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A view of the industry through the eyes of a chain buyer.

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Wal-Mart and Our Industry

A brief, casual history of the relationship.

by Mike Hartnett (July 18, 2011)

Recently someone new to the industry asked me about the history of the world's largest retailer and crafts and fabric. So I rattled off what I knew, what I thought I knew, what I'd been told, and so on. Here are the highlights.

Sam Walton started as a Ben Franklin retailer and said he liked the sewing/fabric department because it attracted the kind of customer he wanted. The modern craft industry was in its infancy (it really started shortly after World War II), but as it grew, Wal-Mart added crafts in part, according to industry lore, because Sam's wife Helen was a huge crafter.

It finally reached the point where Wal-Mart opened three all-craft stores, Helen's Creative Crafts. (I believe two were in Missouri and one in Louisiana.) Wal-Mart sold them a few years later to Michaels. A couple of years after that, I asked a top exec at the time, Don Soderquist, why the stores were sold. He said they felt they'd learned all they needed to about crafts. I suspect the real reason was they were seeing a much bigger return on investment with their new superstores, so they abandoned the craft stores to concentrate on the superstores.

Some Miscellaneous Thoughts

1. Through the decades, rumors that Wal-Mart was dropping crafts were like the tide. They'd sweep through the industry, then recede. One time when the rumors were rampant, I asked the former craft buyer at Wal-Mart if she thought this time it was true.

She said no, because of what she called "destination studies," where consumers walking in the stores were asked what department they were going to first. Crafts apparently always did well in those studies. So the logic was, Wal-Mart may sell more detergent than crafts, but they wouldn't sell as much detergent if they didn't have crafts.

2. Wal-Mart forced vendors into the late 20th century by demanding they adopt modern technology standards such as UPC codes. Today vendors have lots of technology that they take for granted, but they wouldn't have them unless they'd been forced to, kicking and screaming, by Wal-Mart.

3. Quotes from a couple of vendors: A) "Having Wal-Mart as a customer is like owning an 800-pound gorilla. You may think you own it, but you pretty much do what he says." B) When a vendor called me to say goodbye because he was going out of business, he said, "It's my own fault. I said yes to Wal-Mart once too often."

4. At one point Wal-Mart announced they didn't want to see any more manufacturers' sales reps. They only wanted the vendors' top execs and, by the way, Wal-Mart and the vendor should split the savings that would have been the sales reps' commissions.

5. Discount Retailer (now called Retailing Today) used to publish an annual study of chains' departments. Crafts always had one of the lowest turnover rates, but one of the highest margin rates.

6. THE best, most even-handed book about Wal-Mart I've ever read is The Wal-Mart Effect by Charles Fishman. It includes interviews with a couple of current/ex industry vendors.

7. I wondered for years about the fabric department because you needed a clerk to cut the fabric. Same would be true of the fish department where you need a clerk to scoop out the goldfish.

8. For many years Wal-Mart had an excellent reputation among vendors. The company didn't nickel-and-dime vendors, just asked for the best price. But that reputation was damaged a few years ago when the company decided to drop needlework. Vendors were not given much notice. Numerous vendors said, "It wouldn't have been handled this way if Sam were still in charge."

9. When the recession hit, Wal-Mart appeared to be attracting more higher-end shoppers, so the powers that be decided to cut back on lots of SKU's to make the stores more spacious and inviting to these folks. The idea was carried to an extreme. In our nearest superstore, in Pekin, IL, the cross-aisle in front of the checkout counters was so wide and so empty, a small plane could have landed there.

10. Ooops, that plan didn't work. So the company is reverting back to basics; I forget what they're called, but Sam's old favorites crafts, fishing, etc., are being restored. I hear fabric is coming back but in cut-fabric packages. (I don't think that will work, but we'll see.)

11. Here's an unconfirmed story that may indicate, in part, why the company reversed its decision to reduce the number of SKUs in the stores. Supposedly at a meeting of the company's top execs, CEO Mike Duke arrived with a bag of products, all items, he said, that his wife used to buy at Wal-Mart but now has to go elsewhere for them.

12. But there's been some damage done to Wal-Mart's reputation for consistency. No doubt many vendors are delighted by this return to basics, but are probably wondering in the back of their minds if/when the top execs will change their minds yet again.

13. Vendors vent to me all the time about one thing or another, but I have never heard a single complaint about a buyer at Wal-Mart. Complaints about company policies forced on the buyers, yes. Personal complaints, no.

14. I no longer bother to call the Wal-Mart pr department for comment, clarification, etc. Everyone I've talked to is always really nice, but says something like, "Gee, Mike, I'd really like to help you, but I just can't say anything at this time."

15. Sometimes I think Wall Street analysts are too hard on Wal-Mart. Wal-Mart has to sell a gazillion products a quarter, far more than any other retailer, just to have flat sales. So when sales are flat, the Wall Street hotshots shout, "Oh my god! What's wrong with Wal-Mart?"

xxx

 

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