business news in context, analysis with attitude

  • The national director of the leftist Party of the Democratic Revolution has filed a lawsuit against Wal-Mart and the Mexican federal government, charging that priceless archaeological artifacts have been ruined in the construction of a Wal-Mart store at the Teotihuacan ruins near Mexico City.

    Fernandez also charged that federal, state and local officials broke the law in fast-tracking the project, showing "mercantile and irresponsible conduct."

    The store is scheduled to open in December, and has been the subject of much debate in Mexico over the needs of commerce and the importance of the nation’s historical identity.

  • Forbes employs the Star Trek/Borg/”Resistance is futile” metaphor in a story that details Wal-Mart’s relationship with suppliers.

    “Wal-Mart presents a dilemma to its suppliers,” the magazine writes. “It is the most profitable customer for many suppliers on an absolute basis and often on the basis of percentage. It helps everyone strip out costs from the supply chain. Although it keeps a lot of the savings for itself, it also shares some of them with its suppliers. So suppliers dearly want to keep their Wal-Mart business.

    “However, Wal-Mart has another agenda that is not so beneficial to its suppliers. It wants to stock your brand to build traffic to its stores, but it really wants the consumer to buy Wal-Mart's private-label products once they get there, because they are far more profitable for the retailer.”

    In addition, in a scenario familiar to anyone in the retailing business that has been paying attention, Forbes notes that suppliers that allow Wal-Mart to become too large a percentage of their business run the risk of being bereft of if Wal-Mart dumps them.

    The result is that suppliers do have strategic alternatives. Suppliers can refuse to sell to Wal-Mart, or sell only some product lines to Wal-Mart, or create a pace of innovation that is so fast that it always sells new products elsewhere and then sells them to Wal-Mart only when they’ve begun to mature (an approach that Wal-Mart doesn’t object to). However, if you’re not going to sell Wal-Mart, it is critical to create a product line that offers to opposing retailers the ability to create a differential advantage for themselves…because they, after all, are competing with Wal-Mart every minute of every day.

KC's View:
We’ve talked to a number of new manufacturers lately that have found a simple message to be compelling when speaking to mainstream food retailers: “We have no sales calls planned for Arkansas.”

It tells the retailer that while a sale to Wal-Mart might happen at some point, it won’t be in the foreseeable future. And it suggests to the retailer that this might be a product that will aid in the process of differentiation.

Which makes a lot of sense.

Because in the scheme of things, resistance never is futile.