Negotiating with Wal-Mart - HBS Casestudy

"Sarah Talley was 19 in 1997, when she first began negotiations to supply Wal-Mart with her family farm's pumpkins and watermelons". That's a case study on how suppliers / vendors live in a wal-mart world. Sarah enlists some of her basic negotiating principles - my favorite takeaway - "Do not let Wal-Mart become more than 20 percent of your company's business. It's hard to negotiate with a company that controls yours."

That brings me to another interesting story about Vlasic's pickles - whose fortunes changed when they started shipping to wal-mart. to quote from the fastcompany article "The pickle maker had spent decades convincing customers that they should pay a premium for its brand. Now Wal-Mart was practically giving them away. And the fevered buying spree that resulted distorted every aspect of Vlasic's operations, from farm field to factory to financial statement."

Vlasic went bankrupt. This not to say that companies dealing with these big boys of retail are likely to that way.. but it's hard to stay on top of a deal when you are a commodity. after all "a pickle is a pickle is a pickle."

The extent of the large retailers' control over the process cannot be undermined.. "It also is not unheard of for Wal-Mart to demand to examine the private financial records of a supplier, and to insist that its margins are too high and must be cut."

I don't think bending over backwards to please a goliath is workable strategy. It is easy to convince oneself that the loss in margins will be made up in volume. You can't negotiate with them on their terms, you've got to have something thats not easily replacable, not easily commoditized to make a sustainable deal. either ways, it's a tough line to walk. i believe that if you treat your product like a commodity - you're treating you're customers like commodities - and that's always a race to the bottom. getting it cheaper has never been my play. i'd like to create things that people will fall in love with. where the retailer is mere broker between the creator and the user. that would be a different ball game altogether ;)

cartoon via gapingvoid.com