The Wal-Mart Effect--Part IV

This is the fourth in a series of blogs on the new book "The Wal-Mart Effect" by Charles Fishman.

I explained in previous posts that Wal-Mart's entire empire is built on providing products at the lowest possible cost. They are relentless in their push for lower prices. Vendors are constantly asked to produce merchandise at lower prices, even if it means producing a lower-quality item or taking a plant overseas to get the benefit of cheaper labor and less-restrictive laws.

Fishman devotes an entire chapter to "The Man Who Said No to Wal-Mart."

The man in question was Jim Wier. Three years ago, Wier was then the CEO of the parent company of Snapper Lawn Mowers and, according to Fishman, he "politely but firmly pulled all Snapper products from Wal-Mart...a move that instantly cut Snapper's sales by almost 20 percent."

At the time Wier made the decision, Snapper already had a contract with Wal-Mart. Wier came into the picture when his company, Simplicity, purchased Snapper. He understood why the former Snapper management had signed a deal with Wal-Mart. He described it thus: "'The Wal-Mart volume...Once you get hooked on the volume, it's like getting hooked on cocaine, You've created a monster for yourself.'"

But Wier was looking to the future of Snapper. The company had the reputation of making a well-built quality product. This was exactly the reason why Wal-Mart wanted Snapper to produce Wal-Mart's flagship lawn mower brand. At the time, Wal-Mart already had six lawn mowers priced under $200 while Snapper's cheapest lawn mower cost $350. Staying in bed with Wal-Mart meant that Snapper would have to find ways to cut costs: strategies like using cheaper materials and building overseas factories.

Wier was concerned at several levels. Eighty percent of Snapper's products were being sold by a network of ten thousand independent dealers. How were they going to feel if Snapper undercut them by selling a cheaper product through Wal-Mart? How were the clients of the independent dealers going to feel? "Why should I pay $350 for this Snapper mower when I can buy a Snapper mower at Wal-Mart for $150 less?"

The CEO was also worried that selling through Wal-Mart would tarnish the Snapper image. He is quoted saying, "'They wanted to do the same thing with our products that they do with everyone's. They want more product at a lesser price. To achieve that, after a while, you do start taking some of the quality and the features out.'" A $200 lawn mower just wouldn't perform the way that the $350 mower would.

Fishman says, Wier "looked into a future of supplying Snapper lawn mowers and snowblowers 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...[He] looked into the future and saw a death spiral. So he pulled out."

But that decision was only the start. Now Snapper had to be able to produce their quality lawn mower in the most efficient manner possible in order to remain viable in the market. To keep making their mowers in the U.S., Snapper installed robots and lasers and computer-controlled equipment. They measure the productivity of their factory workers "every hour, every day, every month, every year."

Fishman says, "The Snapper lawn mower factory hums with discipline and focus and urgency. It operates, literally, in Wal-Mart time. It must. It lives in the Wal-Mart ecosystem." But Wier and his successors found a way to create quality products in a U.S. factory and still remain competitive. All because Jim Wier is the man who said no to Wal-Mart.