning package was sent to pet food vendors in early January, but so far hasn't been forwarded to other suppliers. Trade observers had expected that the discounter would quickly follow up by sending the package to other suppliers on a category by category roll out.

The Business Planning package is designed to elicit extensive details on how vendors would service the discounter and enable it to execute a category management merchandising program. It was devised by a pet foods buyer using his prior experience with a major consulting firm and what was described as the methodical, systematic approach taught in |Merchandising 101.' He was to become a housewares buyer at presstime.

Wal-Mart has been obtaining similar, but less centralized or correlated, information from programs that some packaged goods manufacturers previously tailored for the discounter. Procter & Gamble has over two dozen staffers full-time in Bentonville, able to tap into the supplier's marketing department and provide any information the discounter wants.

Press reports about guidelines displeased Wal-Mart and may have played a role in the discounter's cautious follow-up to its initial use. The reports also alerted competitors to the retailer's innovative move.

The request for customized marketing plans fits in with a major Wal-Mart objective: development of a market-by-market and even store-by-store merchandising program that would make the discounter more responsive to local merchandising needs and trends. Robert Connolly, senior vice president and general merchandise manager, noted that the discounter's growth and size has resulted in bureaucratization creeping into its operations and made it vulnerable to regional and local competition.

He spoke at a Store Wars conference last month in Atlanta, about two months after the Business Planning package was sent to pet food suppliers. His remarks at the conference--sponsored by the Institute for International Research--provided background insight on Wal-Mart's interest in the marketing information. The company's goal, he said, is to develop a store-specific replenishment program that would be based on the partnerships that resulted from the customized business plans and use technology like Retail Link, Wal-Mart's electronic data interchange system, to exchange information. The Business Planning document stated that the discounter's aim is to boost sales per square foot from its current $325 to $400 over the next three years.

In prior years, the discounter has discussed its objective in broad terms in meetings with security analysts, using "cafeteria-ing" as the term to describe its plan to develop and execute store-specific merchandising programs.

Wal-Mart's drive to become more efficient also was behind the company's decision to deal directly with suppliers and avoid the "cumbersome" negotiating process that resulted when reps were involved. President David Glass said at a National-American Wholesale Grocers' Association convention last month that Wal-Mart needed a direct relationship with top vendor officials "to get the true efficiencies" it wanted.

The drive to become more responsive and operationally more efficient entails the business plan, EDI communications and other advanced technology Wal-Mart would supply vendors. The expected result is the discounter going to a two-day replenishment cycle from its present requirement that goods be in its stores three days after an order is placed.

Wal-Mart feels that suppliers are the best gauge of Wal-Mart's business and they should inform the discounter on an individual store basis, Connolly said at the conference. Vendors should also respond on their own, without awaiting approval from the discounter, to adjust replenishment schedules to sales trends.

The Business Planning document contains an overview and philosophy behind Wal-Mart's move along with information that the discounter will provide suppliers and deadline for specific actions. These include: * The discounter's planning calendar for the next 15 months includes timetables for implementation of such Wal-Mart programs as full operation of Retail Link--due in April--and full vendor compliance in April of shipping standards.

Equipment and store signage requirements for its category management system are expected to be complete by July, followed in October by completion of a plan for regional modular displays to be used next year. Wal-Mart plans to hold "summit meetings" with vendors in August to review and evaluate category management performances during the May to July quarter. The goals detailed in the business plan will be the standards used in these evaluations. * A discussion of the retailer's business focus during this year for the category. * The latest marketing and economic information based on consumer and category information. * Detailed input and responses from suppliers covering a variety of factors. These responses form the heart of the customized business plan.