Selling to Walmart – When and How ?
Everyone wants to sell to Walmart. This is logical, as they rank as the number one retailer in the USA and Latin America plus good presence in China, Canada, and South Africa. Selling to countries where Walmart has stores makes sense for USA producers. However, Export Solutions always advocates a strategy of making export decisions based upon what’s best for the entire country, versus the preferences of an individual retailer even if it is Walmart.
Walmart’s Central American buyers have been speed dialing leading brands pursuing direct purchase agreements. These offers may be hard to resist, but manufacturers must be fully aware of the implications. Selling direct to Walmart International allows you to bypass the “distributor system”. This provides Walmart with a cost advantage at store level of around 15 %. This may create a situation where it is difficult to sell to other market customers, because their list price resembles Walmart’s shelf price.
I visited Guatemala and Costa Rica recently. Walmart places many Direct Import brands in one aisle, away from the products normal category placement. These Direct Import brands are not supported by the armies of in store merchandisers that are common in Latin America. I remember the story of when I served as Director of Sales for Clorox in Buenos Aires, Argentina. Someone from corporate sold my favorite Hidden Valley Ranch salad dressing to Walmart International and it magically appeared on the shelves of my Walmart. I was thrilled, but apparently was the only happy customer. Most in Argentina had never heard of Hidden Valley Ranch. Without advertising, promotion, and distributor support, the brand gathered dust and was discontinued.
I am an advocate of partnering with distributors to sell to Walmart’s international divisions. These local companies sell and merchandise at Walmart and all market customers everyday. Distributors focus on brand building and can provide the muscle at store level to push your brand. Retailers benefit because they can reorder any day versus waiting for the container to arrive from the USA. In my opinion, the distributor model is usually the preferred route to market to create a sustainable business in these fast growing countries.
Many European companies are anxious to Sell to Walmart. Slow down ! Walmart’s USA supercenters specialize in category leaders and fast moving brands. Their consumer base consists of middle and lower income customers who have limited spending power to purchase super premium brands from overseas. Also, Walmart tends to be the “low price” leader. This may damage your ability to sell to upscale supermarkets , as they may be hesitant to stock an item that Walmart is carrying and selling for 15-25 % less. My humble advice for European brands is to create a base business with mid-upscale USA supermarket chains. Approach Walmart at a later stage with your track record of market success.
Walmart is the world’s number one retailer and will serve as a major factor in our strategic decisions. It is flattering and encouraging that Walmart wants to sell our brands. The key is to devise the optimal route to market that builds your brand equity and facilitates your business development to all market customers, including Walmart.