Fascinating piece in the current edition of Fast Company about Jim Wier, CEO of Simplicity, a lawn equipment manufacturer, who is becoming known as the guy who refused to sell to Wal-Mart.
In brief, the story is about Wal-Mart wanted not only to continue selling Snapper, the brand of lawn mowers that had just been purchased by Wier, but to radically expand its selection and go head-to-head with Home Depot and Lowe’s. Wier had other ideas, though – and told Wal-Mart that he was cutting the company off and would not sell them anything anymore.
Wier tells Fast Company that he felt that not only was selling Snapper to Wal-Mart incompatible with his strategy for the high-end lawn mower, but actually would threaten the company’s long-term future. Snapper isn’t just a lawn mower, but an investment in a piece of equipment that can last decades, and Wier felt that Wal-Mart was in the commodities business.
Let’s let Fast Company explain:
“You can buy a lawn mower at Wal-Mart for $99.96, and depending on the size and location of the store, there are slightly better models for every additional $20 bill you're willing to put down--priced at $122, $138, $154, $163, and $188. That's six models of lawn mowers below $200. Mind you, in some Wal-Marts you literally cannot see what you are buying; there are no display models, just lawn mowers in huge cardboard boxes.
“The least expensive Snapper lawn mower--a 19-inch push mower with a 5.5-horsepower engine--sells for $349.99 at full list price. Even finding it discounted to $299, you can buy two or three lawn mowers at Wal-Mart for the cost of a single Snapper.
“If you know nothing about maintaining a mower, Wal-Mart has helped make that ignorance irrelevant: At even $138, the lawn mowers at Wal-Mart are cheap enough to be disposable. Use one for a season, and if you can't start it the next spring (Wal-Mart won't help you out with that), put it at the curb and buy another one. That kind of pricing changes not just the economics at the low end of the lawn mower market, it changes expectations of customers throughout the market. Why would you buy a walk-behind mower from Snapper that costs $519? What could it possibly have to justify spending $300 or $400 more?”
Wier saw in Wal-Mart what Fast Company describes as “a whirlpool of lower prices, collapsing profitability, offshore manufacturing, and the gradual but irresistible corrosion of the very qualities for which Snapper was known.” In other words, “a death spiral.”
So he stopped supplying equipment to Wal-Mart, costing Snapper 20 percent of its business. He resisted Wal-Mart’s suggestions that the company find new suppliers and make a lower-cost mower – in part because he knew that he wasn’t making any real money on the mowers he was selling to Wal-Mart, and knew that the situation wasn’t going to get any better.
Now, the magazine makes clear that Wier was lucky enough to have alternative channels through which to sell Snappers; there remains in the US a strong network of independent retailers in this segment. And, he also had vision - a clear sense of what the company was, who the customer was, and how to grow sales without corrupting either one.
That’s not to say that Wier is anti-Wal-Mart. He makes clear that he is not, that he believes that Wal-Mart plays a role in the US economy.
Just not a role in Snapper’s future.
In brief, the story is about Wal-Mart wanted not only to continue selling Snapper, the brand of lawn mowers that had just been purchased by Wier, but to radically expand its selection and go head-to-head with Home Depot and Lowe’s. Wier had other ideas, though – and told Wal-Mart that he was cutting the company off and would not sell them anything anymore.
Wier tells Fast Company that he felt that not only was selling Snapper to Wal-Mart incompatible with his strategy for the high-end lawn mower, but actually would threaten the company’s long-term future. Snapper isn’t just a lawn mower, but an investment in a piece of equipment that can last decades, and Wier felt that Wal-Mart was in the commodities business.
Let’s let Fast Company explain:
“You can buy a lawn mower at Wal-Mart for $99.96, and depending on the size and location of the store, there are slightly better models for every additional $20 bill you're willing to put down--priced at $122, $138, $154, $163, and $188. That's six models of lawn mowers below $200. Mind you, in some Wal-Marts you literally cannot see what you are buying; there are no display models, just lawn mowers in huge cardboard boxes.
“The least expensive Snapper lawn mower--a 19-inch push mower with a 5.5-horsepower engine--sells for $349.99 at full list price. Even finding it discounted to $299, you can buy two or three lawn mowers at Wal-Mart for the cost of a single Snapper.
“If you know nothing about maintaining a mower, Wal-Mart has helped make that ignorance irrelevant: At even $138, the lawn mowers at Wal-Mart are cheap enough to be disposable. Use one for a season, and if you can't start it the next spring (Wal-Mart won't help you out with that), put it at the curb and buy another one. That kind of pricing changes not just the economics at the low end of the lawn mower market, it changes expectations of customers throughout the market. Why would you buy a walk-behind mower from Snapper that costs $519? What could it possibly have to justify spending $300 or $400 more?”
Wier saw in Wal-Mart what Fast Company describes as “a whirlpool of lower prices, collapsing profitability, offshore manufacturing, and the gradual but irresistible corrosion of the very qualities for which Snapper was known.” In other words, “a death spiral.”
So he stopped supplying equipment to Wal-Mart, costing Snapper 20 percent of its business. He resisted Wal-Mart’s suggestions that the company find new suppliers and make a lower-cost mower – in part because he knew that he wasn’t making any real money on the mowers he was selling to Wal-Mart, and knew that the situation wasn’t going to get any better.
Now, the magazine makes clear that Wier was lucky enough to have alternative channels through which to sell Snappers; there remains in the US a strong network of independent retailers in this segment. And, he also had vision - a clear sense of what the company was, who the customer was, and how to grow sales without corrupting either one.
That’s not to say that Wier is anti-Wal-Mart. He makes clear that he is not, that he believes that Wal-Mart plays a role in the US economy.
Just not a role in Snapper’s future.
- KC's View:
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It seems so simple to say that some companies ought to do business with Wal-Mart and some should not, just as it seems simple to say that some companies should compete with Wal-Mart by offering something different from what the Bentonville Behemoth offers.
Simple. And yet, vision can prove elusive.
By the way, the Fast Company article is worth reading in its entirety, if for no other reason than the description of Wal-Mart headquarters is a scream, especially when Wier describes a vice president’s office as furnished with “some lawn chairs that some other peddler had left behind as samples."
