Posted on 01/18/2006 9:32:09 AM PST by freepatriot32
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 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. 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 percent 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 three, or year four, but year 10.
Wier traveled to Bentonville with a firm grasp of the values of Snapper, the dynamics of the lawnmower 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.
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."
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.' "
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.
Go to: Fast Company's Full-Length Article
You've never been to the Missouri Ozarks. We've got rocks, rock and more rocks. They crawl out of the ground and pop up in yards. We have limestone, onyx, chertstone, traces of lead and zink, etc.
The cable is fine, the plastic hardware broke.
"Who in their right mind would pay this much for so little?
If someone wants to pay that much, that someone can easily afford to have someone cut their grass!"
You answered your own question. That someone cutting your grass will have a nice mower. Perhaps a snapper. Nobody in the lawn care business would buy some piece of crap $100 mower.
Are you sure about the ball bearings on the crank for a four stroke engine from Briggs?
Well, like I said, I haven't been in the engine business for some time, and I don't know what Snapper is specifying now, but at the time we were trying to introduce Japanese engines, our engines had a ball bearing on either end of the crank, and Briggs answered with the "IC" series, sporting at least one, and I thought I remembered two, ball bearings.
They may have changed, but that's the way it used to be many years ago...
This guy looked at the 10 year financial graph without regard to the quick buck. Rare.
That's not a loss leader to my way of thinking. A loss leader is a can of soup or a t shirt you sell at a loss to entice customers to enter the store. While you lose a little on the one product, you get it back on the add on sales.
Snapper has nothing to gain in add on sales. In fact, by demonstrating to a generation of customers that their brand is Wal Mart crap, they will help generate interest in their competitors.
Ask Remington about that POS 710 rifle they made for Wal Mart a few years ago. They lost money making it, they lost more money fixing them, and they lost market share when they convinced all the Wal mart customers that Remington makes junk. They have since dropped the model.
They (Stihl) still do and that gets pretty ridiculous. In our tiny town in Texas (1,500 pop.), we have an independent small engine repairman that can fix anything, INCULDING a sacred cow Stihl. A lot of that stuff is snob appeal. Stihl is a good product don't get me wrong but I've also bought other chainsaws that did good service, were cheaper and with my good INDEPENDENT repairman, gots lots of use out of it/them--and Wal-Mart mowers too--for years.
I also go to other stores and guess what? Yep, their junk is ALSO Chinese made, so what's the beef? I tell you, we keep bashing good companies and running them out of business, soon we'll find ourselves right where the libs want us: Marxist/Socialist government, we're almost there...
My best deal on a mower was the used one that I bought for $15 at the flea market in Grand Prairie from an old man who refurbished them.
It was still running after 6 years but I left it behind for the man who bought my house. The worst thing to happen to it was the muffler rusted out and every neighbor within 4 blocks complained about the loud noise and the blue smoke.
Hey, Im a fan of Wal-Mart! They have pretty much set the bar with regards to how to pursue a cost-leadership strategy. We studied Wal-Mart a pretty good bit in several of my b-school classes, and it is amazing how efficient their operations are, particularly on the IT side of things.
Regarding Stihl, I think they have the licensed dealer/service requirement so they can keep their warranty claims more tightly regulated, although I could be wrong. Or we could both be right, as stihl could be using snob-appeal as part of a differentiation strategy.
The office furnishings are no accident. They are a message that Walmart will sell at rock bottom prices and pay at rock bottom prices. The Snapper guy was right. In time his company would be destroyed dealing with Walmart.
I hadn't thought about it much, but I just completed the 9th year on my Black and Decker CMM1000 cordless rechargeable lawn mower.
I've replaced the batteries once, at a cost of $100. I had it serviced at the same time for normal wear and tear, that cost me about $50 (replacing the brushes, the wheels, and the rubber grip on the handle).
So, in 10 years I've spent a total of about $200 for keeping my lawn mower running, plus whatever I spent on charging the batteries each week. The Lawn mower was $400, which seemed a lot for a mower that doesn't even power itself, but there's no reason to think I'll have to replace it for another 10 years.
I don't know why everybody doesn't buy a cordless electric lawn mower like this. No gas cans in your house, no tuning the engine, no oil changes, oil spills, pulling a cord a dozen times, etc.
And when I'm cutting the grass, I can run to the garage, grab the mower, and cut for 5 minutes. Then I can be interrupted, and start up and get interrupted and start up, because you just pull the lever and it starts back up.
And it is about half as noisy as a gas mower. And I dont' pollute the environment nearly so much.
They don't sell these at Walmart though...
About as far as this story is believable.
I spoke with a snack food worker and he told me that every
***** they make that was under wgt. was sold to Walmart in the original packaging. We cannot market it at the lower
wgt but Walmart buys all of the mistakes. You think you are getting a bargain when the ...... is not acceptable for sale in regular stores.
I'd say it was interesting, a slice of life in the world of the entrepreneur. Certainly no morality play, however, and the fact that many people cannot afford a 500 dollar lawnmower is not lost on the "hero", either, who acknowledges that WalMart provides a great service.
Eliott Ettenberg writes in The Next Economy what Brand Management is.
Like it or not Branding works. You don't buy a Porsche because you need a car to go to work. You buy a Porsche because it is like no other car.
Personally, I'm a brand name shopper. If you establish a proper maintenance schedule and stick to it, you'll actually save money over the long run.
I don't know about their tires, but a friend who has to use a man lift to change bulbs, says Wally's bulbs last about one fourth as long as the ones he gets from Granger.
Both are GE.
No, it's a loss leader because you hope that people will come into the store and buy the higher-end model instead. Regardless, Snapper will fade into obscurity if they don't have a retailer sell their stuff.
"I am curious if Goodyear is doing this too. I have bought 2 sets of Goodyear tires from Sam's Club and they were some of the worst tires I've ever used. I switched back to Michelins and the vibration, irregular wear, and premature wear stopped."
Sam's Club carries Michelins as well as Goodyear. And, Sam's stands behind them. I ruined one on a mountain road. Had about 10,000 miles on the tire. Sam's replaced the tire with a new one at no cost. Actually, Sam's credited me with the price of a new tire which was more than the price I paid. Couldn't complain a bit. Bought two more in fact.
Yeah, I know you're just bringing up a point and it was well taken (about Stihl), because in our little tiny town (again!), we also have a Stihl dealer and he was required to have a certified repairman in the business. Really not a bad idea, but it seems a little to ticky but hey, that's their deal! Yes, it's a good product. Meanwhile, our small engine repairman keeps plugging away at the line of mowers, chainsaws and weedeaters that extends out the front door and the back door, amazing--and he gets them repaired.
I am concerned about all the anti-Wal-Mart attacks though, I see this growing, creeping assault on businesses, usually big businesses but my gosh, look at the numbers they employ such has been discussed at length on FR.
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