Suppliers benefit from Wal-Mart promotions

Adding to this, the promotions provide insights regarding some of the implications of introducing Wal-Mart's Every Day Low Price (EDLP) approach, to Massmart buyers.

Local consumers are used to "high/low promotions" which last for short periods of time.

Partnering with suppliers in the planning processes to improve lead times and forecasting is a driving factor behind providing lower prices for longer.

"It is not only consumers who win. Suppliers also stand to benefit from these promotions, specifically if they are able to forecast production needs optimally," said Jon Martinek, Massmart merchandising executive - Massmart integration.

He added that the result was that the company now received pro-active enquiries from suppliers requesting the opportunity to be included in promotions.

According to Don Frieson, Wal-Mart's lead integration executive in South Africa, suppliers can be successful in longer term price reduction activity in two primary areas.

Firstly, he noted that lowering prices and offering better value allowed existing customers and a new pool of potential customers to make repeat purchases more often of the brands they know and love.

"Secondly, there are outstanding cost-saving benefits through a more predictable supply chain. Those savings can be passed on to the customer. Inherently customers will begin to understand that when and what they buy is not being dictated to them but, rather, that everyday value is being offered," he said.

The suppliers who seem to perform best tend to be those who have the capability, and discipline to plan ahead.

Massmart/Wal-Mart has experienced this for itself with its private label products.

Owing to more efficient production scheduling, Trento Laminate Flooring experienced an increase of 206% in sales, compared with last year's figures.

Further benefits were reinforced by the managing director of a leading brand of appliances, who said there were early signs that the paybacks from extended price cut promotions outweighed those of traditional promotional activity.

Adrian Boland, merchandising executive for Game, explained that as part of the process suppliers received a firm two month commitment enabling better planning and helping the supplier to gear up their production capability, to cater for increased volumes.

This has led, in some cases, to significant increases in sales. In support of this, Boland cites a 107%, year-on-year increase in the sales of the previously mentioned appliances manufacturer.

This level of sales increase was also experienced by three other leading suppliers, who agreed that planning flexibility provided by longer lead times was a key determinant for ensuring an increase in sales. These suppliers experienced an average increase in sales of 525%.

Ten local manufacturers will be exposed to the Every Day Low Price philosophy, and other aspects of the Wal-Mart business, when they are hosted by Wal-Mart, at their home office in Bentonville in May.

The global retail giant acquired a 51% stake in local consumer distributor Massmart (MSM) last year.