Should suppliers turn over their shipping to Walmart? Vote and view live poll results
	Only 38% think malls are going to make a comeback. See full results below.

It has been a truism in channel marketing for a couple of decades now that one of Walmart’s greatest advantages over its rivals (perhaps the greatest advantage) has been the excellence of its logistics. Now the chain has decided to extend the benefits of that expertise to its suppliers – they are asking suppliers to turn over the shipping of their goods to Walmart.

The company is contacting all manufacturers that provide products to its more than 4,000 U.S. stores and Sam’s Club membership warehouse clubs, said Kelly Abney, Wal-Mart’s vice president of corporate transportation in charge of the project. The goal is to take over deliveries in instances where Wal-Mart can do the same job for less and use those savings to reduce prices in stores, he said.

“It has allowed our suppliers to focus on what they do best, manufacturing products for us,” Abney said in a telephone interview yesterday from Bentonville, Arkansas, where Wal-Mart is based. “With lower costs usually comes increased sales.”

The offer is not motivated entirely by a desire to serve the best interests of the suppliers. The suppliers are expected to cut Walmart prices proportionally (or, rather more than that, according to some). And, of course, by cutting the suppliers’ shipping volumes, the costs of shipping to other retailers will increase, giving Walmart another edge over its rivals.

“That aligns with Wal-Mart’s taking cost out of the supply chain for their benefit and not their competitors,” [a consultant] said. “Suppliers are going to have to apply that increased freight cost somewhere, so it’s more than likely it will be passed onto other retailers.”

Still, the only downsides I can see are for Walmart’s competitors. It seems to me that (assuming the price cuts are not out of line) the supplier comes out okay, and I can’t see a reason they wouldn’t do it. Can you? Let’s make this our exit question: Should suppliers turn over their shipping to Walmart? And please add your comments and reasons.

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AMD Launches New In-Store Marketing Program

Ingredient Shopper Marketing? AMD is going to launch a program this summer, with full rollout later in the year, in which they will partner with their OEMs to create endcaps in retail outlets to educate consumers on the functionality of their chips:

The program's goal is to educate consumers on the capabilities of AMD's processors, focusing on how specific chips handle different computing tasks, said Leslie Sobon, AMD's product and platform marketing VP.

"We want to focus on usage over speeds and feeds - experience over technology," she said, adding that focus groups found most people could not translate a processor's specifications to what they wanted to do with a computer.

The program will consist of end caps and additional point-of-sale material. The end caps will feature one of AMD's PC vendor partners and will contain PCs running various demonstrations, such as video editing.

The end caps should also make it easier for sales associates to inform customers what a particular processor is capable of, and it will help store staffers up-sell customers to more powerful machines, said Sobon.

This strikes me as a win-win (or there may be several wins in it), because it moves the emphasis not only away from speed, but also away from price.

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Just for Fun

Those of you who are frequent flyers will get a kick out of this video – it’s an introduction of jet service in the fifties by Pan AM. It’s just a little bit different from the service we receive today.

Recent Poll


We discussed efforts by regional shopping malls to broaden their tenant mix and to regain traffic, and asked: “How will most regional malls fare over the next 5-10 years?” The results were decidedly mixed:

• 38% A bit of a comeback
  
• 24% Holding steady
• 31% Slow decline, but still a big factor
  
• 7% They’re toast
  

The good news for mall operators is that 93% think they’re not toast – the mid-point in the results is clearly in the ‘Holding Steady’ range. But a good number think that they will continue to decline, but not as badly as during the recession.

Follow-Ups

Location-Based Marketing
A study finds that a large segment of smartphone users make use of location-based apps:

Location-based content is particularly effective: 63% said they “frequently” use apps that deliver specific content depending on the user’s location …

Ads, not surprisingly, are less popular, but still effective:

Location-based ads were less likely to be of interest to users; still, 53% reported that they would allow an app to access their location in order to serve “more relevant” ads.

Chargebacks
To the surprise of absolutely no one with a functioning cortex, some retailers have increased their chargebacks during the recession.

“These costs have gotten more onerous,” says Vano Haroutunian, a counselor at law firm Ballon Stoll Bader & Nadler, who reports a recent spike in complaints from his fashion clients about this problem. “Retailers are charging back for anything they decide they want to take from vendors.”

He calculates that chargebacks now represent about 20% of yearly sales for many of his vendor clients, as opposed to 5% a decade ago. While some vendors are learning how to deal with the issue, smaller fashion companies are still suffering.

“Vendors are very frightened to talk about it because they might antagonize retailers,” says Jed Schlacter, who runs his own law firm. He receives several calls a week about alleged unfair chargebacks. “If you don't play ball with them, the retailers won't do business with you in the future.”

I had some conversations a couple years ago with an attorney who had had success in suing a major chain for excessive chargebacks, but I think the key part of his story was that the supplier he represented was in bankruptcy – they had nothing to lose. The better way to deal with chargebacks is to work with retailers in ways that eliminate/minimize them – and to avoid the retailers who use them as a profit center and don’t want to work with you.

SKU Rationalization
The debate continues on whether/when cutting SKUs hurts and when it helps. This article from Canada cites conflicting examples. When Walmart cut its peanut butter brands there, sales in the category increased.

P&G, maker of Tide detergent and Ivory soap, recently reduced the number of its soap and other skin care offerings by about one-third at one retailer, while cutting the array of detergents and other fabric care products by about 20 per cent at another chain.

Following the cutbacks, sales grew in each category. “In the skin care example, shoppers reported they felt that they had more choices because the selection on the shelf was clearer,” spokeswoman Jennifer Chelune said.

On the other hand, Loblaws cut “about 10 per cent of weak-performing products from a store in west Toronto. The retailer is now restocking about half those items because customers missed them.”

There appears to still be a great deal of trial and error in this process. As a Loblaw’s executive told investors afterward, “We knew we’d get probably about half of it wrong.”

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Quickly Noted

Department Stores Are Rising from the Dead
The recovery must be here because, right on cue, we’re getting news reports about the amazing return of department stores. It happens in every recovery, just as the ‘death of the department stores’ articles show up in every recession.
Bnet, 18 May 2010

Estee Lauder to Buy Smashbox Beauty Cosmetics
Estee Lauder will attempt to appeal to a younger audience by acquiring Smashbox Cosmetics, a firm founded by great-grandsons of cosmetics legend Max Factor. The purchase also gives Lauder entrée into chains such as Sephora and ULTA, expanding out of their narrowing department store niche. In addition, they will be acquiring Smashbox’s expertise in social and digital marketing. Seems like a buy with a lot of upside.
Los Angeles Times, 18 May 2010

Coming Soon to Kmart: Laundry Service
Kmart is doing a test, putting a laundromat in an annex (formerly a car service area) of one of their stores in Iowa City. I’ve seen a good deal of criticism of the idea, some of it valid (e.g., Kmart needs to concentrate on fundamentals). But it seems to me a worthwhile idea to test, and something that might work in college towns like Iowa City, and select urban areas with high concentrations of apartments. So, kudos for trying a new idea.
Iowa City Press-Citizen, 14 May 2010

Apparel Remains a "Work in Progress" at Walmart
Sales of apparel continue to underperform, the retailer admits. "Our apparel performance remained below expectations and continues to be a 'work in progress' for our team," [said] Eduardo Castro-Wright. I must admit that I know of nobody who buys any clothing other than basics at Walmart. I’m not sure what they can do to get beyond the automatic response that anyone would have to the idea of buying fashion at Walmart (that even includes me – the least fashionable guy you’ll ever meet).
Just-Style, 18 May 2010

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