Large Retailers: Buying Decisions

Goals

To have a broad understanding of how large retailers make decisions on buying/selling new products. Large retailers can be defined as companies like Macy's. This will be used to guide a B2B digital marketing strategy for clients who are a towel and textile company. An ideal response would include the process, who the decision-makers typically are, and what the key deciding factors typically are for the company to take on a product/new brand.

Early Findings

  • The competition to become a vendor for a major retailer is intense. Getting into Walmart, for example, is extremely difficult. "Although more opportunities now exist for companies to sell through the Walmart online marketplace, very few make the cut to get on its retail shelves. The company has been known to accept as little as 2% of applicants."
  • The group of people responsible for making a buying decision in a B2B context can be called a decision-making unit (DMU).
  • "B2B buying situations are less likely to be spontaneous, and more likely to be discussed carefully among various stakeholders." For example, a consumer may buy a soft drink without overthinking the price, manufacturer, or business relationships. They are buying just to quench their thirst. "A grocery store, however, will carefully consider which types of soft drinks to stock, how many to buy, how to ship them, and how to price them."
  • B2B purchasing situations require relationship building. "A relationship will be built on these meetings, creating trust, alignment, and agreement on how the buying process will be planned and executed."
  • "Trade shows, conferences, and meetings are actually forms of marketing communications and promotional strategy, as one-to-one interactions between buyers and sellers is necessary to build trust for high capital and high volume purchases."
  • Buyers at retailers like Macy's typically submit orders to their DMM (Divisional Merchandise Manager) who in turn then passes them along to their GMM (General Merchandise Manager) for final sign off.
  • Some vendors have a special status in the store through their friendship with the GMM which assures them that their orders will pass regardless of the original plans of lower management.
  • Buyers at large retailers such as Walmart have supplier standards that must be met. "For example, Walmart vendors must carry product liability insurance, have their financial information listed with a reporting agency such as Dun & Bradstreet, and have proper Universal Product Code (UPC) Identification Numbers for all their products."
  • Buyers at large retailers want their vendors to have a proven track record and they do not want to be the largest part of that vendors business. The product should be unique in some way to capture the buyer's attention. "A potential supplier who can offer a complete line rather than a single product will always have the edge with a buyer."
  • "It can take six months to a year on average for a supplier to get a first purchase order, but when that first order comes in, a vendor is expected to move fast. The retailer may even want a 24-hour turnaround."
  • A vendor should be trying to win over the buyer and show that they can overcome obstacles. Whether it's upgrading packaging or changing pricing, a vendor must demonstrate that show that they are willing to work with the retailer.
  • The Walmart supplier application process specifically outlines the steps for a potential vendor to take. However, the steps of completing a Walmart vendor application vary slightly depending on what category of supplier the product falls under: national products, local products, service & non-resale, direct import, e-commerce, and/or marketplace. "For example, potential local suppliers, unlike vendors of national products, can approach their local Walmart store manager directly and pitch their products. If the manager likes the product, they will pass the information about it up the line and provide the vendor with the name of the regional general manager so they can fill out the only product submission form."
  • Home Depot and Costco have similar application processes to Walmart.

Summary Of Our Early Findings Relevant To The Goals

  • Our initial hour of research was spent scanning to ensure we could provide relevant and robust information, data, and statistics surrounding the ask. We only encountered one roadblock which was how generally large retailers make decisions surrounding taking on new vendors and making those buying decisions. That is because as we initially researched, it appears that each retailer has its own set up and many are re-structuring their buying processes because of stagnating sales which was occurring even before COVID-19. Macy's is a good example of that. We were able to find out how Walmart approaches this, but if this kind of granular data is required, we are going to have to look at large retailers individually to get an honest picture.
  • We were able to return some findings surrounding the Walmart process and what some key deciding factors are that buyers at large retailers use when deciding to bring on a new vendor.
  • While a geographic focus was not provided to us, we assumed a United States focus. If a more broad approach is desired, for example, a global focus, this would have to be clearly communicated to us in any reply.
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