Wednesday, June 20, 2007

Growing Without Wal-Mart

AdAge reports companies are beginning to shift their focus from Wal-Mart as it plans to scale back its huge expansion plans. Wal-Mart is a huge retailer which provides the majority of sales for some companies and their products. It is currently adding about 200 Supercenters annually and provides more gross sales than its three nearest rivals -- Costco, Target and Kroger Co. -- combined.

There is no question that Wal-Mart is a key driver of sales for companies and their products. However, companies are finding that more sales do not necessarily mean higher profits. Therefore, they are looking out other outlets (i.e. Supermarkets and drug store chains) to pick up the slack.

Although it gets 26% of its sales from Wal-Mart, Clorox CEO Don Knauss said his company gets a third of its volume and a higher share of its profit from the supermarket channel. AdAge also reports that Procter & Gamble Co. and PepsiCo, already have shifted their strategies toward faster-growing or higher-potential accounts such as drug chains, Costco, Target and some faster-growing regional supermarkets.

Companies are becoming increasingly aware of the fact that they do not want be dependent on Wal-Mart for their sales. They want to find new ways to grow their business profitably.Interestingly, P&G has, through acquisitions and growth in emerging markets, driven its share of sales from Wal-Mart down to 15% from 18% the past four years. Even Clorox Co., which gets 26% of its sales from Wal-Mart, seems to be paying more attention to other retailers, specifically supermarkets.

I have a few tips for companies looking to grow without Wal-Mart below:

1). Re-position products - A lot of companies position their products as "bargain" brands. It is tough to make a product stand out from the crowd if everyone else is saying their price is the lowest. Instead, position your product as a top-of-the-line item shifting the focus from price to quality. However, you may want to narrow down the number of retailers who carry your product if you intend to do this.

2). Selective Distribution - Selective distribution channels will help make your product exclusive and unique. Only make your product available at specific retailers. Paul Mitchell has done a great job using this strategy to promote its line of hair products.

3). Target a particular demographic/niche - You may want to consider partnering with retailers who specifically reach your target market. For example, you may want to develop a relationship with retailers like Gap, Old Navy or Macy*s if you are trying to reach the 25-34 crowd. In contrast, you may want your products to be exclusively sold through Bloomingdales or Nordstrom if you want to reach consumers living in households with annual incomes greater than $100,000.

I hope that some of my advice may be useful. Feel free to leave a comment or suggestion regarding anything I've written.

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