Wal-Mart Throws the Book at Small-Biz Vendors
BY Hal Plotkin
An overview of a program that has assisted more than 3,000 entrepreneurs with distributing their goods at Wal-Mart.
"There's no better place for an entrepreneur than inside a Wal-Mart," says Steve Faught. His Hawaiian Fashion Jewelry Co. operates booths out of four Wal-Mart locations, and each averages sales of about $750 a day, a figure that more than doubles during the holiday season.
Faught is the recipient of a favorable evaluation from Wal-Mart Innovation Network (WIN), one of two related services that provide entrepreneurs with a point of entry into Wal-Mart's mammoth distribution system. "The key to our approach is our use of consistent standards and open criteria," explains Gerald Udell, a professor at Southwest Missouri State University and the executive director of its Center for Business and Economic Development. Udell conceived, designed, and now administers the two Wal-Mart entrepreneurial-support efforts, WIN and the Support American Made program. The programs have already assisted more than 3,000 inventors and entrepreneurs by evaluating their products and prototypes for possible distribution by the chain.
For a $175 fee, entrepreneurs submit their wares and detailed company information to a team of analysts supervised by Udell. Within two months applicants receive a detailed evaluation of their prospects, covering issues like product quality, packaging, service capacity, and capitalization levels. "If you hope to make a $4-million sale to Wal-Mart, you'll need about $1 million in working capital" to carry the deal forward, says Udell. The main programs may be designed to assist entrepreneurs, but "Wal-Mart doesn't want to end up with empty shelves."
The programs aim to remove some of the mystery that often surrounds the decisions made by store buyers. "There are reasons Wal-Mart does business with some vendors and not with others," says Udell. "By explaining those reasons in detail, we are giving vendors something more than a simple no; we are telling them how to get to yes." Applicants receive a manual that suggests how any noted deficiencies might be repaired.
Winning a stamp of approval from the programs doesn't guarantee that a company will be able to sell to Wal-Mart, but the recognition is an important first step. "The folders of the approved suppliers do land right on the buyers' desks," notes Udell.
The Wal-Mart program also gives applicants lists of relevant entrepreneurial-support resources and in some cases even refers them to other retail outlets to test-market their products. Some small vendors, like Steve Faught, even receive approval to set up their own proprietary small stations within Wal-Mart stores in exchange for a percentage of gross sales. Most of those deals are negotiated at the local level, with regional directors or store managers.
"Talk about location, location, location," says Faught. "It's the kind of foot traffic you dream about."