Is getting your product into WalMart a small business owner’s dream or is it akin to making a deal with the devil?
You just might have the chance to find out thanks to WalMart’s second annual “Get on the Shelf” contest. Businesses (and individuals) have until July 31 to submit a YouTube video of their product, with winning entries awarded the chance to sell on Walmart.com. (The grand-prize winner might even make it into some WalMart stores, dependent upon pre-sales, of course.)
So, is this an opportunistic contest on WalMart’s part (let’s shed our reputation for being a small business killer by becoming a small business advocate) or is it truly a once-in-a-life opportunity for small business owners?
Let’s first think about why a small business owner would be tempted to enter this contest, and I’m sure we won’t have to think too hard. Despite their negative public image, WalMart is still a hugely popular shopping destination. (Net sales for 2012 were $443.9 billion.)
And when you’re a small business owner with visions of success and profit dancing in your head, getting into WalMart might seem like the equivalent of hitting the entrepreneurial jackpot.
But before you go making your entry video – or pitching your product to them on your own — check out why getting on the shelf at WalMart might not be the right decision for all small business owners.
Understanding the Risks
“Many envision selling to WalMart and other national retailers as a dependable revenue stream and quick path to riches,” says Jerry Chautin for the Herald-Tribune, but the consequences might outweigh the benefits.
Jerry cautions those wanting to pitch to WalMart to ask themselves if their business can sustain itself without the corporate giant — well before they get any kind of contract with them. He says, “Before you decide to pitch WalMart, be sure that you can afford to lose [their business]. In other words, do you have enough other business to survive if WalMart unexpectedly tells you to take a hike?”
Bob Coleman, author of Money, Money Everywhere but Not a Drop for Main Street, says that you should limit your revenues from WalMart to 10% of your total volume. Why? Because “When WalMart comes in for their annual review and squeezes your small business’ profits, you have to understand the devil you are married to.”
You will also be waiting 90 to 120 days to get paid by WalMart, says Bob, which means they’re borrowing from you at zero interest. And waiting that long to get paid isn’t a luxury most small business owners can afford – but it sounds like that’s far from being one of WalMart’s concerns. “You don’t like the terms, fine. WalMart will go somewhere else,” he warns.
Get on the Shelf — But at What Cost?
Scott K. Curry, founder of Scott’s Marketplace, believes that the WalMart ‘Get on the Shelf’ contest is nothing more than a marketing ploy to steer the public’s attention away from the negative effects WalMart has on mom-and-pop shops.
“I understand the initial allure of the contest: great exposure and seemingly endless potential,” says Scott. “However, I can’t get past all the small businesses that have been forced to close because of the presence of WalMart in small communities across the country. For WalMart to give this opportunity to just a few winners seems to be a “slap in the face” to all the businesses who’ve closed because of them. So from that perspective, I couldn’t consciously partake in, or support, this marketing ploy that WalMart is running.”
Small business owner, Terri (last name withheld at her request), believes that the consequences of being associated with a big-box store such as WalMart, with their penchant for painfully undercutting prices, could be detrimental to small business owners. She advises, “Understand that your product will have to be marked down so low to gain any traction in a WalMart store… possibly much lower than you will feel comfortable with. Ask yourself if you are prepared to offer that product at the same low price with other retailers or in your own stores. It’s a risk you are taking — and a decision that should not be taken lightly.”