Scaling The Wal

The Wal-Mart Mystique

You've negotiated the complex process of getting into Wal-Mart. You've carefully nurtured your product with marketing support, on-time delivery and smart merchandising strategies. You're seeing sales beyond your wildest dreams. Now what?

"Too many entrepreneurs get into Wal-Mart and want to coast," says Wurzel. "The rest of their business drops off. Then Wal-Mart finds [a cheaper version of] your product somewhere else. People go out of business because of that mistake."

"Don't put all your eggs in one basket," agrees Cantrell, who was courting several other mass merchandisers in addition to Wal-Mart. His clients now include discount retail chains and auto supply chains like Paccar Automotive.

Smart entrepreneurs make Wal-Mart part of an overall distribution strategy. A good rule of thumb, Wurzel suggests, is to never let Wal-Mart account for more than 25 percent of your total business. Charles and Patricia Monte had accounts with Mervyn's, Montgomery Ward and Sears before landing Wal-Mart, which now makes up 20 percent of their company's more than $4 million business.

Shouldn't landing other retail accounts be a snap once your product has passed the Wal-Mart test? That's conventional wisdom, and in some cases, it's true. "Being able to say, `Hey, we're in Wal-Mart now' is certainly a door opener," says Wurzel. "It's that `me too' mentality--if people see it doing well in Wal-Mart, they'll want it in their stores, too."

But not always. "Once I got into Wal-Mart, many other [retailers] shunned me," says Steve Kendall. "I went back to Kmart [and other mass merchandisers] I had approached before, and they said, `If your product is in Wal-Mart, then why do people need to buy it from us?' "

How can you avoid this Wal-Mart backlash? One solution is to diversify. If you have several products or product lines, you can sell one to Wal-Mart and others elsewhere.

Another idea: "Get Wal-Mart to put its private label on your product," says Kendall, who did just that with the Cutting Edge Opener System. "Then you can still sell it under your own label elsewhere, and it won't be directly comparable to the Wal-Mart item." Kendall uses this strategy to sell his product via the Internet.

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This article was originally published in the January 1998 print edition of Entrepreneur with the headline: Scaling The Wal.

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