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So You’re a Walmart Supplier – Now What?

by Boyd Evert

It’s a realization of a dream, for many: a product on the shelves of Walmart. With its nearly 6,000 points of distribution in the U.S., including its Sam’s Club division, it’s easy to become overwhelmed through the process. There’s so much to do on the front end to get things into the stores that things that happen on the back end can be easily overlooked – and also very costly. It’s important to educate yourself on what’s in your terms and conditions. The T&C documents are written heavily in the retailers’ favor and may put you on the hook for various allowances and return provisions which can deplete your margins and jeopardize your profitability. Retailers have become much more aggressive in pursuing deductions against their suppliers in recent years. Sometimes years after the sale, you’ll be asked to pay back money the retailer thinks it’s entitled to. Depending on the amount, they may just take the money and it’s up to you to prove you’re in the right to get it back. Walmart, for example, can claw back up to $100,000, no questions asked. That can be the difference between getting a bonus and not getting one for a large supplier. For a small supplier, it may be enough to drive them under.

With that in mind, here are some tips to help you protect your bottom line:

  • Carefully define your event. It’s important that any pricing offers are in writing with specific dates, models and order numbers detailed.
  • Be mindful of event performance over the course of the year. If the retailer bills you for something that underperforms, look for results where you over-performed and negotiate an offset.
  • Monitor your defectives carefully. Some retailers cover shrink, get rid of excess inventory or damage done by shoppers or employees by billing items back to the supplier as “defective,” especially with suppliers that cover 100 percent of their defective costs.
  • Capture all correspondence between your company and the retailer. Anything stated or implied in an email, for example, can be used to make a claim – especially when you get into the post audit environment. This can also be true of any projections you share with a retailer, as it can be held up as a commitment.
  • Don’t cut corners on data. Yes, EDI can be expensive, but it is also what the retailer regards as gospel when reconciling their books, along with their own in-house system such as Walmart’s Retail Link®. If you need to prove the retailer is wrong about something, you’re significantly disadvantaged if you don’t have EDI.(Click here for list of EDI companies.)
  • Align sales and finance teams. Suppliers often walk away from large amounts of money because the sales team didn’t want to ruffle any feathers with the customer, while the finance team has a fiduciary responsibility to accurately capture and report the company’s financial picture.
  • Incorporate deduction expertise into your workflow. Whether you develop this in-house or utilize a service such as ours at Harvest Revenue Group, it is critical to have an ongoing, dedicated resource who has or can build the relationships necessary to navigate the complex environment between your company and shared services and the buyers at your customers’ offices. And, this must be done without impeding your ability to grow your business with the customer. Deductions will happen. The question is, how big will they be and how will the amount and timing affect your business objectives.

While many retailers project a “take it or leave it” attitude in dealing with their suppliers, it’s important to remember that everything is negotiable. Not every supplier has the clout of a mega-supplier like Procter & Gamble in negotiations, but its approach to dealing with Walmart, as reported in The Wall Street Journal, demonstrates you can push back on allowances and other terms and conditions in the supplier agreement and still have a successful, productive business relationship.

Yes, you need each of your retail customers and their network of stores and online channels to get your product into the hands of consumers. You need to build lasting relationships with your customers as well. But the retailers also need you. Whether you’ve got the hot, new item that consumers want to buy or the staple item that moms expect to find on store shelves, the retailers obviously see value in your products. Otherwise, you wouldn’t have made it this far into the process. That gives you the latitude to ask for and expect the ability to level the playing field, so both you and your customer can share in the success of your product offerings.

Boyd Evert is the president of Bentonville-based Harvest Revenue Group

Boyd Evert is the president of Bentonville-based Harvest Revenue Group, a deduction management firm that helps retail suppliers manage and solve pricing, defective, shortage, post audit, on-time shipping and other types of claims with their customers. Contact Boyd at 479-616-1600.

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