Alibaba, Gumps, and Walmart

Folks,

three sites and a view...I found 3 websites interesting, and I recommend you
view them since I will no doubt refer to them as examples in the coming
weeks. the first one is a buyer/seller exchange site, and the second two
have to do with selling to Walmart. I follow this with some notes for your
edification.

www.alibaba.com

http://www.wini2.com/


http://www.walmartstores.com/supplier/

The problem may have its genesis in an fundamental merror as to who the
right customer is for an innovative small business. Let’s compare WalMart
and Gumps.

Large retailers appear to be attractive to a small business since they
can place large orders and do eventually pay their bills. What could be
simpler than to sell a million dollars worth of some wonderful foreign item
to WalMart and ear an easy twenty thousand dollars profit? (Expecting better
margins? Good luck!) This is not an uncommon plan, and WalMart is so
plagued with requests to consider products that they have a website devoted
to potential vendors.

Before I go any further, let me assure you I am a devotee of WalMart, I
know when to shop there and for what, and have relied on the store for some
of my most prized possessions. I pity the misunderstanding folk who reject
Walmart, and I completely accept the Walmart argument that they improve the
standard of living of every community they enter. In essence, since people
save money shopping at WalMart, serious money over time, the same customers
take their savings and spend those savings in other upscale stores in town.
There is no defense against Walmart if as a retailer you try to compete on
price; but the reality is small retailers who move up market when Walmart
arrives generally thrive in Walmart’s shadow.

Having said that, let me say Walmart is an extremely unlikely customer
for the small business international trader. So many people approach Walmart
as vendors that Walmart has formalized a process for responding.

For new businesses like ours, there is the Wal-Mart Innovation Network (WI
N), which is not an invention development or marketing service. To quote from
the www.walmart.com website, “WIN services are limited to providing
inventors with a commercial feasibility analysis (evaluation) of their
invention or new product idea. WIN does not provide research services for its
clients, and it does not develop or market inventions for its clients. The
responsibility for development, licensing or commercialization is solely that
of the inventor/innovator. We do, however, at our option, provide a no-cost
referral service to members of the WIN Innovation Network and other sources
of management and technical assistance.” And further, “During the period of
1991 to 1998, WIN provided preliminary evaluations of approximately 4500
inventions. A recent sample of 400 ideas/inventions/products evaluated by WIN
(1/1/99 – 4/30/99) received the following recommendations:

28% Not Recommended
23% Very limited and cautious development
23% Limited and cautious development
5% Recommended with reservations
12% Recommended for other channels of distribution
8% Recommended for Wal-Mart review
1% Other

This sample contains a significant number of near market-ready products
submitted by manufacturers which may cause a positive bias in the data.”

So Walmart tells you right up front your chances, assuming you have a
good-to-go product, are maybe 8 in 100 that you will even be referred to
Walmart for consideration. 92 out of 100 are rejected immediately. That is
to say, of 100 new companies wishing to sell to Walmart, 8 are recommended to
Walmart. Walmart did not reply to my request for a percentage of how many
recommended vendors of those eight are actually selected as vendors. My
question after that would be, how many of those eight that are selected as
vendors ever turn a profit selling to Walmart. Walmart helpfully includes
this note on their website:

“INVENTOR ALERT: State and federal investigations into abuses in the
invention promotion industry continue. It appears that only about 1 in 1,000
inventors make a profit of $1 (one dollar) or more when utilizing the
services of invention promotion firms, but pay fees frequently as high as
$12,000.” And then, this:
“Many new products are not suitable for review or introduction through large
discount/mass merchandise stores. Pursuing improper channels of distribution
can lead to serious consequences. Thus, we try to steer you in the right
direction. Please refer to paragraph #3 of the Innovation Registration
Disclosure page for a summary of recent evaluation results. Results may vary
over time depending upon the nature of inventions/innovations submitted to
WIN.”
I could not agree more, and that is why this book focusses on finding the
proper, the very best sales channel for your products. But what does
paragraph #3, noted above, say?:
“ As noted in our Registration & Disclosure forms, the fee for an invention
evaluation is $175 in the United States and $195 elsewhere; checks must be in
US dollars (the extra $20 covers the cost of air postage outside of the US).
The fee for a product assessment is $200 in the U.S. and $220 elsewhere.”

See why Walmart is the most successful retailer in history? They will
let you pay at least $175.00 for you to find out what they already know, and
that is it is extremely unlikely they’d be interested in your product. And
further, they will consider foreign suppliers products as well, for $20 more.
So the supplier overseas, for whom you are trying to sell his product, can
very easily go directly to Walmart. What value would you provide selling to
Walmart?

Walmart has shelf space that must produce a certain amount of profit or
the Walmart mission fails. The most likely candidates for Walmart are items
already popular, that, as the Walmart slogan goes, can be always less price
than elsewhere. So naturally, well-known items fit the bill. But the
start-up importer does not have the economies of scale to support the Walmart
mission.

Let’s compare that to Gumps, at www.Gumps.com. Gumps is a San
Francisco-based retailer of fine gift and housewares. They have one store,
and a catalog. They sell well known brands such as Baccarat and unknown
names such as Carl Rotter. One nice water glass at Gumps might sell in then
$150.00 price range. Some people might view that as expensive, but Gumps is
not expensive, when you consider the amazing talent and workmanship that went
into the product. As they say, “you couldn’t make it for that.”

In the history of mankind, those artifacts we consider examples of our
finest art and culture are very often produced in very difficult
circumstances. In cuisine, the truffle is considered de luxe, but truffles
would never had entered our diet if people were not so desperate at one point
as to steal food from pigs. Beer, cheese, and popcorn were all mistakes.
Lutefisk likewise. Celadon pottery, silk garments, Many other products are
created when a problem is perceived and a solution painstakingly created.
Either way, the most appropriate venue to introduce such products, whether
discovered accidently or painstakingly created, is not the Walmart and other
huge mass retailers. Gumps is an example of just one store, in one industry,
gifts and housewares. There are thousands such stores across the USA in gift
and housewares. They have counterparts in every other industry: clothing,
autos, foorwear, foodstuffs, jewelry, skincare and boating. If you can
conceive of a product that solves a problem, there is a store that is
approriate for selling the item.

Gumps is a favorite of mine since it is a leader in my industry, but also
because of certain skill they maintain. When exotic items first emerged in
history, say celadon, it was the royalty who first enjoyed it. Now such
items appear first in stores such as Gumps. And as a practical matter, you
might have to expose your risk credit-wise some $100,000 support a Walmart
transcaction and yield some $5,000 gross profit, a $10,000 from Gumps would
normally yield you the same $5,000 gross.

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