Bob Stefko
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
Bob Stefko
What no story about how he found a horse's head in his bed! Heck, why not pin a medal on his chest and call it a day. Totally dumbass story.
Everything ok until I came to that part. In my opinion Briggs & Stratton, which used to be quality, has evolved into junk over the years.
Sounds like a good move. By lowering the quality to meet Walmart's price, they'd damage the Snapper name. Sure, they could get mowers built in China for a lot less, but...reputation is big in the outdoor power equipment market.
I've bought cheap Walmart mowers a couple of times. One season is all they have in them. My current mower is a Toro, bought in 1984. Starts on the first pull every time, even now.
I've never owned a Snapper mower, so I can't really comment on them.
--in some respects, we still live in a free country--
Of course the moron doesn't understand the well-worn tactic of making a cheaper model under another brand name. Snapper can continue to be top-of-the-line (but what kid is going to buy one if his father bought a Wal-Mart model?) and the other model can be the cheapest they can make.
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!
We're sill using the Toro we bought in the Twin Cities in 1994. I've used up more than a dozen blades but can still get replacements. My Ozarks yard is kind of hard on mowers.
Hey, a Yugo will get you to work just as well as a BMW, so, why buy a BMW?
He could have phoned or sent an email. Wouldn't have had to sit in those uncomfortable chairs.
Walmart=bad I guess.
To sell to Walmart they would have to sacrifice the majority of their current, successful business.
Selling low end products will eventually harm their product name on the high end. It sounds like partnering with Walmart could provide short term gains, but would be bad for the long term viability of the company unless they completely changed the nature of their business to match what Walmart needed.
This is seems to be a good example of why Snapper was wise to walk away rather than go that route.
Hey, I gave up mowing my own lawn when I got my Porsche!
There's plenty of guys around who will do my yard work for a fair price.
Makes for short term gains, but trashes your brand name long term.
Saying No to Walmart put my hometown on the map (and the national news). Our little history: the first town to successfully stop Wal-Mart in post Sam Walton era.
Good for Wier. Too bad we don't have more CEO's like him.
Years ago when I was buying my sons bicycles, we would go crazy looking for a model under $100 on sale. It was a big ticket item, only for a birthday or Christmas.
After Walmart came into the market, we bought one for $39. Sure, it wasn't a great bicycle, but heck my sons outgrew them and treated their stuff like garbage anyway.
Sure Walmart fights dirty, and imports cheap stuff, yada, yada, yada. But I love it. I haven't gone to Walmart for 2 months now, and have a shopping list of 8 or 9 things that I can't get for the price anywhere else that I am going to buy today.
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