Optimism, skepticism, confidence and concern were among the range of emotions shared by Walmart suppliers who participated in the second annual Walmart Supplier Survey conducted by Drug Store News’ sister publication Connecting Northwest Arkansas.
(To view the full results of the Walmart Supplier Survey, click here.)
A total of 194 supplier executives responsible for their companies’ business relationship with Walmart responded to a 46-question survey designed to explore their attitudes toward working with Walmart. The full study is available for download at ConnectingNWA.com and encompasses Walmart U.S., Walmart.com, Sam’s Club and Walmart International.
In general, suppliers expressed optimism that Walmart leadership is on the right track with the right strategies to restore growth, and they indicated that merchandising decision-makers are accessible and receptive to new ideas. However, suppliers expressed skepticism that the pursuit of those strategies will reduce their cost of doing business with the company or that initiatives agreed upon at the home office will be well executed at the store level. Suppliers were confident in their collaborative efforts with the company, their multichannel understanding and the growth potential of Walmart International and Sam’s Club. However, they remained concerned about an intense competitive climate in which they are striving to help Walmart execute its strategies.
For example, topping the list of competitive threats this year was the dollar store channel, mentioned by nearly 80% of respondents. Dollar General, Family Dollar and Dollar Tree collectively operate nearly 21,000 U.S. stores, and their product increasingly overlaps with Walmart. The same is true of second-ranked competitive threat Target, mentioned by 56% of respondents. Target’s ambitious remodeling program, now 60% complete, has made the food, consumables and healthcare categories its fastest growers, while aggressive pricing and a 5% rewards program challenge Walmart’s ability to achieve meaningful price leadership. Not far behind Target on the list of competitive threats was Amazon.com, mentioned by 48% of respondents this year, compared with 30.9% last year. Amazon.com and Kroger switched places on this year’s list. Kroger was mentioned by more respondents this year than last year, 37% v. 33%, but escalating concerns about Amazon caused it to leap frog Kroger.
After these retailers, there was a noticeable drop off in perceived competitive threats. For example, Costco, major chain drug store operators CVS and Walgreens — who combined operate more than 15,000 U.S. drug stores — and such no frills, extreme value players as Aldi and Supervalu’s Save-A-Lot division were clustered together in the mid-20% range. Not a single respondent mentioned Sears/Kmart, which is somewhat ironic considering Kmart was once Walmart’s greatest rival.
As for suppliers’ greatest concerns in the coming years, driving profitable sales growth understandably topped the list, while adjusting to shifting personnel/priorities, store-level execution and joint business planning/collaboration were not far behind. These are perennial challenges for large retailers and in Walmart’s case, they tend to be magnified as the company has absorbed a considerable amount of change in recent years and an emphasis on expense control ensures there is no fat in the store labor budget.
Nevertheless, suppliers gave Walmart high marks in response to questions about senior executive alignment behind a consistently communicated vision and the accessibility of decision- makers in merchandising and senior management. Buyers also were given high marks for possessing a thorough understanding of shopper trends and category dynamics.
However, on the subject of buyers’ willingness to take risks and experiment with new products/services and merchandising strategies, buyers didn’t fare as well. The nature of the retail business ensures a certain percentage of suppliers are going to be unhappy and rate buyers poorly when there are disagreements on the merits of products and whether feature or shelf space is warranted.
Another opportunity area was related to the new item introduction process and its ease and efficiency. All major retailers typically want to be first to market with new items, but suppliers’ responses suggested there is room for improvement and that internal cross-functional collaboration could be enhanced.
Suppliers’ responses also suggested Walmart has opportunities in the areas of speed and execution. When asked whether Walmart was a surprisingly nimble organization that acts quickly on established priorities, the answers skewed toward the negative end of the agreement spectrum. And on the subject of execution, there is room for improvement in the scores suppliers gave on the topic of whether merchandising initiatives developed in collaboration with suppliers tend to be well executed at store level, as responses were not as skewed toward the strongest levels as would be ideal.