Being a Walmart supplier can be tough. The stories of manufacturers who made bad deals with Walmart that resulted in disaster are legend. Walmart buyers are tough, they know their numbers, and they are skilled negotiators. However, Walmart buyers do not force manufacturers to make bad deals. The only person in those small rooms in Walmart’s Home Office than can make a deal that will result in financial trauma for the manufacturer is the manufacturer’s sales person.
A common mistake that many manufacturers make when preparing to sell Walmart is to only prepare to discuss their product and their price. Many don’t even consider the last two pages of the supplier’s agreement before they meet with a buyer. These last two pages can have a significant impact on their overall profit margin without them even realizing it. The last two pages of a Walmart Supplier Agreement covers the terms and conditions for returned product.
There are ten questions about returns that suppliers should be ready to discuss and negotiate with the buyer when closing the deal at Walmart. For those who may be thinking “Returns? What is the big deal?” we would point out that a study conducted by the Aberdeen Group in 2007 found that on average manufacturers spend 9% to 14% of sales on returns. Another interesting finding from the same study found that 30% of the companies surveyed had no idea how much returns cost them. They were literally blind to cost of returns. The point is that proper preparation, knowing Walmart’s expectations and what the benchmark for returns processes are for your products will have a significant impact on the bottom line. In fact it could be worth as much as 5% of sales!
If a you have answers to the following ten questions you will have everything you need to negotiate a win/win deal with Walmart and maximize the your profits.
- Will you credit Walmart for returns based on actual items returned or provide a standard off invoice allowance?
- Do you want Walmart to dispose of the returns or send them back to you?
- Are you going to receive returns directly from each store or through the return center?
- What should your company’s consolidation fee be for items returned through Walmart’s return center?
- What is your end of life strategy for your product?
- How are you going to handle recalled product?
- What are your return authorization requirements?
- What is your plan for seasonal overstocks?
- Are you going to have “return caps” or other limits to the value of returns that you will credit in a given period?
- If you are going to use an off invoice allowance, what is the standard for your product and how will it be adjusted?
To learn more about how Greve-Davis can help you in preparing to negotiate your terms and conditions with Walmart, go to http://bit.ly/lC8zqW.