Walmart debunks 3 myths that deter emerging brands

With 4,600 stores nationwide, roughly 600 Sam’s Club warehouses and a rapidly expanding ecommerce platform, Walmart touches more American grocery shoppers than any other retailer, and yet many emerging manufacturers eliminate Walmart from their retail strategy before ever pitching a buyer. All too often, the knee-jerk reaction to dismiss distribution through Wamart is based on longstanding assumptions about the retailer’s distribution requirements, impact on premium positioning and shopper demographics. During a presentation at the Summer Fancy Food Show in New York City at the end of June, Walmart executives sought to dispel those perceptions, arguing that outdated assumptions, not operational realities, often keep entrepreneurs from considering the retailer. One of the biggest misconceptions is that a purchase order from Walmart automatically means supplying 4,600 stores nationwide, which is financially out of reach for many scaling brands, said Gabi Caceres, senior merchant, Walmart. “I don’t want you all to think of us as the big, scary 4,600 store Walmart. We are the niche retailer if and when we need to be,” she said. She explained that Walmart buyers work closely with brands to create a distribution strategy that works for both partners. “I don’t want you all to think … that you have to go to 1,000 stores or 2,000 stores. It could be as little as 50 stores. Especially if it is a regional brand or maybe [a brand that] wants to test us out, but are not ready to scale – we can work with you” to identify the right number of stores in the right locations as well as what SKUs will perform best in those stores, she said. Distribution through Walmart doesn’t have to be just in retail stores either, she noted. Buyers often work with brands to create the right mix of distribution in stores and online. “Let’s say you have 20 SKUs but your top two SKUs are 80% of the volume. Maybe we do the top two SKUs in 200 test stores, and then we do the rest of the portfolio [online] to make sure the consumer has the opportunity to purchase your full portfolio online,” Caceres explained. Denetrias Charlamagne, senior director of emerging brands at Walmart, underscored the potential to build a business by leveraging Walmart’s online presence. “People think of us as just the store,” but distribution through Walmart’s online Marketplace or the app can be a “great way to drive discovery,” and establish who is buying the product, what types of advertising they respond to, where they live, how much they order and how often. That data can help brands determine which physical stores are a good match for their brand as they scale distribution, she explained. The data also can help brands determine how fast to expand their distribution to more doors once they are in Walmart’s network. Caceres explained that one way brands can tell if and when they are ready to graduate from a 200-door pilot to a 1,000 doors or more is by examining their velocities. Before each launch, no matter the size, Caceres works with brands to set target velocities based on their category and the competitive landscape. If a brand is struggling to meet its targets, Caceres says she can pull in Walmart Connect, which is the retailer’s marketing support arm to determine how best to drive visibility or do in-store sampling. Another option may be piloting the product in a different set of stores or scaling back to make the goals more attainable. Charlamagne also encourages brands to base a distribution strategy on what they can support from their end. “Do you have enough people to pay attention to the details of the channels and to execute well? I understand that the venture capitalists of the world want double-digit growth and all that, but sometimes that is at odds with success. You don’t want to get that 4,600 PO and go to 100 in a year,” she said. A better strategy is to start small but manageable and scale as quickly as possible. Another common misconception is that Walmart’s focus on “everyday low prices” will undercut an emerging brand’s positioning and make them appear as a lower quality product because they are less expensive. “I hear a lot that [brands] feel that coming into Walmart is going to erode away their brand equity. That we are going to ask for a very, very low price and we’re going to erode the value of your brand that you built in the market. And that is 1,000% never going to be my goal as a merchant,” said Caceres. She acknowledged that Walmart will negotiate “the best everyday low price,” but that “doesn’t have to mean that we’re going to erode your brand equity in the Western market.” One way that Walmart can help brands sell at a lower price point without devaluing their business or their positioning is by leveraging the retailer’s scale to drive efficiencies on the back end, she explained. “We can help you maintain what you need,” she added. Hand in hand with the perception that selling at Walmart devalues a brand’s positioning is the idea that Walmart shoppers can’t afford or don’t want premium products – that they shop on price alone. The reality is that Walmart caters to a diverse consumer base across income brackets, said Charlamagne. “We are also growing with a higher income customer, which is driving growth for a lot of the younger generation. So, we see a lot of growth coming from the $100k+ households,” which is a reflection of how “everyone is looking for value,” in the current economy, she explained. In response, Walmart is elevating its shopping experience to “feel more modern, more welcoming,” she said. For example, she called out the retailer’s better merchandising, “beautiful food displays” and fashion as well as better navigation in store and on the app. While Walmart isn’t the right retailer for every brand, those that are willing to give it a shot will find buyers willing to work closely with them to create a winning sales strategy, said Caceres. She explained that the four most important metrics that she works with brands to track and improve include

Walmart debunks 3 myths that deter emerging brands

Walmart executives challenge common assumptions about national distribution, premium positioning and the retailer’s shopper base, and share the performance metrics they say matter most after launch

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