Shark Tank Adds Up To Customer Trap

Pitching Products to Wal-Mart, in 30 Minutes

Entrepreneurs, in ‘Shark Tank’-style, try to get their gadgets and foods onto retailer’s shelves

BENTONVILLE, Ark.—The vibe is “Shark Tank” meets speed-dating, with a side of “Superstore.”

At the headquarters of Wal-Mart Stores Inc. here, dozens of its buyers held half-hour meetings earlier this month with hundreds of prospective suppliers touting products—from frozen deep-fried turkeys to toddler dirt bikes—all eager for a chance to land on the shelves of the world’s largest retailer.

Scott Bonge, a Little Rock, Ark., investor and father of three, was trying to interest Wal-Mart in his plastic shaving stencil, the GoateeSaver. With sales of shaving gear falling as more men embrace scruff and beards, Wal-Mart is looking for different shaving paraphernalia to sell.

The product “came out of my own need for something to keep my goatee looking even back in college,” Mr. Bonge told Jason Kloster, senior buyer for personal care at Wal-Mart.

Mr. Kloster then drilled down into how many American men have goatees. Without an exact answer, Mr. Bonge noted that they are popular in the South among men over 25.

“I’ve been in the category for four years and I’ve never heard of your brand,” Mr. Kloster said. “Your biggest challenge is awareness.” Mr. Kloster suggested selling the device on Walmart.com to test demand before offering it in stores.

The daylong event provides a window into the relationship between Wal-Mart and its suppliers as well as the influence retailers have both on selecting the products for their shelves and how those products appear.

These meetings serve a clear purpose for prospective suppliers—a shot at vaulting into retail’s big leagues. For Wal-Mart, the purpose is more subtle. New suppliers bring risks of inexperience and untested products. But the retail giant is on a mission to improve its 4,600 U.S. stores and part of that is overcoming a reputation of stocking cheap imported goods. Pursuing new suppliers, whose products at least partially are made in the U.S., could help it attract new shoppers and add momentum to a recent run of slightly better U.S. sales.

Since taking the helm in early 2014, Chief Executive Doug McMillon has been working to make Wal-Mart’s stores better. The company—which has annual sales of $485.65 billion, 60% of which are generated in the U. S.—is trying to fix its fresh grocery experience and has raised the minimum wage to motivate store employees to keep its shelves stocked and stores neat. Wal-Mart’s same-store U.S. sales have increased slightly the last three quarters and traffic has the last two.

Wal-Mart billed the event—Made in USA “Open Call”—as a way to boost its support for products made or assembled in the U.S. For Wal-Mart shoppers, where a product is manufactured comes second only to price in their on-site purchase decision, Matt Kistler, the retailer’s head of global customer insights, told the gathered businesses in a presentation.

‘Anything under $2, you are gold.’
—Paul Renn, Wal-Mart’s category team director for produce and floral
U.S. manufacturing is a thorny issue for the retailer. Wal-Mart’s purchasing power and its dogged pursuit of low prices has drawn criticism for driving the production of goods offshore in the first place.

This is the second year in a row that Wal-Mart has held the event, which it advertises in newspapers and other outlets. Many of the participants received invitations because they were on the radar of Wal-Mart buyers. Wal-Mart won’t say what its acceptance rate is for pitches made during the Open Call. Those who do get a shot at Wal-Mart often are given a small run in a few hundred stores, so as not to overwhelm their startup businesses.

In a long hallway lined with small conference rooms at the Wal-Mart headquarters, buyers grilled the mostly small-business owners about market research, peppered them with questions about social-media strategy and prodded companies to make improvements to packaging. A unifying mantra was price.

With executives from Blamtastic, a company pitching adult diaper-rash spray, Wal-Mart buyer Staci Cochran quizzed the Atlanta-based company about its pricing plans in a discussion about the size of the bottle. “Wal-Mart absolutely cannot be beat on price,” said Ms. Cochran, senior buyer for over-the-counter pharmacy. “To win at Wal-Mart make it under $10.”

Jacob Moore, the retailer’s merchandise planner for health and wellness, analyzed the mock packaging of the yet-to-be-released product called BootySpray. “You can use this billboard much better,” he said, examining the spray can. Mr. Moore suggested a bigger font for some phrases like: “No messy hands.”

Karen Posada knows that getting into Wal-Mart doesn’t lead to immediate success. The 36-year-old Austin, Texas, resident started supplying Wal-Mart with $4.99 organic pasta sauce about two years ago but sales haven’t been strong enough to make a profit.

Part of the challenge was an unexpected competitor: Wal-Mart itself, which started selling an organic store brand version for under $2, a price point shared by other nonorganic sauces on the shelf, undercutting her sauce.

“I’m thinking I’ve won the lottery and all of a sudden your product is not moving,” said Ms. Posada, who co-owns the Austin-based business with her mother.

She says she made other missteps too. She started out selling in about 300 Wal-Mart stores scattered around the country far from her production facilities in Texas and New York. The cost of shipping glass jars ate into profits. Wal-Mart tried to help by placing her sauce at eye level on shelves and pulling back distribution, but it didn’t make much of a difference.

She now has something new she thinks will work at Wal-Mart—veggie smoothie and juice pouches, priced around $1.80.

“We’ve learned we need a ‘1’ in front of our price,” Ms. Posada told Paul Renn, Wal-Mart’s category team director for produce and floral, as he sipped her new beet, tomato and pineapple drink. The Good Promise pouches are refrigerated, so they can be sold near produce, a more desirable part of the store, said Ms. Posada.

“Dry grocery is tough,” because sales of those foods are falling overall, Ms. Posada told Mr. Renn. “Yes, it’s a beast,” he said.

Mr. Renn nodded approvingly as he tasted, noting the pouch will stand out on refrigerated shelves now filled with juice in bottles often priced slightly higher. “Anything under $2, you are gold,” he said.

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