The Man Who Said No to Wal-Mart

The Man Who Said No to Wal-Mart 731

Posted by Hemos on Wednesday March 29, 2006 @03:02PM from the he's-the-man-who-never-returned dept.

Charles Fishman, senior writer for Fast Company magazine has recently published a book entitled The Man Who Said No To Wal-mart. It's an excellent book (Yes, I've read it) that talks about the intersection of making good stuff, the commodization of products, and the changing world that we work in; not exactly high tech, but tech nonetheless.

Every year, thousands of executives venture to Bentonville, Arkansas, hoping to get their products onto the shelves of the world's biggest retailer. But Jim Wier wanted Wal-Mart to stop selling his Snapper mowers.What struck Jim Wier first, as he entered the Wal-Mart vice president's office, was the seating area for visitors. "It was just some lawn chairs that some other peddler had left behind as samples." The vice president's office was furnished with a folding lawn chair and a chaise lounge.

And so Wier, the CEO of lawn-equipment maker Simplicity, dressed in a suit, took a seat on the chaise lounge. "I sat forward, of course, with my legs off to the side. If you've ever sat in a lawn chair, well, they are lower than regular chairs. And I was on the chaise. It was a bit intimidating. It was uncomfortable, and it was going to be an uncomfortable meeting."

It was a Wal-Mart moment that couldn't be scripted, or perhaps even imagined. A vice president responsible for billions of dollars' worth of business in the largest company in history has his visitors sit in mismatched, cast-off lawn chairs that Wal-Mart quite likely never had to pay for.

The vice president had a bigger surprise for Wier, though. Wal-Mart not only wanted to keep selling his lawn mowers, it wanted to sell lots more of them. Wal-Mart wanted to sell mowers nose-to-nose against Home Depot and Lowe's.

"Usually," says Wier, "I don't perspire easily." But perched on the edge of his chaise, "I felt my arms getting drippy."

Wier took a breath and said, "Let me tell you why it doesn't work."

Tens of thousands of executives make the pilgrimage to northwest Arkansas every year to woo Wal-Mart, marshaling whatever arguments, data, samples, and pure persuasive power they have in the hope of an order for their products, or an increase in their current order. Almost no matter what you're selling, the gravitational force of Wal-Mart's 3,811 U.S. "doorways" is irresistible. Very few people fly into Northwest Arkansas Regional Airport thinking about telling Wal-Mart no, or no more.

In 2002, Jim Wier's company, Simplicity, was buying Snapper, a complementary company with a 50-year heritage of making high-quality residential and commercial lawn equipment. Wier had studied his new acquisition enough to conclude that continuing to sell Snapper mowers through Wal-Mart stores was, as he put it, "incompatible with our strategy. And I felt I owed them a visit to tell them why we weren't going to continue to sell to them."

Selling Snapper lawn mowers at Wal-Mart wasn't just incompatible with Snapper's future -- Wier thought it was hazardous to Snapper's health. Snapper is known in the outdoor-equipment business not for huge volume but for quality, reliability, durability. A well-maintained Snapper lawn mower will last decades; many customers buy the mowers as adults because their fathers used them when they were kids. But Snapper lawn mowers are not cheap, any more than a Viking range is cheap. The value isn't in the price, it's in the performance and the longevity.

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?

That's the question that motivated Jim Wier to stop doing business with Wal-Mart. Wier is too judicious to describe it this way, but he looked into a future of supplying lawn mowers and snow blowers to Wal-Mart and saw a whirlpool of lower prices, collapsing profitability, offshore manufacturing, and the gradual but irresistible corrosion of the very qualities for which Snapper was known. Jim Wier looked into the future and saw a death spiral.

Wier had two things going for him: First, he had another way to get his lawn mowers to customers -- a well-established network of independent lawn-equipment dealers that accounted for 80% of Snapper's sales. And Wier had the courage, the foresight, to take an unblinking view of where his Wal-Mart business was heading -- not in year 3, or year 4, but year 10.

Wier traveled to Bentonville with a firm grasp of the values of Snapper, the dynamics of the lawn-mower business, the needs of the dealers, the needs of the Snapper customer, and the needs of the Wal-Mart customer. He was not dazzled by the tens of millions of dollars' worth of lawn mowers Wal-Mart was already selling for Snapper; he was not deluded about his ability to beat Wal-Mart at its own game, to somehow resist the price pressure. He was not imagining that he could take the sales now and figure out the profits later.

Jim Wier believed that Snapper's health -- indeed, its very long-term survival -- required that it not do business with Wal-Mart.

Every Snapper lawn mower sold anywhere in the world comes from a factory in McDonough, Georgia, a small town 30 minutes southeast of Atlanta. Coils of raw steel arrive on flatbed trucks every day at the old, nondescript building; brand-new fire-engine-red lawn mowers leave every day, loaded in 18-wheelers. The facility looks undistinguished, but it is energetically trying to defy the conventional wisdom about manufacturing in the global economy.

The Snapper factory has had an invigorating decade. Ten years ago, it produced about 40 models of mowers, leaf blowers, and snow blowers; now it makes 145. Today, robots do the welding, lasers cut parts, and computers control the steel-stamping presses. Productivity is three times what it was 10 years ago, and the number of people working here, 650, is half what it was.

Indeed, the productivity of every factory worker is measured "every hour, every day, every month, every year," says Snapper president Shane Sumners, who walks the 10.5-acre factory floor with comfort and familiarity. "And everybody's performance is posted, publicly, every day for everyone to see." It's a lot like Wal-Mart -- which measures the number of items every checkout clerk scans every hour. Some of Snapper's dramatic productivity improvements, in fact, seem to come almost directly from the Wal-Mart playbook. These days, the Snapper factory operates in Wal-Mart time. It must, because it operates in Wal-Mart's ecosystem.

Ten years ago, at about the time Sumners came on board, Snapper had 52 regional distributors. It uses no distributors now -- the company runs four regional warehouses of its own and sells directly to 10,000 independent dealerships. Ten years ago, in part because of the complexity of the middleman distribution system, Snapper carried a huge quantity of inventory. It paid to manufacture and ship thousands of lawn mowers -- worth tens of millions of dollars -- without quite knowing when they would be sold. Now planners come up with an ideal level of inventory for every model, for every region of the country, based on things like historic demand and the weather. The goal is to make sure every customer can get the mower he wants -- while making absolutely the smallest number of lawn mowers.

Production at the Snapper factory is rescheduled every week, according to the pace at which mowers sell. A computer juggles work assignments and balances the various parts of the assembly line. The main manufacturing line for Snapper's entry-level walk-behind mowers -- with 28 people -- was recently charged with producing 265 lawn mowers in an eight-hour shift. The group hit the mark exactly. That's a new lawn mower, from loose parts to sealed box, every 109 seconds. "It's all a matter of seconds," says Sumners.

It's not hard to make a cheap lawn mower. A cheap lawn mower feels flimsy, sounds louder than it has to, and even when new, requires a mysterious, frustrating combination of choke, priming, and pulling to start. The cutting deck of a cheap mower is stamped from thin sheet metal. Making a high-quality lawn mower -- even in 109 seconds -- requires attention to detail and constant improvement, which seems surprising for a machine that doesn't evolve that much.

All Snapper machines, from the simplest walk-behind to the most elaborate riding mower, are painted one color: what Shane Sumners calls "Snapper red." In the factory, the finished chassis of riding mowers coast along slowly, dangling from an overhead conveyor as they approach a 20-foot-long pool of red paint. The conveyor track dips low, and the mowers glide down into the pool and completely disappear beneath the surface, then rise back up, gleaming red, before heading for a pass through a curing oven.

It's not quite as simple as dip and bake, however. Each mower is electrically grounded as it hangs from the overhead conveyor, and a slight positive electrical charge runs through the 16,000-gallon trench of paint. "So the paint is attracted to the metal and builds up on the parts and sticks very effectively and evenly," says Sumners. The process is monitored every hour -- from the speed of the conveyor and the temperature of the ovens to the pH of the paint -- along 115 parameters. "If you control the process," says Sumners, "you will get a good paint job."

Snapper technicians start every riding mower before it leaves the McDonough plant. At the "hot start" station, a man wearing ear protectors squirts gas into the fuel tank and oil into the crankcase, pulls the starter cord, and brings the machine to life. He runs through all the gears, checks speed, engine performance, the mounting of the seat. The engine is given just enough fuel for the "run in." If the mower passes all the tests, the man sucks the oil back out and sends the mower on to be boxed.

As Sumners watches, one of the riding mowers takes two pulls to start, then comes to life with a rough growl. In the blink of an eye, the technician shuts it down. "Did you hear how that sounded?" asks Sumners. "It's not right. That's a bad one." The mower is shunted off to be inspected and properly tuned if possible. "If we didn't," says Sumners, "that mower would have gone to a customer."

The Snapper factory started making riding mowers in 1951. It is unadorned and old, but it is old in the sense of solidity and use. There is nothing tired about it. More significant, there is nothing sentimental about it. This factory isn't here out of some misplaced sense of economic loyalty to U.S. manufacturing. It's here because it makes Snapper-quality lawn mowers at a competitive price.

Snapper's factory hums with discipline and focus and urgency. Even with no products at Wal-Mart, a company like Snapper has to compete psychologically, has to keep the price gap between the big-box lawn mowers and its lawn mowers rational. If it did not, its potential slice of the market would get smaller and smaller.

Sumners has to spur his factory on with the same tirelessness as if it were supplying Wal-Mart -- the efficiency of every factory worker measured every hour of every day -- because Wal-Mart sets the pace, even if you're not working for them.

Jim Wier is 62 years old, with a youthful twinkle, despite a thatch of white hair. He is a solidly built man who dresses casually. He is comfortable with himself. Wier, who until the summer of 2005 ran a group of lawn-equipment businesses that approach half a billion dollars a year in sales, is confident, direct, and unprepossessing. He mows his own lawn. "I don't want to hire a service," he says. "I still love to cut my grass."

Wier is much like Snapper's customers. "When we do surveys of our customers, they like to cut their grass. And they want a good piece of equipment to do it. We're designed to give you the best quality of cut. We have full rollers on the riding mowers, to give that nice striped look on your grass, like on the baseball fields. It makes you feel proud of the home you own. Proud of your lawn. The neighbors walk by, they say, 'Look how good the yard looks.' "

Wier doesn't really think that a $99 lawn mower from Wal-Mart and Snapper's lawn mowers are the same product any more than a cup of 50-cent vending-machine coffee is the same as a Starbucks nonfat venti latte. "We're not obsessed with volume," says Wier. "We're obsessed with having differentiated, high-end, quality products." Wier wants them sold -- he thinks they must be sold -- at a store where the staff is eager to explain the virtues of various models, where they understand the equipment, can teach customers how to use a mower, can service it when something goes wrong. Wier wants customers who want that kind of help -- customers who are unlikely to be happy buying a lawn mower at Wal-Mart, and who might connect a bum experience doing so not with Wal-Mart but with Snapper.

And so in October 2002, with a colleague, Wier kept an appointment with a merchandise vice president for Wal-Mart's outdoor-product category.

"The whole visit to Wal-Mart headquarters is a great experience," says Wier. It really is a pilgrimage to the center of the retail universe. "It's so crowded, you have to drive around, waiting for a parking space, you have to follow someone who is leaving, walking back to their car, and get their spot. Then you go inside this building, you register for your appointment, they give you a badge, and then you wait in the pews with the rest of the peddlers, the guy with the bras draped over his shoulder."

Normally, meetings between Wal-Mart buyers and people from supplier companies take place in the legendary meeting rooms just off the vendor lobby. These cubicles are simple to the point of barren -- a table and four chairs, and 30 minutes to make your case. "It's a little like going to see the principal, really," says Wier.

In this case, Wier says, both he and the Wal-Mart managers "had a feeling that this would be an important meeting." So Wier and his colleague were scheduled to visit the vice president in his office. Sitting on lawn chairs.

"The meeting started with the vice president of the category saying how it was clear that Lowe's was going to build their outdoor power-equipment business with the Cub Cadet brand, and how Home Depot was going to build theirs with John Deere," says Wier. "Wal-Mart wanted to build their outdoor power-equipment business around the Snapper brand. Were we prepared to go large?"

Talk about coming to the table with different agendas. Wier was in Bentonville to pull his mowers from Wal-Mart's stores. The vice president was offering a greater temptation: Let's join hands and go head-to-head against the home-improvement superstores.

Which is when Wier said no.

"As I look at the three years Snapper has been with you," he told the vice president, "every year the price has come down. Every year the content of the product has gone up. We're at a position where, first, it's still priced where it doesn't meet the needs of your clientele. For Wal-Mart, it's still too high-priced. I think you'd agree with that.

"Now, at the price I'm selling to you today, I'm not making any money on it. And if we do what you want next year, I'll lose money. I could do that and not go out of business. But we have this independent-dealer channel. And 80% of our business is over here with them. And I can't put them at a competitive disadvantage. If I do that, I lose everything. So this just isn't a compatible fit."

The Wal-Mart vice president responded with strategy and argument. Snapper is the sort of high-quality nameplate, like Levi Strauss, that Wal-Mart hopes can ultimately make it more Target-like. He suggested that Snapper find a lower-cost contract manufacturer. He suggested producing a separate, lesser-quality line with the Snapper nameplate just for Wal-Mart. Just like Levi did.

"My response was, we would take a look at that," says Wier. "The reason I gave that response was, it was a legitimate question. In my own mind, I knew where I'd go with that" -- no thanks -- "but at that kind of meeting you at least have to be willing to say, I'll investigate." And that was it. "The tone at the end was, We're not going forward as a supplier."

No lightning bolt struck. Except that Snapper instantly gave up almost 20% of its business. "But when we told the dealers that they would no longer find Snapper in Wal-Mart, they were very pleased with that decision. And I think we got most of that business back by winning the hearts of the dealers."

Snapper was successfully integrated into Simplicity, which in 2004 was itself bought by Briggs & Stratton, the company that makes many of the engines in Snapper and Simplicity mowers. Simplicity and Snapper operate as independent divisions, and Wier remained CEO of both until last summer, when he resigned to join the private equity firm Kohlberg & Co. In McDonough, business is strong. Shane Sumners plans to add a second assembly line for both walk-behind and riding mowers.

One serious hazard to Wier's strategy is that independent lawn-equipment dealers face all the same pressures that have killed, for instance, many independent hardware stores and toy stores. "That is a legitimate question and a legitimate concern," says Wier. "I think we have a part in that outcome. Can Snapper, as a major supplier, continue to supply [the independents] with great product, and a product different than you can buy at Wal-Mart?"

Wier says, "I'm probably pro-Wal-Mart. I'm certainly not anti-Wal-Mart. I believe Wal-Mart has done a great service to the country in many ways. They offer reasonably good product at very good prices, and they've streamlined the entire distribution system. And it may be that along the way, they've driven some people out of business who shouldn't have been driven out of business." Wier wasn't going to let that happen to Snapper.

Wier had determined to lead Snapper to focus on quality, and through quality, on cachet. Not every car is a Honda Accord or a Toyota Camry; there is more than enough business to support Audi and BMW and Lexus. And so it is with lawn mowers, Wier hoped. Still, perhaps the most remarkable thing is that the Wal-Mart effect is so pervasive that it sets the metabolism even of companies that purposefully do no business with Wal-Mart.

And the power and allure of Wal-Mart is such that even Jim Wier, the man who said no to Wal-Mart, a man who knows all the reasons why that was the right decision, has slivers of doubt.

"I could go to my grave, and my tombstone could say, 'Here lies the dumbest CEO ever to live. He chose not to sell to Wal-Mart.'"

Charles Fishman is a Fast Company senior writer and the author of, "The Wal-Mart Effect: How the World's Most Powerful Company Really Works -- And How It's Transforming the American Economy." See www.walmarteffectbook.com for more information.

From THE WAL-MART EFFECT by Charles Fishman. Reprinted by arrangement with The Penguin Press, a member of Penguin Group (USA), Inc. Copyright (c) Charles Fishman, 2006. Charles is a senior writer for Fast Company magazine.

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