Wal-Mart to lean on suppliers for better prices, products, sustainable solutions

The number one internal lever Wal-Mart said it can pull this year is to grow comp store sales. Top executives note that they can’t do it alone, which is why the retail giant outlined its core strategies last week (Feb. 2 - 5) to suppliers in the annual “Year Beginning Meetings” held in Orlando. 

“Our core message this year is to make our stores better all over the world. ... Nothing will move the needle up like comp sales. We are investing to define the future of retail with our team out in San Bruno and around the world. ... We are listening to our teams out in the stores trying to create a better in-store experience, engaging our hourly associates is a priority for us,” CEO Doug McMillon said in his opening remarks at the annual YBM event.

Aside from improving store operations, McMillion was quick to tell suppliers the retailer is going back to what works and that is the “Everyday Low Prices” (EDLP) philosophy which begin with Everyday Low Costs (EDLC) of goods from suppliers.

“What we need from you is EDLP and EDLC. We are still fighting this battle in some parts of our business. ... That’s because it’s just so tempting to put an item on sale. Putting items on sale and special promotions have never worked for us. When we get away from our pricing model out in the middle of the road we get run over,” McMillon said.

‘PLAYING OFFENSE’
He told suppliers that figuring out how they could move back toward a net invoice cost with Wal-Mart is going to be critical this year. McMillon said the retailer would lean upon the merchant leadership from its suppliers to get back to “playing offense with price to deliver EDLP and earn customer trust.” 

“We want to drive more business for you and us in a collaborative fashion. We are thinking about (how) dynamic pricing tools via the Internet can be applied and we don’t have it all figured it out just yet. But what I do know, is that our pricing objective is aimed at building customer trust,” he said.

With Wal-Mart’s capability to provide inventory in-store and online and the low cost pricing model, McMillon said he doesn’t want customers to doubt that Wal-Mart has the items they want at they price they want to pay.

Greg Foran, CEO of Walmart U.S., said at the meeting that the best of EDLC suppliers are already seeing benefits. He said one item retailed for $2.94 last year, but with supplier and buyer collaboration the price was taken down to $1.68 this year, with no reduction in quality. In response, Wal-Mart doubled its order to 13 million, up from 6 million last year.

Foran was not bashful telling suppliers that they should put their best and brightest talent on the Wal-Mart account. He said Wal-Mart wants to collaborate with suppliers’ best in order to get top results for both parties.

PRODUCT PUSH
McMillon said new items are crucial this year. He encouraged suppliers to innovate and then ramp up quickly so Wal-Mart can keep a fresh stream of new items in stores. He said the retailer is committed to ordering deeper and gambling somewhat on new items they think will resonate with the customer base. 

Other top Walmart executives said during the meeting that buyers may want to expand assortment and they always want Walmart to be first to market with some exclusivity. But the retailer also is eager for more candid conversations with suppliers about leaner supply chain costs and building brand awareness.

In the midst of the small store boom, with grocery leading the way. Mike Moore, president of Neighborhood Markets, said if this grocery chain stood alone it would rank in the top 50 grocers in the nation. After opening 100 new grocery formats in recent months, the Neighborhood Market banner now has 601 stores in the U.S.

Moore said there are opportunities in the smaller stores for suppliers as they work to create better product displays and product mixes that make sense. He said they are looking to suppliers for input on issues like seasonal items and other general merchandise items that could be regularly featured.

“We are eager to try and test new things with this format,” Moore said.

There is also the localization of content in the neighborhood stores. While there is no set policy by corporate execs, store managers have the ability to source local items. It is commonly done in produce and fresh foods, but it also applies to flavor preferences and even ethic food offerings. 

The retailer announced it will hold another open call for new products made in the U.S. on July 7 in Bentonville.

SUSTAINABLE SOLUTIONS
Underscored by Wal-Mart’s top management is the need for sustainable solutions from product innovations like LED lighting to zero waste packaging. Much of the low hanging fruit has already been gathered, the execs said, and Wal-Mart will continue to lean on suppliers to help with the sustainability initiative. 

Wal-Mart will hold its Sustainability Milestone meeting in San Bruno, Calif., on Feb. 24. 

Michelle Gloeckler, executive vice president and U.S. manufacturing lead, said at the YBM event that 1,400 suppliers are participating in the sustainability survey and their score is posted on their evaluations. She said participating is important because buyers look closely at sustainability during the purchasing process.

(For this story, The City Wire was able to listen to recorded sessions of the event.)