Lonnie: Don Soderquist, he used to be a fairly
high-ranking person at Wal-Mart. He one time
said selling to Wal-Mart is not a difficult
process. It’s pretty straightforward and really
it is. It’s a lot of stuff that you have to
learn, but once you learn it, regardless of what
product you’re carrying, you’re probably going
to be successful. I love to think you’re going
to be successful and that’s why we do what we
Michael: Getting a product into Wal-Mart or any
of these large mass merchandisers is like
winning the lottery to an entrepreneur or a
product developer. I want to shed some light
onto the reality of this subject and, obviously,
it’s been done before because Wal-Mart is filled
with products. But I want you, through you’re
experience, to talk about your trials and
tribulations and your frustrations and your
successes and how you did it and maybe someone
listening to this, it can give them a more
realistic view of how to do it and things to
avoid. And we’ll just kind of talk about your
Michael: So, how did you, Lonnie, start in all
this? Give me the genesis of even being an
entrepreneur. Where you an employee of someone
before you got into trying to get your stuff
Lonnie: I’ve been involved in consumer-packaged
goods now for about 22 years.
Michael: So, explain what is a consumer packaged
Lonnie: A consumer-packaged goods is a company
that manufactures items for resale. When you
think of CPG, that’s what we abbreviate it, CPG
manufacturers, we’re thinking of people like
Procter & Gamble, Unilever, General Mills,
Quaker, Pepsi-Cola or PepsiCo, that’s a CPG
company, as well.
Michael: So, I’m thinking Coca-Cola, cereals,
soaps; things like that. What about Procter &
Lonnie: Procter & Gamble is a consumer packaged
goods company without a doubt, yes. As a matter
of fact, ironically I started my career with
Procter & Gamble years ago back in the early
80s, covering a pretty diverse territory for
them, so that’s kind of where I got started into
Michael: As a sales rep?
Lonnie: As a sales rep, yes.
Michael: What were you selling, their whole
Lonnie: No. Really Procter & Gamble at the time
at seven divisions and the division that I
worked for was bar soap and household cleaning
products. So, I sold the soaps like Coast and
Zest and Ivory and the household cleaning
products like Downy and Mr. Clean. Now, there
was also a division that sold packaged soaps and
detergents, so I wasn’t a part of that division.
I was part of the other division that
complimented that. And then, of course, it had
six other divisions besides those two.
Michael: So, what was your job with them?
Lonnie: Sales rep. And so, what I did was I
walked into retailers and I would call on retail
outlets and back in the days when I started
there were still a lot of independent grocers
left around. So, when you call on the
independent grocers, you really got a better
understanding of how grocery worked because
these guys that you called on, Michael, were
responsible for everything. They’re responsible
for their entire P&L. Their entire family’s
livelihood relied upon them doing well in
Michael: And there’s very small margins in the
Lonnie: We used to call them razor thin. We had
this little deal where we used to go out and we
took a dollar bill and we would mark this dollar
bill off based upon how much money went where
for the retailer. And in terms of profits, we
had less than a penny marked off one the dollar
Michael: Per dollar?
Lonnie: Per dollar, yes.
Michael: So, it’s like 1% profit.
Lonnie: So, you’re looking at about 1% is what
they’re actually getting at the end of the day.
Even though they work on higher margins, at the
end of the day they’re getting about one penny
out of every dollar goes towards profit. That’s
the way it was back then. And now, of course,
with the new bigger retailers like Wal-Mart, it
might even be less.
Michael: So, what did you learn by calling on
the independents? What is it you learned from
them that made it valuable for today?
Lonnie: Number one, you understand the whole
grocery business, the whole supply chain. You
understand where it starts, where the whole
lifecycle starts out in the field, and you also
learn how it gets into the stores, how to
markup, what kind of margins they’re operating
on, different types of overhead; for instance,
labor and that nature. What’s the greatest
amount of overhead? I guess the biggest thing
you learn is how to be a retailer. For instance,
at a chain store, you only see one side of it.
At an independent store where the person owns
it, you see everything. When you would meet with
an independent owner, you met with not only the
person that was in charge of marketing, you met
with the person that was in charge of
operations, you met with the human resources
manager, and everything in that one individual.
And so, you learned a lot about the business
calling on the independents back then. Now,
they’ve all gone along the wayside. There are
not a lot of independent grocers left anymore.
There are very few, they’ve been eaten up by the
Michael: Just gone out of business.
Lonnie: Well, yes. There’s a lot of negative
press out there now about Wal-Mart in terms of
what they’ve done to the independent grocer. But
I think all chains have that responsibility, as
well, because when I started calling on them
back in the 80s, Wal-Mart didn’t have a Super
Center, but independent grocers were going out
of business left and right and Wal-Mart wasn’t
around at that point. So, it’s just the
evolution of the business, it’s not just about
Wal-Mart. These chain operators can do it
bigger. They’re more efficient. They have bigger
buying power than Mom and Pop grocery stores.
Michael: Working for Procter & Gamble, they’re a
huge company. Do they have influence that gave
them a huge edge even to get into the
independents and even the mass merchandisers
that the small guy, the guys with the dream and
a product who want to try and get in, the little
guy. I mean, obviously, how can a little guy
compete with such a powerful force like Procter
Lonnie: That’s always been a source of
contention for a folks, as well, when they dealt
with big companies. Procter & Gamble never had
much influence as much so as they had excellent
Michael: So, they really were a great product
Lonnie: Without a doubt. Procter & Gamble…they
were very cautious, they were very _____ about
how they did things. And when they came out with
new items, you better believe that it had been
tested and tested and tested and tested again to
the point where it almost ended up, Michael,
being a detriment to Procter & Gamble. There’s
this old story about Procter & Gamble and Loves
or Pampers…I’m not really sure which one it
was…and how Procter & Gamble was a leader in the
market and how Huggies took that because if you
look on the side of the diaper, it had those
little sticky things that stick, Procter &
Gamble was scared that little tiny plastic piece
that came off of the adhesive piece, they wanted
to make sure no kids would choke on it. They
tested and retested and in the meantime Huggies,
Kimberly-Clark came out with theirs and boom.
So, they were able to take advantage of that.
And so, the whole idea behind test markets,
which was a solid proposition, started to go
away, as well because there’s like, look, if we
want to get our product to market fast, we don’t
have time to test market. We need to get it out
in the stores.
Michael: What did you do after working for
Procter & Gamble?
Lonnie: After Procter & Gamble, I went and I
worked for Frito-Lay, which is a division of
Pepsi. There are essentially two types of
distribution methods in consumer-packaged goods.
There’s warehouse where the product is made by
the company, shipped through a warehouse, and
shipped to the customer’s warehouse and then out
to the customer stores.
Michael: I want to backup. So, would this fall
into the category for Frito-Lay?
Michael: Would that fall into the category for
what Procter & Gamble was doing?
Lonnie: That would fall into the category for
Procter & Gamble.
Michael: So, give me an example.
Lonnie: Well, first of all, Procter & Gamble
manufactured the soap in their manufacturing
facility, so there’s a case of soap. Now, a
customer would place an order for a case of
Michael: And a customer could be a chain of
Lonnie: Could be a chain of grocery stores,
right. They would place an order and say send me
a truckload of this soap. So, for instance, that
purchase order would go up to their order
processing area, the order would be processed,
the truck would be loaded, and the truck would
go directly to the customer’s warehouse where it
would loaded and slotted into the warehouse.
Michael: And then it’s distributed to their
stores from the warehouse.
Lonnie: That’s what we call warehouse. Now, the
other delivery system is called direct store
delivery and we abbreviate that as DSD. And what
direct store delivery does…for instance, let’s
go with Frito-Lay. Frito-Lay manufacturers their
chips, they fry their chips and the put them in
bags. Instead of putting them in cases and
shipping them those cases directly to the
customer’s warehouse, they put those chip on the
back of trucks, and the Frito-Lay delivery
person goes out to the store every day and
delivers the chips directly to the store. And
that’s what we call DSD. And you can see that.
When you go to the stores in the morning, you’ll
see a lot of bread trucks, a lot of Frito
trucks, a lot of cake trucks, and even some
frozen food truck delivering right there that
Michael: Is that a necessity because of the
short lifespan of the product or why do we some
products delivered that way directly to the
stores compare to warehouse? Why won’t they just
ship to a warehouse and let the stores do their
Lonnie: The reason they don’t do that is, again,
just like you said, its part of that perishable
nature of the product. You’ve probably got a
point with Frito-Lay because with Frito-Lay,
their product has 60 to 90 day shelf life on it.
You could literally take that through most
warehouses and not lose. But the direct store
delivery piece that Frito-Lay has put in place
enables Frito-Lay to always make sure their
product is on the shelf. They’re touching their
product every day.
Michael: They’re going in looking at their shelf
space. They’re making sure it looks neat, their
display, their point of purchase.
Lonnie: Now, you take a company like Wal-Mart,
they have such an efficient supply chain. They
could literally take that through the warehouse
and probably do just about as good a job getting
it to the stores as the DSD guys. The problem
you have, though, is once it gets to the store,
who is going to touch it. And so, that’s where
the DSD guys…they will fight going through the
warehouse tooth and nail.
Michael: So, they don’t want to go through a
warehouse because they know that’s going to hurt
their sales in the long run.
Lonnie: Yes, I think they know that. The major
companies know that. They think it will hurt
Michael: That’s what sales reps for
Frito-Lay…they’ve got people in areas delivering
and touching that product and making sure it’s
displayed properly or new promotions are done to
help move it off the shelf.
Lonnie: Right, and if they didn’t do that, then
someone in the store would have to do that.
Michael: And it never gets done. You can’t rely
on the employee.
Lonnie: Frito-Lay has a wonderful model. When I
used to work for them, they used to brag about a
98% customer service ratio every day. That’s
phenomenal. They want to get a service level,
that 98%, every day.
Michael: So, with Frito-Lay, what were you doing
Lonnie: I worked on their systems and I worked
in an area called category management. And from
the systems standpoint, I was helping them
understand how to leverage data to sell
products. That’s the bottom line.
Michael: How to leverage data to sell products.
Lonnie: Right. And then by doing so, how could
we package that data and deliver that to the
salespeople. And so, we would build a software
program to deliver that sales data to the
salesperson out in the field who then in turn
would deliver it to their customer in a value
added way. And I also did their category
management piece. Now, what category management
is was simply a big push back to the mid 90’s to
early 90’s and it’s even still around where you
focus more on the category than the individual
Michael: What does that mean?
Lonnie: Say for instance you want to do a
promotion on Tide. You’d give all this money to
do this promotion on Tide. You’d sell Tide at
such a crazy price that you look at your
category at the end of the day and you lost
money in your category, right.
Michael: And your category is what…the laundry
Lonnie: The laundry detergent category, right.
So, what retailers started to say was wait a
minute, wait a minute. You guys are coming in
and your managing your brands, but you’re not
managing the category. It’s got to be our
responsibility to manage the category so that if
there’s a brand that pulls overall profitability
and sales in the category down, we need to make
sure that we have the right type of promotions,
right type of product mix and everything to
ensure that that does not happen.
Michael: So, does that mean that if they come in
a run a real low price or a coupon on Tide, then
everyone comes in and buys the Tide, but they
don’t buy the other soaps in the category at the
grocery store and that hurts their sales.
Lonnie: That’s irresponsible category
management, yes, will hurt their sales.
Michael: The grocery stores don’t want that.
Lonnie: Well, I wouldn’t think so. I wouldn’t
want my category to lose money. You could say,
well the money that Tide gave you to run the
promotion should offset loses. No, that’s not
the case because every day when you sell Tide,
you’re also selling another product at full
revenue. You’re selling Tide at full revenue,
you’re also selling other people’s product at
full revenue, as well. So, when you deal Tide,
yes you’re going to sell more Tide, but you’re
going to lose those full revenue sales of other
people that someone would have bought. But you
say, well I can’t pass up this deal on Tide. And
so, you’ll lose some revenue that way. Although
there’s a twist to that, which we’ll talk about
in a minute when we talk about Wal-Mart, but the
whole category management piece is manage the
health of the category. Don’t just manage
individual brands in the category and really
that’s the way even buyers have managed and
merchandisers have managed the category previous
to category management.
Michael: So, that’s important for buyers when
they’re looking at the products is to understand
is this product going to help my category rather
than just looking at a product sales focus.
Lonnie: Right. And here’s an important point,
Michael, category management enables the small
manufacturer or the small guy with the great
idea to be able to compete with the big boys
because what it does is it says this product
might be right for your category…now it might
not be right for all your grocery stores or it
might not be right for all your chain stores or
your discount stores, but it could be right for
Michael: It could be an add-on to a category
that pumps up profit.
Lonnie: Exactly. It could serve a need in that
Michael: So, if you have a product that you’re
asking yourself is there potential for Wal-Mart
or a large mass merchandiser, ask yourself this
question; could my product help the overall
category and can I use that as a selling benefit
when I get in to talk to a buyer.
Michael: That’s something I never even realized.
Lonnie: Exactly. I tell people whenever they
want to get a new item anywhere, I don’t care
what store they want to get it in, I don’t care
if it’s a small independent grocery down the
street and they just want to make the product
for that one store, to before you even approach
that store, you go in and you know everything
about that store and you know everything about
that category you want it to go in.
Michael: How would you suggest I do homework on
that? Let’s say I have a product and I want to
get into a store, what would you tell me to do
to go do my research? Go down to the physical
Lonnie: Yes. It all starts with going through
the store. It all starts right there. The first
thing you always want to do is make sure that
there is a glaring need that is not being met by
the products that are currently in the category.
And if you can prove there’s a glaring need
that’s not being met with the products in the
category, you’re going to be successful
somewhere down the line. It’s going to take hard
work, but you’re going to be successful. And
don’t tell me yours tastes better because
everybody’s product tastes better. Everybody’s
products perform better. Everybody’s product
lasts longer. Those are things that buyers get
tired of hearing every day.
Michael: They want to hear unique selling
Lonnie: There it is right there. The USP, the
unique selling proposition. They really do want
to hear that. They want you to give them
compelling reasons. Buyers don’t really want to
Michael: Do they want reasons to say yes?
Lonnie: Yes. I read a long time ago from a guy
named Jeff Fox and he wrote a bunch of books,
one called How To Be A Rainmaker and How To Be A
Marketing Superstar, and he said, “Buyers don’t
buy products, they buy what products can do for
them,” which is very important. It’s almost
personal. I tell people all the time, look,
buyers don’t always buy the best tasting
product. My case in point is, go to any store
and start picking product off the shelf and eat
it. Some of that stuff tastes so bad you want to
throw up. Buyers buy what products can do for
them and by them they mean what it can do for
their bottom line for their store. Does it meet
a compelling need? Does it meet a glaring need
that’s not being met currently based on the
Michael: How about for their ego? There’s a way
to sell a buyer and a buyer has ulterior motive.
They want advancement. They want the star
product. They want recognition. Can you give me
the psychology of the buyer?
Lonnie: Well, again, it gets back to that
statement…buyers don’t buy products; they buy
what products can do for them.
Michael: So, if a buyer comes across a super
product that just really kicks ass in the store,
what can that do for a buyer’s career?
Lonnie: You understand that you’re measured by
the overall category gross margin, your overall
category profitability. There’s a number of
factors that you’re measured by.
Michael: So, buyers are constantly measured by
Lonnie: Oh, yes, without a doubt because again
you’ve got a sales budget and if you don’t meet
that sales budget, you’ve got a problem because
it all rolls up to that overall budget, which
says this is what we’re going to do as an
organization for this year. And so, you’ve got
your goals that you have to reach. Every buyer
waits for that one product to come in the door
and say wow, this is going to take me to fame
and fortune. You never know what it is. I mean
we’ll talk later about some of the examples with
Wal-Mart where they have a program called the
VPI program, which used to be a program called
the volume producing items.
Michael: Is that a program for buyers?
Lonnie: That’s a program for buyers. That’s a
program for store level. That’s a program for
everybody at Wal-Mart that is in some type of
capacity that touches product that can have VPI.
Michael: Because they want that whole company
looking for the next star product.
Lonnie: Without a doubt. That was all Sam Walton
and his genius.
Michael: Tell me what can happen to a buyer if
he finds that product? Let’s say he finds that
star product that catapults huge sales for
Wal-Mart worldwide or nationally or whatever. Is
he paid a commission on gross revenues if he’s
the guy who found that product? What kind of
incentives are there for him in volume-wise to
really keep an eye out for good products?
Lonnie: Pretty much everybody that I ever called
on has a bonus potential. And so, what it
relates to is if they get certain criteria,
they’re going to make additional monies. They’re
going to get a bonus based upon what they did.
And so, that’s why they’re always on the lookout
for that product, as well, because it’s going to
mean money to them. Now, there’s a cap to what
they’re going to make. It’s not going to be
infinite, no. But they’re still going to be able
to make their max bonus if they have the right
item and the numbers actually hit; whatever that
scorecard has down there.
Michael: My father used to tell me never write a
buyers name down in pen because they’re always
moving around; always do it in pencil. What’s
the lifespan of a buyer?
Lonnie: It just depends. My experience at
Wal-Mart in one of the categories that called
on, over the last six years I’ve had ten buyers.
So, ten buyers in six years, that’s less than a
Michael: And where did they go?
Lonnie: They go on, they move up, or they move
Michael: They move up to different categories?
Lonnie: No, they move up to the same category or
promotion within a different category or they
move out, meaning they move…could be to a
different category or out of the company.
Michael: What’s the hierarchy, the levels of a
buyer? Start from the lowest to the highest. How
does it work? Is everything broken down in the
Lonnie: Well, yes. It really varies, too. A
buyer is also called a category manager. You’ve
got that. Below them you’ve got an assistant
buyer or assistant category manager. Then you go
up from the buyer, you’ve got a senior buyer and
then you can go up to a variety of positions
from there; head of grocery merchandising or
vice president of perishables. It just depends.
I think Kroger years ago used to have their
buyers and then the buyers would actually go out
and work the stores and run the stores at a
Michael: So, are the buyers the ones meeting
with the sales reps or are the assistant buyers
Lonnie: No, the buyers are meeting with sales
Michael: The assistants are supporting the
buyers…administrative or whatever.
Lonnie: And sometimes they’ll meet with reps.
Michael: So, does the buyer have to get approval
from who’s above him?
Michael: All buyers have decision making
Lonnie: They have decision making ability,
however, there are some organizations that have
a buying committee and if someone comes in with
a new product, they present that to the buyer
and then buyer in turn goes and presents that to
the buying committee.
Michael: So, they have meetings every week?
Lonnie: Right, every Friday or every Monday, it
just depends. And the buying committee makes the
determination if that is a good product and it
should be brought into the company. But, in a
company like Wal-Mart, you can’t have a buying
committee meet every week, although they do have
their weekly meetings on Fridays and they do
have a Saturday morning meeting. A lot of good
ideas and they share. A new buyer is not going
to buy something without getting the go ahead
from their boss, but many buyers bought from me
right there on the spot.
Michael: I want to go back a little bit. What
happened after Frito-Lay?
Lonnie: I did some consulting for a little bit
with IBM; business and retail and consumer
packaged goods manufacturing.
Michael: Because you had gained a lot of
experience with your years at Procter & Gamble
Lonnie: Oh, without a doubt.
Michael: How many years total between the two?
Lonnie: Eleven years.
Michael: So, why did you end Frito-Lay? You were
just tired of it?
Lonnie: I was just tired of it, yes. I had to
move on to what at least I thought was a better
Michael: So, you got into consulting.
Lonnie: Yes, I did consulting for a couple of
Michael: What were you doing in that? You were
Lonnie: Retailers and manufacturers. Mostly
retailers. I helped them become profitable and
look at their categories, make sure they had an
efficient process and procedures in place and
all those types of things. It was kind of
interesting; a lot of manual, hard work, a lot
of documentation…documenting of processes and
procedures. It wasn’t very glamorous, but I
think it’s something that really gives you a
solid base to go out and do others things.
Michael: Where were you seeing the most common
mistakes among the retailers you were consulting
with and would that shed any light for
opportunities for me getting my product into
Lonnie: Oh, yes. The most common mistake that I
saw with retailers is that they didn’t know how
Michael: They didn’t know what was going to
Lonnie: Well, they kind of had an idea, but they
just didn’t know how. Let me give you a good
example. I did an engagement one time with a
beverage company on the Eastern Coast.
Michael: What does an engagement mean?
Lonnie: A consulting gig.
Lonnie: I did this with a beverage company on
the East Coast and this company had done like $5
million in sales.
Michael: What were they selling?
Lonnie: They were selling alcoholic beverage
items…micro-brews, wines, those types of things.
They made $5 million in sales and lost $10
million. There was just such disparity between
their profitability and their overall sales that
it wasn’t even funny in terms of how much money
they lost. And they were, we don’t know why were
losing all this money. So, I started talking to
some of the buyers and here are a few examples I
Michael: These were people who bought their
Lonnie: Yes. They bought for those stores. Do
you see what I’m saying?
Michael: You were consulting with a beverage
company, but you were talking to buyers of these
Lonnie: This was a retail beverage outlet. It’s
just like calling on a regular buyer for a
Michael: I’m with you.
Lonnie: And so, they were buying all these
beverage products from around the world, not
around the country, but from around the world.
And here are two glaring mistakes I saw one
buyer make. One buyer was talking about
Coca-Cola and we were sitting there talking and
I found out he had a warehouse full of Coke. And
I said why do you have a warehouse full of Coke?
He said because it was such a good deal, I
couldn’t pass it up. I said wait a minute. Let
me get this right. You’re using warehouse space
on a direct store delivery product? And he said
yes, it was a great deal. I’m like well it’s
direct store delivery. You don’t need to forward
buy on direct store delivery. What he was doing
was forward buying on direct store delivery at
this great deal; at least he thought it was a
great deal. And it really wasn’t because
beverage items…I can go back in 1982 when two
liters were introduced around that time frame, I
could buy a two0liter for 99-cents. Guess what,
Michael, it’s 2006 and I can still buy a
two-liter for 99-cents. He got someone who sold
him what he thought was a great deal. I think
ultimately it hurt the person who sold it to
him, as well, because it’s showing you’re not
thinking for the future.
The second one is there’s these vineyards around
the world and what these guys would do is they
distill wine. They’d bottle this wine and it
would be a limited run. Well, what these guys
would do is they found it would be a limited run
and they’d go and they’d buy all the inventory
not knowing if they were going to sell it or
not. They’d just buy so their competitors
wouldn’t get it.
Michael: So, they were making poor business
Lonnie: They were making very poor business
decisions. So, when I went in there were $200,
$300 bottles of wine on the shelf that were not
going to move and contrary to popular belief,
all wine is not good aged. And so, you had to
have a fire sale. And when I talked to the buyer
about it, he says well you don’t understand
wine. We buy for passion. And I said and you
don’t understand business. It’s okay to have
passion for the business, but if you’re buying
based on passion and not based on the numbers,
well you’ve got a problem.
Michael: So, were you able to help these guys
Lonnie: We helped them out. It was a few of us.
We spent around six months just helping them out
and apparently they just turned profitability. I
went on with different things. But the bottom
line is in this business, if you’re really not a
good business person and you really don’t
understand the category that you’re calling on
or that you’re buying and you really don’t
understand what your overall goals are, your
objectives, you’re going to have problems.
Michael: So, you did the consulting for two
years and then what?
Lonnie: And then I just had a variety of
different jobs, but more importantly, I worked
for a tortilla company for six years. And with
that tortilla company it’s when I got most of my
Wal-Mart experience. The first time I called on
Wal-Mart was back in about 1993.
Michael: Was your capacity as a sales rep?
Lonnie: You could call me a sales rep. Actually,
I was a team leader and I built a team of people
at Wal-Mart. But the bottom line is when I took
over the Wal-Mart business the company
nationally had done around a half a million
dollars with Wal-Mart. When I left that company
a year ago, they did $120 million.
Michael: Were these soft flour tortillas or
Lonnie: These were flour and corn tortillas,
yes. So, the bottom line is you take a niche
product and you can build that niche product to
$120 million business.
Michael: Was the geographical or were you going
Lonnie: National. I called on Wal-Mart
headquarters and built a team up there.
Michael: Let’s do the story. This was your first
experience getting into Wal-Mart. You were
representing flour tortillas.
Lonnie: No. My first experience getting into
Wal-Mart goes back to Frito-Lay.
Michael: Do you want to talk about that success?
Lonnie: Yes. Frito-Lay actually had a small
warehouse business and if I’m not mistaken, they
were trying to leverage their Taco Bell line at
the time. Frito-Lay was part of PepsiCo, who at
the time back in the early 90s owned Taco Bell,
Kentucky Fried Chicken, and _____. So, they were
trying to leverage their Taco Bell line, which
they had taken the Taco Bell name and they had
put it on some tacos and they boxed them to be
sold it through the warehouse and by a company,
the young man up there…back then we flew into
Fayetteville. Nowadays, Wal-Mart has built a
pretty nice airport in Northwest Arkansas. They
have direct flights in daily from a number of
cities around the country. But when I flew in,
we were still flying on a prop-plane to
Fayetteville, Arkansas, which they had a little
airport there. And we went to meet and that was
my first experience with them and that’s where I
really understand when we met with a kid that
looked like he had been out of like high school
for two days.
Michael: And he was the buyer.
Lonnie: He was the buyer.
Michael: What year was this?
Lonnie: This was back in 1993. We flew into
Michael: What’s the city like? Was it built up
at all there back then?
Lonnie: No. Back then it was that built up, but
it was getting there.
Michael: And so, this is Wal-Mart’s
Lonnie: Wal-Mart is headquartered in
Bentonville, Arkansas, and Bentonville is a part
of a metropolitan area in Northwest Arkansas
that includes Fayetteville, Springdale,
Bentonville, obviously, and then there are some
smaller communities, _____; they’re all part of
that metropolitan area. And so, anyway, we flew
into there and it was that same day in and same
day out because they’re flying out of Dallas. We
flew in and went to meet with the Wal-Mart
buyers. He looked like I said, two, three days
out of high school, but when this kid opened his
mouth, I found out he was very intelligent. We
threw our proposition out there and that where
he broke in and he says, look, number one you’ve
come in here with an item, have you even
bothered to go visit the category. Do you know
how much space I have in the category? Will this
product even fit in the category? How am I going
to price this product? What differentiates this
product from any other taco shell that we have
on the shelf? Why is your product better? And he
really came after these guys and he told
them…and I was the category manager representing
them at the time…and he told us all, he says
listen, get your act together and try it again.
And so, that was the end of the meeting.
Michael: Those buyers, they’re saying come and
sell me your product and tell me why and how I
can do it and we’ll do it.
Lonnie: Don Soderquist, he used to be a fairly
high-ranking person at Wal-Mart. He one time
said selling to Wal-Mart is not a difficult
process. It’s pretty straightforward and really
it is. It’s a lot of stuff that you have to
learn, but once you learn it, regardless of what
product you’re carrying, you’re probably going
to be successful. I love to think you’re going
to be successful and that’s why we do what we
Michael: So, you hear rumors that it’s all
political. That master distributors are the only
people who can get into these large chains and
they hire lobbyists to lobby the buyers. Is this
a bunch of BS?
Lonnie: No. First I think it’s a bunch of BS
that only major companies can get into Wal-Mart.
Yes, that’s definitely a bunch of BS. And I
think what it is, is people who are making
excuses. You hear that a lot. I’ll never get
into Wal-Mart. I’m a little guy. They don’t care
about me…blah, blah, blah…and so forth. Wal-Mart
has put a very unique process in place to make
sure that the little guy can be successful at
Wal-Mart. However, they don’t depart away from
the critical merchandising standards and the
critical process that you need to follow to be
successful. So, they’re not going to depart
their business model so that you’re successful.
They’re going to say, look, if you’ve got a good
item and it fits in this particular business
model, then we want to hear about it.
Here’s a neat story. I had a guy call me up
about three days ago. He was young. He was in
his 20s and lived up in the northeast and he
said I’ve been trying to get my product into
Wal-Mart and they told me you’re the person that
can get it in there for me. And I said well I
don’t really do that type of thing. I can give
you information on how to get your product into
Michael: Who told him that?
Lonnie: Well, he was using a sales ploy.
Michael: I see.
Lonnie: And I said well first of all what’s your
product. And he said it’s really an idea. I said
oh it’s an idea. And he’s like yes. And I said
what’s your idea. He says I’m a really good
drawer and a lot of people tell me I should make
tee shirts. And I said you should make tee
shirts. And I said what’s your manufacturing
capabilities and he said huh. I said if Wal-Mart
brought in one of your tee shirts tomorrow,
could you supply them with 1,000 tee shirts if
they wanted them right there. Well, no because I
was thinking about running it off on that paper
and ironing them on each tee shirt. But this is
what we get.
Michael: Because most people are very clueless
when it comes to business. They just have no
Lonnie: Right. And so, I tried to help the kid.
I didn’t want to discourage him or anything like
that. I said listen get a track record on it and
so forth, but you don’t walk away saying this
guy’s telling me Wal-Mart doesn’t want to deal
with me. And so, that’s why those rumors start
getting spread. You get folk out there that
really don’t do their homework. Wal-Mart tells
you everything you need to do and just go do it.
It’s some pretty straightforward stuff.
Michael: You just have to get some education and
have an understanding of how to do it.
Lonnie: Right. I used to have a little saying
years ago, a big would come work with maybe the
senior vice president of sales would come work
with the sales rep and that rep would call me
the night before and say Lonnie I don’t know
what to do. This guy is coming to work with me
and blah, blah, blah, and so forth. And I would
always tell them you can get your act together
for one day because this could mean your career.
And if you can’t get your act together for one
day, you have no business being in this
business. That’s the same thing with Wal-Mart.
You get an appointment…or any customer…Michael
you get an appointment with any customer, if you
don’t do a pre-call plan and spend the amount of
time and hours that you need to get ready for
that call, then you don’t deserve the business.
Michael: That one visit to Wal-Mart could set
you for life.
Lonnie: It could set you for life, yes indeed.
But the bottom line is a lot of folks don’t
really get ready for that one call.
Michael: Do you have some stories in your mind
where you’ve known the little guy or guys with
dreams and ideas and they’ve approached Wal-Mart
and literally become millionaires?
Lonnie: Well, I mean look at the tortilla. In
the tortilla category you’ve got a couple of
companies. You’ve got Azteca Foods, they’re your
number two company. You’ve got Mission Foods
who’s your number one company.
Michael: Where’s Mission out of?
Lonnie: Mission is out of Dallas, Texas. They’re
based in Irving, Texas just right outside of
Dallas. They’re a billion dollar company. He
started back in 1977 in the United States with
nothing in terms of selling. He was very
successful in Mexico, so he brought it over
here. But the point I’m making is there was a
guy named Don Barnes. Don Barnes, Jr. graduated
from North Carolina, came out of college, his
dad was a pretty successful businessperson, too.
He says to his dad, dad you know what, I think I
want to go into business for myself and he said
what are you going to make son. He said I don’t
know. He got to thinking and he said I know
there are a lot Mexicans moving into North
Carolina. He says I know they eat something. He
says, wow, they eat corn tortillas. So, Don
Barnes got into the corn tortilla business. He
opened up a plant and started making corn
tortillas. And a few years later, Mission came
and bought him out for line $30 or $40 million.
I don’t know what the figure was. But I mean
here’s a guy that started and he’s successful
getting into Wal-Mart. And there’s a lot of
small tortilla companies out there. There’s
Albuquerque Tortilla Company out in New Mexico.
They were a small company that got into
Wal-Mart. There’s a little small company out of
Plainview, Texas called Casa Rica.
Michael: Let’s say I’m a manufacturer in China
or some other country and I want to get my
product here into the United States. Is Wal-Mart
looking for products from other countries or are
they loyal to America?
Lonnie: Wal-Mart has three ways you can get into
their stores. One way is you can be manufacturer
that sells a product in the United States and
you’re going to sell it to all stores. Number
two, you can be a manufacturer in the United
States and you’re going to sell it to a few
stores and there’s a process by which you do
that. And then number three, you can be an
importer, and by importer that’s the
manufacturer in China that wants to get their
product into Wal-Mart. And there’s a buying
office in China that they would go through to be
able to get an audience here in the United
States and present their product. Wal-Mart is
always looking for the right product.
Michael: Are buying offices set up all over the
Lonnie: Oh, yes. They’ve got buying offices
Michael: And in the Chinese office, they all
speak Chinese there?
Lonnie: English, as well. They’re Americans in a
Chinese office. Wal-Mart has a buying office in
Puerto Rico. Wal-Mart has buying offices in
Michael: How big is Wal-Mart for someone who
really doesn’t understand the sheer size of this
Lonnie: Let’s look at Wal-Mart’s sales. Wal-Mart
had $300 billion in sales last year. If you look
at their $300 billion in sales and you make it
equivalent to the gross national product, that
would make Wal-Mart the 9th largest country in
the world, if you equivalize that to the gross
national product. If you look at Wal-Mart as a
city with it’s 1.7 million employees in the
United States, that would make it the 5th
largest city in the United States. So, that’s
one of the best ways you can look at Wal-Mart.
In terms of stores, they’ve got well over 3,000
Michael: Just in the U.S.
Lonnie: Just in the United States, right. And
then they’ve got stores in Argentina, Mexico,
Canada, Great Britain, Germany, China.
Michael: Can someone get a product into Wal-Mart
here in the U.S. and then it gets picked up in
Lonnie: Oh, yes. We were trying to do that with
Michael: Let me ask you this. I’ve heard that
you will not get into Wal-Mart…for some
products, I’m sure it’s not for
everything…unless you have a huge advertising
budget and they want advertising to support the
sales of the product. And if I’m a small guy and
I’ve got an idea and a product, but I don’t have
a million dollar advertising budget, is there
really a chance for me?
Lonnie: No, that’s not true. There’s always a
chance for you. There was this story about the
girl who sold the antenna balls to Wal-Mart.
Michael: Tell me about that story.
Lonnie: Apparently some young lady decided to do
a special type of antenna ball that you would
recognize your car in the parking lot and they
were a huge hit at Wal-Mart. She didn’t have a
million dollars of this or a million dollars of
that. She didn’t have all of this, she just had
a good idea and she got a manufacturer and she
got them brought on by Wal-Mart.
Michael: Is Wal-Mart loyal to their customers?
So, for instance, let’s say she came up with an
antenna ball and Wal-Mart is buying them for
$1.50. She’s patented. Some guy knocks it off,
approaches the buyer at Wal-Mart and says I’ve
got these antenna balls, but I’ll undercut what
you’re paying right now. I’ll give them to you
for $1.00. Is there any protection or loyalty to
their existing customers where they’re just not
going to buy the guy’s because he can sell it
for 50-cents less? I want the real world.
Lonnie: I’ll give you the real world answer.
Wal-Mart has certain standards for vendors. They
publish those vendor standards. Supplier
standards is what they call them. As long as you
meet those supplier standards, if you come with
a cheaper mousetrap, Wal-Mart is going to buy
Michael: They are?
Lonnie: Oh, yes. Wal-Mart is going to buy it if
it’s a cheaper mousetrap, but it offers the same
quality or better than what they’re currently
carrying, they’re going to carry it.
Michael: Okay. So, let’s stop right there. So,
let’s say someone is looking to get into
Wal-Mart and they’re looking for opportunity,
can I go to Wal-Mart, go to a category, go look
at products and ask myself how can I beat this
product. How can I make this product better? How
can I get it to Wal-Mart cheaper? Is there a
possibility for me to get in that way?
Michael: Just do it better and cheaper.
Lonnie: If you can do it better and cheaper, you
definitely can get into Wal-Mart. You say
better, its just quality…if you have the same
quality or better you can get into Wal-Mart.
Michael: Is that a slam-dunk?
Lonnie: Is that a slam-dunk? No, nothing is a
slam-dunk with Wal-Mart. But it’s very
Michael: That’s a good strategy.
Lonnie: It’s a wonderful strategy if you can do
it. Wal-Mart looks at a company like this. They
say, look, first of all you have to have the
wherewithal. That’s mean your financials and
whatever to be able to support the product that
Michael: Let’s talk about that. Let’s say if I
don’t have the money and I go to a buyer and he
says I like it, we’re going to go into 300
stores, here’s your P.O. Can I take that P.O.
and get money?
Lonnie: I have known people to do that.
Michael: How much of a barrier not having the
money to support Wal-Mart purchase orders, is
that a barrier or are there ways around it?
Lonnie: It is a barrier because number one,
Wal-Mart is going to look at your financial
before they let you on as a supplier.
Michael: Before they give me a P.O.?
Lonnie: Well before they get a P.O., they’re
going to look at your financials.
Michael: What if I don’t have the money? What’s
a strategy for me to get around that?
Lonnie: I would get the money because Wal-Mart
is not going to be in the money-fronting
business. It’s like we’ll bring you in and we’ll
front you the money by buying the product.
Michael: At what point are they looking at
money, after I meet with a buyer?
Lonnie: Well, it’s hard to say. What happens is,
once they want to see you they allow you to fill
out a supplier form to become a supplier at
Wal-Mart. And when you filled that out, it has
all the company financials…you’ve got to give
them a DNB and you know what a DNB what it’s
going to do. If you don’t have a DNB, you’re not
going to get into Wal-Mart. You know, a Dun &
Bradstreet report; give them a Dun & Bradstreet
report. If you don’t have that, you’re not going
to get into Wal-Mart.
Michael: So, does that mean you have to be a
Lonnie: Even if you’re family owned operation
you’re still a corporation. But if you’re a
self-proprietorship and you haven’t disclosed
your financials for a Dun & Bradstreet, you’re
not going to get into Wal-Mart.
Michael: Okay, because you’re going to have to
fill out a vendor application with financials.
Lonnie: As part of the online vendor application
process, they click there and say okay, now you
have to obtain your D&B report. And then
Wal-Mart obtains that D&B report from Dun &
Bradstreet. If you don’t get it to them, they
obtain it and they charge you like $75 to do it
or whatever the case is. I forget how much
exactly it is, but they already have that
information on file.
Michael: For someone who doesn’t know what a D&
B is, explain it to them.
Lonnie: Well, Dun & Bradstreet is just your
credit rating. It just tells what type of
company you are, what kind of money you have,
what kind of resources you have. That’s
essentially what a Dun & Bradstreet report is.
If you’re going to do business with someone,
it’s always good to pull a D&B to find out what
kind of company they are, what kind of
leadership they have, and what kind of capacity
because remember you are dependent on your
Michael: I’m sure there are a lot of people who
have ideas and have products, maybe have bad
credit, and don’t have a D&B. Can you give me a
strategy of a way to get around that and still
give me the possibility of getting my product
in? Could I approach someone who is already in
Wal-Mart and offer them to carry the product who
already has good credit and a good D&B?
Lonnie: Well, I think so. It depends on what
you’re selling. Number one, it has to fit those
tests that we already talked about. Does it make
sense for the category? Number two, you have to
find the company that has a relate item.
Essentially what you’re doing is signing the
whole product over to the other company.
Michael: Does that sound like an easier way to
go is to find someone who is already an
established vendor and maybe work a deal and
sell them the product?
Lonnie: It’s always an easier way to go, but
what you’re doing now is selling to people
because, number one, you’ve got to sell someone
on buying the product from you to be able to
resell it in Wal-Mart.
Michael: It’s a double-edged sword.
Lonnie: Exactly. It’s not very difficult, but
there’s a lot of work involved in this. And
also, for instance, say Wal-Mart represents 30%
or less of your business. That’s okay. Wal-Mart
gets nervous when they represent more than 30%
of your business.
Michael: Why is that?
Lonnie: Well, because if Wal-Mart should happen
to go to another vendor, you’re out of business.
Michael: Why should they worry about that?
Lonnie: Well, I mean there’s still public
Michael: Do they want to know that you have
other business going?
Lonnie: They had asked me from time to time to
supply my other customers…what do I do with my
other customers. Now, I didn’t supply that
information to them, but I did tell them they
only represent 15% of my business or whatever
the case is and they should leave it alone at
Michael: So, what do you have right now going
Lonnie: I work for another company that has a
product that’s in Wal-Mart and so that’s why I
have to remain confidential about…
Michael: Can you tell me what category it is?
Lonnie: It’s still tortillas. I still do
Michael: What do you call that category, the
Lonnie: Well, you call it tortilla category, but
at Wal-Mart is quite a commercial brand.
Michael: So, you work for a company that has the
tortillas in there.
Lonnie: Yes, they have their tortillas in there
and so I’m helping them out. I worked for a
larger tortillas company, now this is much
smaller tortilla company. We do okay because we
have a good understanding of how we operate at
Wal-Mart. I tell people, too, I say listen if
you’ve got a new product idea and it’s a food
item, it’s always easier for me to get a food
item in than it is to get an electronic gadget
Michael: Why is it?
Lonnie: Everybody consumes foods. See, Wal-Mart
has a deal called store of the community and
what that means is they like to carry items that
a particular geography really likes and really
wants to have.
Michael: Let’s say you’ve got someone who grows
wonderful produce in a local area.
Lonnie: What I mean by this is let’s say you
have a small tortilla company and for 100 years
you’ve lived in this one little area and you’ve
made this wonderful tortilla. A lot of people
love this tortilla in this particular
marketplace and Wal-Mart has 10 stores in this
area. You’re going to find that tortilla in
those 10 stores because it’s part of the
Michael: And what do we call that program?
Lonnie: It’s called store of the community
Michael: So, they want to support local vendors.
Lonnie: They want to support local vendors that
have a huge following in that market.
Michael: Because it’s good money and it gets
people into their store.
Lonnie: It’s good money and it’s good PR, as
Michael: Do they have special buyers looking for
that local community?
Lonnie: Every buyer looks for store of the
community. It’s not special buyers. Every buyer
has a responsibility to make sure they have the
right product mix in every store. And if you’re
in a particular area and there’s a chocolate
company, for instance, and they make these great
chocolates and they’re in every other store in
the area, you want to make sure that you’re
buying that product, as well; same with potato
chips. Gosh, there are so many different snack
companies out there, but some of them have huge
followings. For instance, in Chicago there’s
Jay’s Potato Chips.
Michael: I’m sure Jay’s is in the Chicago area
Lonnie: Without a doubt.
Michael: So, let’s stop right there because
every time you talk, I want to look for
opportunities for the people listening to this
recording. So, look for stars in your community
who aren’t in Wal-Mart. Let’s see if you can
approach those manufacturers as a commissioned
salesperson and get the rights to go to
Lonnie: You could do that. Here’s a neat little
story. I know a guy that makes a meat rub in
Garland, Texas, and I approached him not too
long ago. And I said you really should market
this meat rub because everybody loves it. It was
written up in the Dallas Morning News. It’s just
an outstanding meat rub. Doesn’t have a UPC on
it or anything like that. And I said, Dave, you
should really market this thing at Wal-Mart. And
he says I’m going to think about that, but I
have to get a UPC first. Of course, I showed him
how to get a UPC and all those types of things.
Michael: Real quick, what is a UPC?
Lonnie: The universal product code. It’s the
barcode that goes on every product. You have to
have one if you do business with Wal-Mart. You
have to have a barcode.
Michael: So they can scan it.
Lonnie: It’s not a matter of you getting a
printer and printing off labels with a barcode
Michael: No, there is a process.
Lonnie: Right. You have to be registered with
the Uniform Product Council.
Michael: Can you show someone how to do this
Lonnie: Yes, that’s part of the seminars that we
put on, as well. We show them how to get a UPC
code. But the UPC is based upon the size and
sales of your company. And so, if you’re a small
company, it’s not going to cost you a lot of
money to get a UPC.
Michael: So, you told him to get a UPC code.
What did he say then?’
Lonnie: He said it’s something I want to look
into. He said but I don’t know if I want to be
that large. So, here he has an item that was
written up in the Dallas Morning News…I think
what he was saying to me, though, Michael, is I
don’t have time to do it. I’m waiting for
someone to do it. Now, the reason I didn’t say I
would do it for him is because I’m just a
consumer of the product and I just enjoy the
product. And I’m kind of selfish too because I
always felt that when you find something really,
really good, if I don’t represent it as a
salesperson if I’m using it as a user. The more
mass appeal it gets, the more diluted the
Michael: Right. He may have also thought I don’t
have the money to get into Wal-Mart and had some
of the automatic fears and objections that come
in their mind based on irrelevant information.
Lonnie: And that could have been it, as well.
What Wal-Mart is looking for, again, from a
manufacturer is, number one, do you have the
wherewithal to be in business and do you have
the manufacturing capabilities to supply what
we’re looking for. And if you’ve got that, it’s
fine. And so, you don’t have to have $10 million
in the bank to do that. You might only have
$200, but if you’ve got the manufacturing
capabilities and you’re not deep in debt, you’re
going to be fine. And then, of course, you’ve
got to get your liability insurance. And once
you get your liability insurance, you’re fine.
But there are a couple of things I want to talk
about. First is the VPI program, volume
producing item. Every buyer takes a certain item
that they use to drive business. Now, it used to
be called the volume producing item, which is
the VPI. Now, it’s called the value producing
item program. It’s the same acronym, but it’s
just a different meaning behind it. What it does
mean is that every buyer wants to get an item
that they can really take this item and build
this item and it can really have huge,
tremendous, positive impact on category sales.
Now, the criteria behind the value producing
program used to be that it was an item that
wasn’t in distribution. Do you see?
Lonnie: It’s an item that was not currently in
distribution at Wal-Mart.
Michael: So, a totally unique item.
Lonnie: It’s a totally unique item.
Michael: Can you give me an example of one in
the past that you could relate this to?
Lonnie: Well, let’s look at this. Someone had a
VPI item called pompom in their paper towels and
they were sold at Sam’s and they hadn’t been in
Michael: What’s a pompom? What is it?
Lonnie: A paper towel.
Michael: Is it unique?
Lonnie: It’s an industrial paper towel. It’s for
food service and those types of things. And so,
it was a unique item at that point and someone
had that as their VPI item. But also, though,
remember it says it has not been in
distribution. So, for instance, someone could
have picked the Cherry Vanilla Coke because it
wasn’t in distribution. It’s kind of cheating,
but it wasn’t in distribution.
Michael: You’re telling me each category manager
needs to pick a VPI?
Lonnie: Each category manager doesn’t need to,
Michael: They do pick one?
Lonnie: Yes. They’re very competitive about
these VPI items.
Michael: When they choose the VPI, what are they
saying? They say this is my VPI.
Lonnie: This is the item that I’m going to build
this year. Here’s a small item or here’s another
item that wasn’t in distribution last year and
I’m going to put a huge amount of effort behind
building this item this year.
Michael: And the buyer is saying this?
Lonnie: The buyer is saying this, yes.
Michael: What kind of effort can they put in to
build it other than getting it into more stores?
Lonnie: They can get it in stores. They can get
it in roll back programs?
Michael: What’s roll back program?
Lonnie: Where they roll the price back like
10%…10 to 20% roll back. Temporary price
reduction. They can get it in action alley,
which is that big isle with a bunch of pallets
in it at Wal-Mart.
Michael: Oh, action alley.
Lonnie: They call that action alley, yes. Action
alley was typically between where the general
merchandise and the food areas come together.
Michael: So, that’s a high-volume moving aisle.
Lonnie: That’s a high-volume moving aisle,
right. They can get it in there. They can tell
the stores to push that item and they can get
additional off shelf displays.
Michael: And they want to do this because they
want to build their category?
Lonnie: They want to build their category and in
turn they’re building the brand. They’re
building this new item.
Michael: And as they build the brand, it becomes
more popular and hopefully will be a long
lasting, revenue-generating brand for Wal-Mart.
Lonnie: Exactly. And this item also fills a
glaring need that’s being unmet in the category.
Michael: So, those pompom paper towels, for
instance, that was an industrial paper towel. It
had never been on the shelves.
Lonnie: I don’t know. All I know is that item
was the VPI for one of the big muckity-mucks
over at Sam’s. Now, a version of that could have
been on the shelf, but this particular one
didn’t. Do you know those orange buckets you can
get at Home Depot?
Lonnie: Someone picked yellow buckets or orange
buckets like that. They sold them for like $1 at
Michael: And they just must have sold billions
Lonnie: They sold a whole bunch of them. The
bottom-line, though, its just all a matter of
the numbers, too. If they sold 25 million
buckets, that means they only made $25 million
from that VPI item. Imagine if you took a food
item that retailed at $3 and you sold 25 million
units of that food product.
Michael: The consumables are much more
Lonnie: No, I don’t think so. But what I’m
Michael: In the long run because of the
Michael: Do you see them going after consumer
related products that are consumable for VPIs
compared to one-time sales like a bucket?
Lonnie: Well, yes, every buyer has it. So, for
instance, if you buy tortillas and you can’t
pick a bucket. You have to pick something that
you buy. So, you’re going to pick a tortilla
company…one of their items to really push. If
you buy pastries, you’re going to pick a pastry
Michael: I want to relate it back to me, the guy
who wants to get into Wal-Mart and I want to
relate it to strategy. So, when I’m coming up
with a product, whether I’m going in there
looking for a competitive edge on an existing
product or whether I’m going to source and
manufacture my own product, keep in mind when
I’m talking to the buyer that maybe I could
pitch my product as one of their VPIs and give
reasons why this would be a good one for that.
Lonnie: That’s correct, yes.
Michael: Good strategy?
Lonnie: That’s correct. Personally I think store
of the community and VPI are some of the best
strategies you can employ to get into Wal-Mart
because, number one, store of the community
helps you get started and there is a government
to it. And what I mean that is you’re not going
to get a purchase order tomorrow for a thousand
Michael: When you get into Wal-Mart, they’re
going to test it and be cautious, right?
Lonnie: No, they may not. You might have some
hemp door mat that will retail for 78-cents and
they’ll move like crazy and they’ll put them in
every one of their stores around the country.
Michael: But buyers know that a product like
that is going to move.
Lonnie: Yes. I think they’re going to be
measured at first. Most buyers are measured.
That’s happened to me on some of the tortilla
items that I’ve sold in the past. They say let’s
start out in new stores and then we’ll see how
it does and then we’ll move from there.
Michael: Let’s talk about money. I’m a
manufacturer. I get an order for 1,000 stores of
Wal-Mart. I’ve got to finance everything until
I’m paid. How long am I going to wait until I
get my money?
Lonnie: Wal-Mart pays their bills. If you follow
their process, whatever your terms are, they’re
going to pay within those terms.
Michael: Who sets the terms, the buyer or me?
Lonnie: The manufacturer sets what your payment
Michael: So, when you go into Wal-Mart and they
want your product, you should say look I’m a
small manufacturer, I can handle getting a new
source, but I need net-30. Is that realistic?
Lonnie: That’s realistic.
Michael: So, Wal-Mart will sometimes pay net-30?
Lonnie: They’re going to pay net-30. They’re
going to pay whatever your terms are. If
Wal-Mart doesn’t like your terms, they’ll let
you know up front, we don’t like those terms.
Michael: Something that I always believed, which
may be totally untrue, is that Wal-Mart will
make you wait six months for your money or nine
months for your money.
Lonnie: That is untrue. Wal-Mart has a list of
expectations for suppliers and they also have a
list of supplier expectations of them. And one
of them is you can expect as a supplier you will
get paid and you will get paid on time.
Michael: That’s great. That’s a misconception I
think a lot of people believe.
Lonnie: It’s a huge misconception.
Michael: Where do you think that comes from?
Lonnie: It comes from the fact that what happens
is Wal-Mart is very automated and what’ll happen
is you might not be automated. They ask you for
different documentation that you’re supposed to
have and you didn’t supply that documentation…
Michael: And that’s what holds everything up.
Lonnie: Yes, it holds everything up.
Michael: Because you haven’t followed directions
as a vendor.
Lonnie: For instance, EDI, electronic data
interchange, all orders at Wal-Mart are pretty
much EDI orders. They’re transferred
electronically back and forth.
Michael: Tell me what that is. Explain it to me
Lonnie: EDI is the way that we transmit orders
into computer-based and what we do is we take
the order and we electronically send that
order…it’s not an email…it’s an electronic
format that’s readable on the other end and once
that order is received, it actually kicks into
motion a series of things.
Michael: Let’s say your brand gets a purchase
order from Wal-Mart. That’s the order you’re
Lonnie: Yes, it’ll be electronically transmitted
Michael: Are you given a website as a vendor to
go in to get those orders?
Lonnie: Actually the larger companies don’t have
websites because the computers talk directly
with each other.
Michael: Do you have to have a special computer?
Lonnie: No. There are companies out there that
can help and enable you in EDI technology.
Michael: Can you help someone with that in your
consulting on how to get that all set up?
Lonnie: Oh, yes, without a doubt. We point out
those companies. I’ve done some of that type of
stuff in the past, as well.
Michael: So, this is no big deal. You first got
to get your order and you’d better make sure
when a P.O. comes in…they’re not going to call
you and fax it to you.
Lonnie: No, it will be sent to you in some
format electronically and you will respond back
to them in some format electronically.
Michael: All right. Right now, you’ve received
Lonnie: Yes, through EDI all that is automated,
processed, and takes care of it. There are
companies who are go betweens that help you
become EDI. So, it’s not peer-to-peer. You EDI
to a hub and that hub to that company and that
company EDIs whoever you need to EDI for. It’s
electronic and there are companies out there
that will help you.
Wal-Mart believes in float.
Michael: What is float?
Lonnie: It’s a really interesting concept. Years
ago there was a story and I don’t know if this
story is true or not, Michael, but I’m going to
assume it was true. Years ago there was a story
about Pampers, if I’m not mistaken and about how
Wal-Mart was taking a loss on Pamper, yet making
money on Pampers. What they were doing is they
were selling them below cost, yet they were
making money on the Pampers. And everyone was
saying well wait a minute, how can you sell
something at cost, yet make money on it. Well,
what Wal-Mart was doing is they were turning the
Pampers so fast that they were floating the cash
and they were making money on the interest. They
didn’t even have to pay the bill. And that’s
that whole concept about cash flow, the fast
nickel and the slow dime, and that type of
stuff. Just like Wal-Mart when they make a few
pennies. One company might make 10-cents on
something, Wal-Mart might make only one penny on
it. But Wal-Mart makes 100 times what that other
company sells in a short timeframe.
Michael: So, isn’t that why they would really
want to take as long as they can to pay you?
Lonnie: No, not necessarily because when we’re
talking turning, 30 days in a supermarket,
that’s a lifetime. You could turn a product ten
times in those 30 days.
Michael: Would you think your 30 days because
you’re a tortilla compared to a plastic
manufactured product, do you think it maybe
different with the different categories?
Lonnie: Yes, I think so.
Michael: So, in your category, 30 days is okay.
But you say there maybe some categories where a
manufacturer can expect to wait 90 days to six
Lonnie: Again, you stipulate your requirements
Michael: And if they don’t like it, they’ll tell
Lonnie: Yes, if they don’t like it, they’ll tell
you and you don’t have to do business with them
if you don’t like what tell you. And that’s what
I tell a lot of people, too, when they talk to
me. I’m like, look, the company has their
policies and their policy is what it is, but by
and large, I’ve never heard of any one not being
dealt fairly when it comes to getting paid. I
just never heard of it and I’ve been up there
for a number of years. I’ve never seen anyone
walking away from the home office grumbling.
I’ve never been to a meeting where a bunch of
people came out against Wal-Mart. The bottom
line is when you get Wal-Mart, you’ve got one of
the best partners in the industry that you could
Michael: I think the media has really done a
number on them and painted them as the big, bad
Lonnie: Well, they’ve done a terrible job with
Wal-Mart and beat them up pretty badly. And the
bottom line here, Michael, is that I am a
consumer and I have children and I have a
family. And what’s interesting is we had this
conversation the other night at the kitchen
table, me and a bunch of us…sisters and
brothers, and in-laws, whatever…we were talking
Michael: They save the American family money.
That’s my position, too.
Lonnie: Money that we can spend elsewhere or
money that we can choose to save. But the bottom
line is they save us money.
Michael: We don’t have to shop there. You want
to go spend more money, go somewhere else.
Lonnie: If you go to Kroger or Albertson’s
without their loyalty card, you’re going to take
a killing. I don’t need a loyalty card at
Wal-Mart. I just go and shop and I save money
every day. I saw an interesting article a couple
of days ago in the Business Journal…every city
has their Business Journal…I was reading the
Business Journal for the city I live in now and
I saw an article about gas stations. And the way
the reporter wrote the article was kind of
slanted because he said a lot of these Kroger
and Giant Eagle and all these guys, they have
these incentive programs where if you buy a
certain amount of groceries from them, you get a
discount on the gas that they sell. And he said
but Wal-Mart doesn’t discount their gas for
their customers. I said that’s not true.
Wal-Mart discounts their gas for everybody. They
offer discounted gas. You don’t necessarily have
to be a Wal-Mart customer, but it’s at a
discounted price. So, I don’t have to have a
card to buy gas from Wal-Mart and receive a
Michael: Wal-Mart is one company. Have you had
experience in other mass retailers and are
seeing similar or are there a lot of
Lonnie: Well, there are a lot of differences.
I’ve dealt with Target at one point in my life.
I’ve dealt with Cosco and a few other ones out
Michael: What other large chains would you tell
a international manufacturer, may be importer,
to definitely look at if they don’t have success
Lonnie: I would tell them to look at all of
them; even look at Kroger, Albertson’s, Safeway.
Look at those guys, as well. If you’re going to
see a product, you might as well sell it to
everybody or try because a lot of times what
Wal-Mart will require is that you have a track
record. Well, what do you mean a track record?
And it’s like well I don’t have a track record.
But it’s always easy to sell your product if you
have a track record than if you don’t. So, you
might get picked up by one of these guys. And
again, it’s kind of a double-edged sword, too,
because you might go in to see Safeway and they
say does Wal-Mart have it and you say well no.
And they say well I don’t know why we want to
carry it. Or they might say does Wal-Mart have
it and you say yes. They say, well we don’t want
to carry something Wal-Mart carries. We’re
trying to differentiate ourselves from them or
they’ll run us out of business.
Michael: Let’s say Wal-Mart places an order for
your widget. It goes in and those sales records
are meticulously kept…they’re shared by other
large retailers. So, Cosco may see a hot item in
Wal-Mart. Can’t they subscribe to that data?
Lonnie: Wal-Mart doesn’t release their data to
any syndicated data services. You’re talking
about Nielson data or ROI data, information
resources data, which tells how a product is
selling in a particular market or chain.
Michael: Right. So, Wal-Mart isn’t involved with
Lonnie: Wal-Mart doesn’t release their data like
that, no. Now, you can release your internal
data anyway you want and say I’m selling this
product and I do have it available at Wal-Mart.
Here’s the growth of this product. Not
necessarily at Wal-Mart, but here’s the growth
of this product. That’s fine.
Michael: I’m saying for the guy who doesn’t have
a track record. So, let’s say I get it into
Kroger’s who uses IRI data and we have a lot of
success in Kroger’s. There are other companies
who subscribe to that IRI data because all these
other buyers are looking for hot products.
Aren’t they reviewing IRI data?
Lonnie: Yes. There’s a report in the category
management called an items not carried report.
And what that does is that looks at the items
that are in the market and compares them with
the items that you carry. And then what it does,
it takes out the items that you don’t carry and
says okay here are these items. And then what it
does, it kind of puts a predictive model
together saying if you carried this item this is
the type of sales that you could expect. And so,
if it was a track that they look at and say well
yes we should probably carry that item and
they’d bring that item into distribution. So,
that’s when you’re looking at the IRI data and
you get a track record and, yes, the retailers
are saying that.
Let me explain one quick area, also, just to
help you out with items. If you have an item
that’s environmentally friendly, run, do not
walk, to Wal-Mart.
Michael: Tell me why.
Lonnie: Environmental sustainability is what
they like to call it, but really what it means
is that we need to be good stewards of this
earth. There are going to be 8 billion people on
the face of this earth pretty darn quickly and
all this stuff has to go somewhere. So, Wal-Mart
is looking at items that are made from recycled
papers. They’re looking at items where the
packaging has been reduced. They’re looking at
items that are made from organic cotton. They’re
looking at items that are printed with non-toxic
inks. They’re looking for items that are
biodegradable, compostable; all those types of
things they’re looking for because environmental
sustainability is a huge, huge push for Wal-Mart
right now. They’re looking at items that have
been made with renewable fuels.
Michael: They have a responsibility. They want
to do better for the world, right.
Lonnie: Exactly. And also, with that in mind,
for instance, Wal-Mart is replacing light bulbs
in their stores and they’re saving millions of
dollars by doing it. And when they replace it,
they’re going from like a regular tungsten type
of light bulb to a fluorescent type, for
instance. When they look at that and they say
here’s our annual electricity saving…they’ll say
that…but they take it a step further, Michael.
They’ll say here’s how much coal we didn’t have
to use, so we saved the environment from crap
being spit into the environment. They take it
all the way back to the manufacturer. So, what I
tell folks is look, if you’ve got an item that’s
eco-friendly, run, do not walk, to Wal-Mart. If
you’ve got an item that’s got better packaging
in recycled paper or whatever, just run, don’t
walk, to Wal-Mart. That is one of the easiest
ways right now I think you can get into Wal-Mart
is with an item that you can put on the grocery
shelf that still has a clear benefit, a clear
point of differentiation than the rest of the
items on the shelf. But also, it has a benefit
to the environment.
Michael: That’s a great strategy, too.
Lonnie: It’s a huge strategy. I wish I could
slap people right now and say hey guys here’s a
great opportunity, buy also make it affordable.
Michael: Well, here’s an idea, the idea about
going into category, looking on the shelves,
looking what’s there and trying to do something
better. You could look at existing commodity
type products and repackage it environmentally
friendly and take over the product.
Lonnie: Right, you could do that or you can also
approach some of the companies that are in there
and say look, I can show you how to print your
packaging in non-toxic inks. Wal-Mart creates
opportunities for everybody. Also, Michael,
there’s a program Wal-Mart has that’s just not
for if you want to be a supplier of an item for
resale. You can be a supplier for Wal-Mart for
an item for Wal-Mart to consume.
Michael: Tell me more about that.
Lonnie: That means Wal-Mart buys paper towels
every day to use themselves. Wal-Mart buys
cleaning items to use themselves. Now, remember,
you’re coming in the door with an eco-friendly
cleaning item that you can use to clean all the
Wal-Mart stores or a new light bulb. Do you know
what I mean?
Lonnie: You could sell that item directly to
Wal-Mart, not for resale, but for being one of
their suppliers for the stuff that they consume
themselves. So, that’s another way to get into
Michael: You’re going to be putting on seminars
and you’re going to help importers and you’re
going to help manufacturers have a better chance
and a higher probability of getting their
product successfully into Wal-Mart. You’ve got
over 15 years of experience. What are we going
to learn in your seminars if we were to hire you
or to look for more information on this other
than what we’ve talked about today? Have we just
touched the surface today?
Lonnie: You’ve just touched the surface. How can
we help them? What we do is we help you get
prepared for that ultimate goal, the meet in
front of Wal-Mart. Wal-Mart has a very well
ordered published process out there. Anyone can
go to www.walmartstores.com and right there it
tells you how to become a Wal-Mart supplier and
I really wish it was that easy. So, what we do
is we take that piece and we take it three steps
further. So, we say, here’s the process to
becoming a Wal-Mart supplier. We’ll help you
with the published process. That’s meaning
here’s how you get your proposition together,
here’s how you get all this information together
for this proposal. We then take you to the
non-published process. There are other ways to
get in touch with buyers. There are other things
that you need to do. I’ll walk you through how
to go to a store and how to identify a need. How
do you know if you have a right product? I’ll
walk you through how do you obtain a D&B. How do
you obtain a UPC? How do you become a minority
Michael: Tell me about that?
Lonnie: Wal-Mart has criteria for everybody.
Now, if you’re a woman owned business or if
you’re a minority business enterprise, and you
still fulfill the same criteria that everybody
else does in terms of having the wherewithal and
the manufacturing capabilities and so forth,
Wal-Mart is going to take a very positive view
of helping you out. They really do help out
minority owned businesses. Now, again, all they
do is they put everybody on an equal level
playing field. And what they say is look I’ve
got an item over here that’s an excellent item
that’s being made by a company XYZ. I’ve got the
same item over here that’s going to be made by
this minority business enterprise. It’s an
excellent item. It offers the same benefits to
my customer. Wal-Mart is going to look towards
helping the minority business enterprise out and
get up and get going. It’s the same product or
maybe even better. And so, that can help you get
in. So, if you’re a certified minority business
enterprise or if you’re a certified women’s
business enterprise…and what I mean by
certified, you’ve got to get certified. And
we’ll show you how to become certified by
walking you through the certification
process…and again, it’s a difficult process, as
well, because the WBENC, that’s the Women’s
Business Enterprise Council, they’re good
partners of many corporations in the United
States, so they’re going to have tough criteria
for you to become certified. They’re just not
going to give their certification to anybody.
And that’s the same with the minority business
enterprise, DNB, they’re going to make sure that
you live up to that certification process, so
they’re not going to give it away, as well. So,
we walk you through that process. We walk you
through the backend process; things like
understanding Bentonville, understanding the
Wal-Mart culture, what does the 10-foot rule
Michael: What is the 10-foot rule?
Lonnie: The 10-foot rules means whenever a
customer gets within 10-foot of any associate,
the associate is supposed to smile and greet
them…Sam’s rules of merchandising. There are all
different things that are out there that come to
play and we help you with those things. And
additionally, what we do is we help you try
different strategies. For instance, the process
of Wal-Mart says take all this information and
then you go online and you fill out this thing,
submit it, and then if this organization
believes you should be here, they’ll turn your
name over to a buyer. That’s the way it works.
Well, what I do is I get my proposition together
and I get on the phone and find out who my buyer
is and I call the buyer. I call him direct and I
say I’ve got blah, blah, blah, blah, and I was
referred to you by blah, blah, blah, blah. I
help you with all of that. And if a buyers wants
something, the buyer will bring you in and then
what happens is then instead of you having to
wait for this committee that gets your
proposal…I think it’s called supplier
development. They’re waiting for supplier
development to send the paperwork over, they
already have the paperwork and they send
information to supplier development and say
we’re dealing with these people here.
Michael: So, you’re going to give me
step-by-step, you’re going to hold my hand,
you’re going to give me the support, you’re
going to give me the tools, you’re going to give
me the resources to show me how to get my
Lonnie: The only thing I’m not going to be able
to do is take you to Bentonville and make that
presentation for you. I’ll even help you prepare
the presentation, but I’m not going to go to
Bentonville and I’m not going to make that
presentation for you. There are companies that
will do that for you and they’ll do it for a
Here’s my thing on this whole fee base thing.
There are companies out there that charge as
much as 5% of gross sales for X amount of years
to get your product into Wal-Mart and help
represent you. I see people do this and
sometimes they’re successful and sometimes
they’re not. If they’re not successful, the
company obviously doesn’t get anything, which is
fair obviously. But if they are successful, the
company gets 5% of their gross. While they give
5% of their gross away, they can’t buy any other
support services that they need. For instance,
say you’re a food company and you get your
product into Wal-Mart. Somebody needs to be able
to touch that product for you, so you need some
kind of a representation in the store. There are
brokerage firms that represent you and they
charge 2, 3, 4% to do that. You need to spend
that money into those companies that will help
you with that product in the store, paying that
2, 3, 4% there and you’ve already spent it up
front trying to get into Wal-Mart. My thing is,
if you’ve got a sound proposition, you’ve done a
tremendous amount of homework, I think
ultimately you’re going to be successful in
getting in the door at Wal-Mart.
Michael: So, are you saying beware, there are a
lot of wolves out there trying to take advantage
of people who have the dream of getting their
product into Wal-Mart?
Lonnie: That’s true of anything, and I don’t
know if I want to call them wolves and I don’t
know if I want to say they’re taking advantage.
I just think if I were doing it, I would not use
the company to help me get into Wal-Mart that’s
going to charge me a percent of my gross sales.
I don’t understand that. I would latch onto a
brokerage company or sales and marketing agency
that can help my product sell every day at a
store level. And that’s how I would divest my
funds. So, what we do is we take a flat fee up
front and then you’re done with us. That’s what
we do. I mean that’s just our business model and
I think it’s fair.
Michael: So, Lonnie, if someone wants to talk to
you about getting their product into Wal-Mart
and to kind of look at some of the services you
offer, how can they get in touch with by phone?
Lonnie: They can reach me at (360) 525-0208.
Michael: (360) 525-0208.
Lonnie: That’s correct.
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