Suppliers benefit from Walmart 10 Week Extended Price Cut Promotions
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It has already been proven that Massmart-Walmart’s ten week extended price cut promotions offer numerous benefits to customers, including more time to plan for purchases. Adding to
this, the promotions provide important insights regarding some of the implications of introducing Walmart’s famed Every Day Low Price (EDLP) approach, to Massmart buyers. SA retail 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. The result is that we now receive pro-active enquiries from suppliers requesting the opportunity to be included in these promotions,” says Jon Martinek, Massmart Merchandising Executive – Massmart Integration. According to Don Frieson, Walmart’s Lead Integration Executive in South Africa, suppliers can be successful in longer term price reduction activity in two primary areas. “Lowering prices and offering better value allows 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 down 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 says.
The suppliers who seem to perform best tend to be those who have the capability, and discipline to plan ahead. Massmart-Walmart 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 are reinforced by the Managing Director of a leading brand of appliances, who says there are early signs that the paybacks, of extended price cut promotions, outweigh those of traditional promotional activity. “We have participated in three extended price cut promotions, with Massmart-Walmart, and the benefits are compelling. For our locally manufactured products, specifically, we have more flexibility. If volumes end up outstripping our forecasts, as they did in the previous three promotions, we’re able to manufacture more products locally, if raw materials are available. The lead time on locally manufactured products is about 6 weeks and on imported products, 4 months.”
Adrian Boland, Merchandising Executive for Game, explains that as part of the process suppliers receive 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 agree 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%. Massmart-Walmart’s supplier planning focus doesn’t end after the promotion; the momentum is sustained through de-briefing and planning meetings. As part of this pro-active planning, ten local manufacturers will be exposed to the Every Day Low Price philosophy, and other aspects of the Walmart business, when they are hosted by Walmart, at their home office in Bentonville, this May.
Massmart-Walmart’s fourth Extended Price Cut Promotion runs from 22 April to 24 June and includes lower prices on Russell and Hobbs Breakfast Packs, at Game; the Samsung 40 inch 3D FHD LEDTV, at Dion Wired; Vitagen dog food at Makro; and a Grip Petrol Generator, new and exclusive to Builders Warehouse.
Media release issued by Brunswick on behalf of Massmart-Walmart
Brunswick SA – 011 502 7300
Cecilia de Almeida – 083 325 9169
Gordon Kgaugelo Letsoalo – 079 510 6127