Published on: June 25, 2015
I was highly critical of Walmart's decision to seek out across-the-board slotting allowances, suggesting that this veers away from a long-held differential and competitive advantage and will result in the company being hooked on the "heroin" of promotional fees that creates higher prices and a system that makes money on the buy rather than the sell. (I wasn't just critical. I was in high dudgeon.)
I received a fair amount of email in response. One MNB user wrote:I'm sure your email box is full with different views on Wal-Mart slotting. As you point out (with the help of your friend Glen Terbeek and any number of others who will wholeheartedly agree) the idea to ask vendors to pay for Wal-Mart's inability to maintain its cost advantage goes fully against their EDLC / P approach.
EDLP is WMT's strategy; it's not for all CPG companies. When WMT commenced EDLP, they had a 3%+ operating cost advantage versus their competitors and they invested it in a shopper-advantage EDLP program. Today, they no longer have that cost advantage so they want their vendors to fund EDLP that is counter to many CPG's strategy of differentiation. Ditto in WMT .COM platform; any differentiation has been mostly brought to the table by the vendor community.
The vendor community needs to respond by writing Doug McMillon, Greg Foran and the Wal-Mart Board members, openly protesting this approach, before the official letter is sent out to Vendors. (I'm told that Walmart Finance hasn't yet sent the letter, but it will be out to vendors within a month.)
The difference in situations isn't lost on me; If South Carolina can remove a flag within a week, the Wal-Mart vendor community can show a unified front by writing letters and dealing proactively. There will be many in the MNB community who will hesitate, for fear of retribution. However, not doing anything will also send a message to other retailers that vendors have incremental funds available for the ask. So, it's up to the MNB community to "stop the insanity" as Shark Tank viewers hear from time to time.
I suggest that the vendors use this opportunity as a rallying cry to eliminate slotting all together, across all retailers, and get back to deploying funding in a way that is beneficial to shoppers. "Selling more" is what Brand funds are to enable, not wage increases, IT investments and more dividend payments for WMT shareholders (much of which is Walton family).
Wal-Mart's ongoing desire to grow top line worked well in the late 80's and early 90's. However, slow growth results today don't motivate vendors. Its time to talk about real growth vehicles.
Foran needs to understand that what works (e.g. slotting) in Australia (within a retail duopoly) isn't going to work in US. But, its really up to all in the MNB community to feel passionately enough to do something about it.
It will be interesting to see if the MNB community is passionate on their ability to influence change.
I'm not sure your comparison to South Carolina is appropriate ... but I get your point.
MNB reader Joe Ciccarelli added:I totally agree with you and Glen Terbeek on this move by Wal-Mart. In my 40 years in the CPG Industry I have seen the cycle of retailers who were focused on making money on the buy, rather than taking care of their customer wind up bankrupt and non-existent. Some that come to mind – W T Grant, Food Fair, K-Mart, Revco, McCory & Woolworth all had the same mentality – force the manufacturer to pay and cover their miss-steps.
From another MNB reader:Walmart strikes again in trying to cover their business decisions partially on the backs of their suppliers! The largest CPG’s should look at this decision and IGNORE it! For years these companies gave Walmart a price that included all the other programs that they used at traditional retailers to try and keep an even playing field. I can’t tell you how many hours my Sales staff and I met with company lawyers to make sure the playing field was level. Now Walmart decides to charge for slotting and warehouse space? Any major CPG should make a counter proposal tomorrow with major price increases to cover this give back! You can bet the Krogers, Aholds, Albertsons/ Safeways etc will be watching this very closely. Glen is correct about the beginning of a new model but that can’t happen overnight and in the meantime Walmart’s competitors have an opportunity to make further inroads.
And another:Kevin, I had to laugh at the Walmart slotting fee article. Some chains still try to convince themselves that there are different pots of money from manufacturers. I have seen it personally for years. When will they understand that simply the best cost allows them to do as they wish on pricing. Having suppliers piece the buckets up only hurts Mrs. Consumer and it is obvious in the chains by their retail prices. I refrain from mentioning those high priced chains and also the value chains and leave that up to you. Huge mistake for Walmart, and bad timing.
And still another:Slotting Allowances? New and different Credit terms? You are right on in your analysis. I can hear “Taps” being played in the distance as the flag is being lowered and the sun is setting.
And from yet another:Your analogy of slotting being just like heroin is absolutely true. Let me give you a real example. I participated in a senior level meeting at a dominant US grocery retailer a couple of years ago. In this meeting, the Merchandising EVP told the CEO that they were getting out of the slotting business, primarily because he thought they were paying for slotting in their cost of goods (which is true). The annual amount of slotting was $36 million. The CEO (who has an outstanding reputation in the industry) responded to the Merchandising EVP, “that’s fine with me, just make sure you get the $36 million somewhere else”. This ultimately failed and this retailer, couldn’t take the needle out of their arm and continued to charge suppliers slotting. Sad.
And another MNB reader chimed in:The prices just went up in Arkansas!
We continue to get email about the South Carolina situation.
MNB reader Gary Mountain wrote:Thanks for expressing what so many must be feeling these past days. You were very eloquent and compassionate in your words. Thank you!
But another reader wrote:I personal don't own one or want one but I see this is an exercise in stupidity. Those that fly the flag are probably not going to change their attitude because they stop selling them in Sears and Walmart. Problem is in the heart and not on the shelves of Walmart.
And from another:Isn't that the moral-equivalent of book-burning?
There are people who disagree with you. Get over it!
I recognize that people disagree with me on a wide variety of issues, and I have no problem with it. However, I also get the last word ... and I'm certainly not going to apologize for it. (This is something that you
will have to get over...)
I was having this conversation online yesterday with a young man I know (and have known since he was born), and he found the debate about the Confederate flag to be pathetic, since he believed it was overshadowing the broader and more important debate. We're all human, he argued ... and that ought to be both the beginning and the end of the discussion.
Wouldn't it be pretty to think so?
I'll tell you what I told him ... that of course we're all human. (Well, maybe not that terrorist who decided to wrap himself in the Confederacy and kill nine innocent people. And maybe not the people at the Council of Conservative Citizens, who apparently believe in white supremacy, and possibly believe that the surrender of the Confederate State of America was, in fact, only a cease fire.)
But you miss the point of the flag discussion. Life is mostly metaphor, a favorite writer of mine once said, and that flag is metaphor for something very insidious, very painful and very inhuman. By addressing it - and what it stands for - you at least acknowledge the metaphor and then can begin to deal with the problem.
It won't be easy, and it won't be quick ... it is 200 years since the end of slavery, and we still have black people being killed because they are black.And by the way, while you are right that getting rid of the flag won't magically fix anything,it may actually make a difference in the lives of black people who won't have to look up and see a banner of oppression and hatred and subjugation celebrated as some sort of cherished historical object.
Symbols matter, and life is mostly metaphor.
Since we talk about movies a lot here, I was interested in this email from MNB reader Jan Fialkow:I watched Gone with the Wind on TV a few months ago — first time in years. I had become enamored with the book as a young girl, loved the romance, the fact that I was reading a grown-up novel. The movie was re-released when I was in junior high, and I was enthralled. Superman in the opening scenes. Rhett Butler gazing up from the bottom of those stairs. Scarlett O’Hara's fire and courage. Wow!
After this last viewing, I was embarrassed that I had loved it for so many years. GWTW distorted history — often described as written by the victors — to be the vision of the vanquished. It took the ultimate act of treason and made it heroic. It was not crudely racist; it was insidiously racist. I can’t believe I overlooked all that.
Perhaps GWTW will go the way of the overtly racist Birth of a Nation. Maybe the times finally are a’changin'.
One can hope.
I must admit - and I know this will offend a lot of people - that I've long believed that Gone With The Wind
is one of the most overrated movies ever made ... I've never liked it much, and won't mourn if somehow it gets relegated to a less elevated position in movie history.
I said yesterday that as a longtime Amazon shopper and vocal supporter, I was offended by the fact that it moved slowly to pull Confederate flag merchandise from its site ... much slower than Walmart or Sears, for example. I wrote that I will forgive, not not forget, and that I expect better of the company.
MNB reader Tom Hahn responded:
Kevin, how disingenuous…….re: Amazon, “I’ll forgive but I won’t forget, and I’ll be watching”?? Is that because you can’t live without them? What kind of stand is that?
If you are as worked up about this as you insist, how about not using them? That’s how most folks send a message to a business they are unhappy with.
It is fascinating to watch how some people react in these over-emotionalized debates about what’s right & wrong……..people have strong opinions until their sacred cow becomes part of the problem…….then it’s all about rationalization.
Maybe. That's a fair enough observation.
And maybe I really can't live without Amazon.
Kate McMahon wrote an excellent piece yesterday about contretemps that took place over a proposed Nutella boycott over its use of palm oil, though it ended up that Nutella is highly responsible in its sourcing of palm oil.
Of course, I may have managed to undercut a serious conversation when I commented about an organization cited by Kate - the Roundtable on Sustainable Palm Oil - as sounding like something out of a Monty Python movie.
One MNB user was not amused: I read MNB regularly and appreciate your humor most of the time; but palm oil and global warming are no laughing matter. Refer to the link below to learn more about the Roundtable on Sustainable palm oil. Retailers, such as Aldi have had policies on the use of Palm oil in their products for over 2 years.
Sorry ... but I tend to poke fun at most things. Doesn't mean they're not serious subjects, just that I'm an ironist and wisenheimer at heart.
From another reader:Thanks for great commentary on the Nutella blow up. As you mentioned in your article, palm oil use will only grow with the ban on trans fats in the U.S. While healthier for us, most of the world’s palm oil production comes from Indonesia, much of it from suppliers with dubious backgrounds and processes. With poverty a huge issue in Indonesia, many farmers have turned to growing palm oil. The issue is that to replant densely forested areas with palm oil, they have taken to burning down the forests as it’s the most effective means at killing off native vegetation. Sadly, it also releases incredible amounts of carbon and destroys valuable wildlife habit. Thus, Kevin, arose the Roundtable on Sustainable Palm Oil. Maybe a Monty Pythonesque name, but important work nonetheless. Do some research and you’ll find many top manufacturing brands and retailers are members.
A few readers joined in the Python comparisons. One MNB user wrote:The comparisons are just too rich…
Everyone arriving to the Roundtable on Sustainable Palm Oil is accompanied by the sound of coconuts clattering…
The French are awaiting the chance to taunt the Italians another time…
From another:As long as they are protected by the Knights who say “ni”, it should all be good. After all, this isn’t the Spanish Inquisition.
And another:France lifts ban on Nutella in return for a shrubbery.
And another:…around which sit the Knights Who Say ‘Nutella’…
Sorry. We're just looking on the bright side of life...
Finally, I also got a number of responses to my commentary regarding Olive Garden's order to managers not to clean their rugs more than once a month. I wrote:These people are morons. Utter morons.
I suppose it never occurred to them that Olive Garden is, by its very nature, a family restaurant. it encourages families to come in and eat cheaply. (It isn't like they are enticing customers with actual Italian food.) Families have kids ... and it seems like a pretty good bet that the carpets are getting hit with all sorts of greasy, oily foods ... and that some of the restaurant managers are cleaning the carpets twice a month because they have to, not because they're looking to break the company's finances.
It also seems to me that if these carpets can't stand to be cleaned twice a month, they must be pretty crappy carpets.
Once again, this seems like a textbook example of a company that is putting efficiency before effectiveness, of putting Wall Street before Main Street, and not giving a damn about the customer.
I'd use the Italian word for "morons" here - which happens to be "idioti" - but it doesn't seem appropriate because it would be about the only Italian thing that would be associated with Olive Garden.
MNB user Carl Jorgensen wrote:There's another, perhaps more colorful, word the Italians use: "cretini."
One MNB user wrote:Pssst Darden Group! Have you heard of tile floors? Don’t you know customers consider cleanliness before food and price? “ Dirty restaurants floors, tables, and restrooms? Let’s go somewhere else. "We might get sick here.”
And another wrote:So I gather you are not an Olive Garden fan? I get it, but as you point out it is a family restaurant. I do now understand why the carpets look like they do. Corporate policy to only clean the sauce stains once a month; YUCK! There is only so much you can do with those “fancy” sweepers they use.
I am familiar with the zero based budgeting concept, it meant we had to bring our own coffee and plastic utensils, cups, dinnerware and napkins. They did make a Keurig available but you couldn’t have one in your office or cubicle for safety reasons, you could provide your own heater so you didn’t freeze from the air conditioning which lead to my suggestion of turning the thermostat up a notch or two. When I left there weren’t restrictions on how many pages you could print but office supplies were being closely guarded. I believe it is supposed to promote an “We’re all in this together mentality”, but lead to much resentment and “tattling” instead. There were bets on when we need to start providing our own toilet paper.
At Olive Garden there always will be plenty of toilet paper ... it doubles as lasagne noodles.