Podcast transcript
Introduction
Hi, and welcome to another live episode of Marketplace Masters. Brought to you by MerchantSpring, the leading marketplace and analytics platform for marketplace agencies and vendors. Here at Marketplace Masters, we strive to go deeper into the challenges that agency and vendors face to lift performance by our practical actions and insights.
Paul Sonneveld
I'm your host, Paul Sonneveld, and today we're going to talk about the strategies, tips, and insider knowledge that will help your business really thrive as a supplier at Walmart. I have invited Eric Smith to join us today and share his valuable perspectives on really how to achieve this. So allow me to introduce him.
Eric Smith is the VP of Product for SupplyPike. They're a cloud-based tool that helps CPGs reduce revenue loss by automatically detecting and resolving retailer deductions and compliance issues. He directs the strategy and product development for the deductions Navigated tool, a software product built to help suppliers manage retail reductions. Thank you so much for being on the show today, Eric.
Eric Smith
Yeah. Excited to be here. Thanks, Paul.
Paul Sonneveld
And let me just say thank you for putting up with my voice. I'm a little bit, I've got a slight cold, so I sound a little bit like Barry White today.
Eric Smith
I know.
Paul Sonneveld
Thank you for putting up with those deep tones in your air pods there.
Eric Smith
Well, that makes two of us. I'm a little hoarse today too.
Paul Sonneveld
So, well then were both
*both laugh*
Eric Smith
Yeah.
Paul Sonneveld
Hopefully, we’ll then muddle through here.
Eric Smith
Yeah.
Paul Sonneveld
Look, we, this is, I'm really excited today because we get a lot of questions about Walmart particularly from our Amazon Vendor community. A lot of them are looking to expand, and are looking to do better on other retail platforms. And of course, Walmart is right at the top there. So, maybe just let's start with a sort of broader question around what are some things that new suppliers to Walmart, just don't realize when it comes to doing business with Walmart?
Eric Smith
Hmm. Yeah, it's a great question. We work with vendors all the time who they've been doing business on Amazon or elsewhere, or maybe they're new to a company that's been in Walmart for a while and are just kind of getting their feet wet. And there's so much to know about doing business with Walmart, but one of the things that we always talk about is just being mindful of the different ways that compliance programs, invoicing, best practices, just all the gotchas that can cut into your profitability at Walmart. They are vast and if you're used to a certain retailer coming into the Walmart space, you've got a whole new ballgame, to learn and get up to speed. So, with a retailer, with a customer, the size, the scale of a Walmart, those types of issues can really stack and add up.
Paul Sonneveld
So yeah, I think, we've got some material here, around some of those.
Eric Smith
Yeah.
Paul Sonneveld
Do you want to just walk me through some of those issues that you see there?
Eric Smith
So, it looks different, different at every retailer. So, for those of you familiar with Amazon you've got all the different programs that you're used to dealing with there. And Walmart's going to have a lot of parallels to that, but also some of their own little, tricks and gotchas that are going to look different.
Walmart, you know, we typically bucket deductions, fines, and penalties into a handful of different buckets. By far the most common that we see vendors dealing with are going to be your deductions withheld from invoices. So shortages are far and away the most common within that bucket. Shortage deductions, you invoice for 20 cases, and the retailer says they receive 10, so they're only going to pay you for 10. They'll deduct you the rest. Far and away the most common, what's unique about Walmart, whereas Amazon typically has a single deduction type for shortages or quantity variance.
At Walmart, you're going to see many, many different codes. So that's, I think what this slide here is showing, you know, about a dozen or so unique deduction codes for different types of shortages. So they really start splitting here but highlighted there at the top you'll see three codes. So, code 22, 24, kind of 25 with a bit of an asterisk there. But these are going to make up the most volume of these types of shortages. And so that's what you'll hear a lot of suppliers talking about when they're lamenting about deductions at Walmart typically those 22,24 and 25. But that's far from the only bucket that we see. So those types of deductions with shortages, price variance, allowances, those types of things with health and invoices are super common.
But also with Walmart, you've got to be conscious of some really sophisticated compliance programs. Most people are familiar with Walmart's OTIF program On Time In Full, which has been around for several, several years now. But there's a lot of nuance to that program, to really mastering that.
But they've also launched within the past year or so, a new program called SQEP or Supplier Quality Excellence Program, which is a new and very, very nuanced compliance program around how you are doing business with them from your EDI documentation that you're transmitting to how you're packing and shipping product. Everything in between really, it's a program aimed at getting some suppliers compliance so that Walmart can automate their receiving processes.
So there's dozens of different types of fines that go with that, and that's being rolled out, or it has been rolled out over the past couple of years. And so a whole new program. If you've been away from Walmart for a couple of years and you're coming back fresh, something new to be aware of. We also talk about buckets like post audits are a really common, type of revenue loss that vendors will see, which is essentially a catchall true up that, Walmart actually works with third-party audit firms to audit your business, look for areas that they may have missed and basically come back around at the end. So, A lot of retailers have similar programs. Walmart is pretty notorious for going really, really deep into the weeds and oftentimes throwing a lot of spaghetti at the wall to see what sticks.
Paul Sonneveld
Yeah, definitely. Yeah. I've spent many years in a retailer myself and that was a great lever when we’re close to getting points season. We would get the forensic orders in and they would obviously. they were paid on a sort of no-win, no-fee basis as well. So, they were very creative in finding all sorts of lost profit opportunities as we used to call them. You know, things that were missed, not charged and all of that. Just to minor follow-up question for me here. As a new supplier, what is the biggest, I call it banana skin or what are the biggest issue that I tend to like or trap that folds into trap’s probably the wrong word. I don't think Walmart's out there to get you but, what slips me up?
Eric Smith
Yeah, something I would pay very close attention to. Oftentimes we see new suppliers at Walmart. There's a lot of excitement that you're in this massive, massive, retailer. It's a big deal. And so they kind of gloss over some of the details of things like your vendor agreements or the contracts that you're negotiating, not paying very close attention to that. As well as things like initial items set up.
A lot of Amazon vendors coming from that world are probably scarred and are paying a little bit closer attention to things like item setup, but skipping over the details early on like that is going to lead to a lot of cascading issues. So, that's typically where we say, Hey, you know, pay very, very close attention.
Make sure you understand the terms of your agreement. Make sure that you are invoicing per those terms, and make sure that when you're setting up new items you are following Walmart's guidelines, everything from pack size to all the way down to how you're shipping, to make sure you're, you're being compliant with those programs. It's going to save you a lot of headaches further down the line.
Paul Sonneveld
My second question was around how does this manifest, these issues, financially? Obviously, we know from an Amazon point of view, Amazon will just deduct off invoicing and go, hang on. I was expecting a lot more money. And see, there's not that much coming through. How does that financial process work for Walmart?
Eric Smith
Sure. Yeah. One thing that I'd say is a little bit unique about Walmart is that each of those buckets that we talked about earlier from deductions with help from invoices to their OTIF program, to SQEP, to post audits, to, you name it, they kind of have different ways that they will be siphoned off. Whereas a lot of retailer's compliance fines hit a check and look very similar to a deduction for a shortage or a price discrepancy. At Walmart, deductions are withheld from invoices when they issue that remittance. But OTIF defines are billed on a monthly basis for all orders for that month. And SQEP functions similarly.
So those are going to come across looking very different to a standard deduction on a remittance. And so if your AR team is looking at your remittances, oftentimes it's like, okay, I see your shortage deduction. That makes sense to me based on what I'm used to. Now, what's this random line down here for deduction that's not my invoice number. It looks a little bit different because it's a rolled-up type program. Similarly, post-audits are going to be withheld from checks and follow a totally different format. So they trickle off in kind of different areas. So it's important to understand what each type of withholding means, how to identify it, and then where to track down backup information, what actually happened? because each of those live in different places within Walmart's system retail link.
Paul Sonneveld
Yeah, it sounds like, I thought that the Amazon vendor side was rather complicated, but, I don't think Walmart is, offers simplicity here either. Right?
Eric Smith
Yeah, it's tough to rank them, I'd say. But, you know, just in terms of my experience with both, I'd say that Walmart, things spiral a little bit more at Walmart.
Paul Sonneveld
Yeah. Interesting. Well, I'd love to get an example of that a little bit later, but, so let me just sort of say the high level, like, do all suppliers deal with this? Is this just, everyone just puts up with it? I mean, what, what does it look like?
Eric Smith
Yeah, so, you know, something that we have the benefit of visibility here at SupplyPike, working with as many suppliers as we do across the box. You know, what we've been able to understand is this is not just an isolated issue. So if you’re, try grocery, you're going to deal with this and other categories, you're probably fine.
No, this really is a pretty universal issue. Obviously, there's some fluctuation in terms of the severity from supplier to supplier, but what we see is on average suppliers are losing 5% of what they invoice on a regular basis. And so not insignificant. We've definitely worked with suppliers closer to the 20-25% range which starts to become an existential crisis.
Paul Sonneveld
Yeah. Well. Big money.
Eric Smith
Yeah. Big money and it's extremely rare for us to come across someone who's less than 1%, they'd be very buttoned up, doing very well. If that's all that you're losing.
Paul Sonneveld
So if you're in the 5% range, that would be considered quite reasonable. Like the sort of the so the opportunity
Eric Smith
Averagely.
Paul Sonneveld
All that back, is, is limited, would you say? Or do you still find there's opportunities there?
Eric Smith
There's, I'd say, at that 5% range, there's still some opportunities there to improve upon that. That's typically what we would call average when we begin working with a supplier. So, you're in the middle of the bell curve there, but certainly, still, opportunities to improve. With Walmart, there are definitely buckets of types of deductions that are harder to prevent than others. Where essentially it's due to just bad processes on the retailer side, and there's only so much you as a vendor can do to prevent that. Other areas where it's very clear you're shooting yourself in the foot. We can improve this and that can reduce the inflow.
Paul Sonneveld
Yeah. So what areas are the most common, would you say? What are the issues and areas?
Eric Smith
So shortages, I would say, almost invariably across suppliers shortages are going to be the most common. It's rare that we encounter a supplier who does not deal with those quintessential codes 22, 24, 25. If you're direct import. If you're DSD, or something like that, you're probably dodging the bullet there. But otherwise, if you're shipping, especially through Walmart's DC network. Welcome to the world of codes 22, 24, and 25, by far the most common.
Paul Sonneveld
Mm-hmm.
Eric Smith
I think that the next slide you pulled up is a pretty important thing to touch on here. And it goes back to what I mentioned in the beginning as far as things to pay attention to early in your relationship with Walmart. These types of issues stack. And so one issue with items set up related to pack sizes or item cost or something like that can lead to multiple issues.
And each of those issues have to be tackled one by one to recover the money. So just because you can prove that, hey, this was a shortage, deduction, you know, it was invalid. Therefore, my in full fine for the OTIF program should also be invalid. Because I proved it was not a real shortage. That's two different disputes, two different teams at Walmart. You know, swept fines would be a third type of dispute. So they don't give you the benefit of the doubt and go back and reconcile. So, it's because of how things snowball like that and because the resolution is specific to each fine or penalty, it's far less work to take care of this on the front end than to try to come around later and clean up.
Paul Sonneveld
I was going to say, what's your success rate in disputing some of these charges and shortages? What are the odds?
Eric Smith
Yeah, that's one thing I think is pretty unique to Walmart. We certainly deal with retailers where the success rate of say, disputing a shortage is below 50%. Even if you can prove it was an invalid shortage that you should be paid back. Some retailers just don't play ball. To Walmart's credit, I will say they will. They're one of the better retailers when it comes to repaying deductions if you can prove your case. And so, you know, take part there. For those of you new to Walmart, with shortage deductions as an example, we see win rates on average, and this is across categories across supplier size. Win rates, typically at least 75 to 80% for shortages. So very, very high likelihood you can get those repaid if you can prove your case.
Paul Sonneveld
So, that, of course this is all premised on the fact that there'll be lots of issues and getting it back, but ideally you're trying to avoid these in the first place, right? Not having any claims against you, much better than doing all the work.
Eric Smith
Absolutely.
Paul Sonneveld
So, you know, any suggestions you'd offer to our audience here in terms of how do you deal with Walmart? How do you do this properly?
Eric Smith
Yeah. So, I've mentioned one of those best practices and that's item set-up. I harp on that because it's so critical. Probably not news to those of you at Amazon. Paying very, very close attention to all the details of how your items are set up from pack sizes to pack quantities to pricing, you know, you name it. Making sure that that is absolutely accurate is going to save you a lot of heartache.
Another very important thing with Walmart is just understanding their secondary packaging guidelines, how they expect products to be packaged in cases, how they expect pallets to be loaded, labelling, and best practices. Those types of things will help with the receiving side of Walmart's products and product entering their network.
The last thing I'll say is, how you invoice as well and specifically around timing of invoices. We've seen this be one of the simplest kinds of best practices that your team can implement to avoid especially a lot of the shortage-type deductions. It's just making sure those invoices are not being transmitted too early. We know a lot of suppliers like to send that invoice out. About the time a truck leaves the dock at their warehouse. More often than not, that's going to lead to a shortage-type deduction. Best practice typically is to tie that invoice state to the MABD, when goods are expected to arrive at a Walmart DC. And that can, you know, just that simple timing change. Head off
Paul Sonneveld
Just a little bit of buffer for Walmart to actually do the receipting and the processing and capture it in their systems before you trying to ask them to start matching off invoices against quantity received, and all of that.
Eric Smith
Exactly. And similar news to Amazon there. Because so much of that process is automated on their side, give a little bit of buffer room to allow things to settle in.
Paul Sonneveld
Yeah, yeah, yeah. Now we spoke about a little bit about what the win rate is and the fact that Walmart's actually quite reasonable in a lot of cases if you provide the evidence and all that. We haven't yet spoken much about the actual process for doing that. How do I, as a supplier, how do I go about making a claim? I know there's so many different aspects. You already mentioned there's different teams. So how do I navigate through this?
Eric Smith
That's, you know, one, I'd say kind of pitfall that we see with a lot of teams coming into Walmart for the first time. Many retailers that we deal with have typically a single process for disputing any number of types of issues. With Walmart, there are multiple different dispute portals. So the way that you dispute a shortage deduction looks very different from how you dispute an OTIF fine, which is different from how you dispute a swept fine, which is different from how you dispute a return or a post audit.
So, the process is going to vary a lot. Most of these processes are through various web portals, so within the retail link, or a similar system, you know, a web form you're filling out, attaching documentation and submitting. Things like post audits or an email process where you're actually negotiating directly with the auditor. So not even directly with Walmart, it's with a third-party auditor.
But every process looks a little different and we see that trip up some teams, where a vendor is accustomed to their AR team handling disputes. They've got access to maybe a web portal where they see remittances come through and can create disputes with another retailer. So there's kind of one familiar process. With Walmart, that definitely splinters. And so, collaboration across teams, making sure your AR team is talking with your supply chain team, is talking with your account management team, because they're all probably using different portals for different things and may not realize, Hey, I've got the portal for disputing this type of fine, I've got the portal for disputing this type of deduction. And that's where we see a lot of issues kind of fly under the radar and not get acted upon.
Paul Sonneveld
I was just thinking about all the different portals that you're talking about, the process and the email addresses. I'm just visualizing a series of bookmarks in my browser just to sort of deal with all of that. And you put around the kind of cross-functional collaboration within your business to do that is super critical. How good or how quick is Walmart if a dispute is valid, they agreed to refund. I mean, how long does it take for them to settle a dispute and how far back can you go as well? That's probably another interesting question.
Eric Smith
Two really good questions and both are things that we see vary a lot, across retailers for sure. So I'll start with how far back. The general rule of thumb with Walmart kind of a little bit regardless of the type of issue that we're talking about, is about two years. So things like deductions are almost always going to be a two-year statute of limitations. Few exceptions here and there, sort of gotchas to watch out for.
But generally, with Walmart, two years is a good kind of ballpark to remember. Whereas, we see with Target, for example, that's going to be about 18 months. Kroger's really short, 180 days to fight a shortage. Amazon, we put 30 days on this slide with an asterisk. So those of you familiar with Amazon's settlement, process or creating a case and entering into some kind of negotiation like that with Amazon, you can go pretty far back with that process.
But for Amazon's initial dispute process, submitting a dispute through their portal, there's a really tight window of time where you can expect success with that. Otherwise, you're basically resigned to having to go try to negotiate through a settlement. So Amazon, we consider that window for best success to be pretty tight. From there you can go back further, but yeah, two years for Walmart.
Also something a lot of suppliers don't realize, when we talk to a new Walmart supplier, maybe if they're accustomed to a Target or Kroger, Hey, go back, two years if you're brand new. Not an issue yet, but as far as resolution time, time to hear back from Walmart on a dispute, it's going to vary depending on the type of dispute we're talking about, right? The most common one that we talk with suppliers about would be invoice deductions. So those are disputed through a portal called APDP. I always think ACDC, but APDP is far less fun.
Paul Sonneveld
Close the button. Yeah.
Eric Smith
Yeah. APDP is a web portal for submitting those disputes. Historically with APDP, we saw average review times. You could expect to have something done and closed out within two to three months at the most. More recently recent development with Walmart. We've seen those timelines extend, due to some changes in their internal process. So Walmart used to offer a settlement program similar to that Amazon settlement, where you could hand them, you know, three month’s worth of shortage deductions and say, I don't agree with any of these, and they'd offer you 60, 70% of what you think you're owed and meet in the middle and call it good.
And Walmart used to have a similar program. They've since done away with that altogether. It's no longer an option at all. So with that change, you have this huge influx of new suppliers who've never disputed through that web portal, having to do all their disputes through the web portal. We've seen that really stretch out review times for Walmart. So the average that we're seeing now is it's upwards of six plus months, that we're seeing some disputes before they get any kind of resolution or comment at all. We still see action being taken sooner than that. But it's a lot more common to see that multiple-month delay.
Paul Sonneveld
Yeah, I see. I guess they've done away with negotiating a bundle of claims together and really investigating everyone on single merit. So yeah. That by default.
Eric Smith
Mm-hmm.
Paul Sonneveld
Time and effort. It's understandable. We've gone pretty deep into lots of sort of aspects and facets here of, this particular topic. But sort of before wrap up, I mean sort going back up again, are there any other best practices that you'd recommend that Walmart suppliers implement or maybe tighten up if they're sort of already on their way? What best practices are you thinking of?
Eric Smith
Yeah. First, a really practical thing, make sure your team has a process in place to capture documentation that's going to do you favours if you need to dispute something. So, real basics are going to be your shipping documentation, because that's typically how you're going to fight, say a shortage deduction. So making sure you have a process for storing that information and being able to recall it when needed.
But other things as well, like, any kind of communication with your buyer. So if your sales team is negotiating rollbacks or any kind of price moves like that. Hang on to that documentation, store those emails, everything like that. Because with Walmart's post-audit process, auditors are going to have access to emails to any kind of communication between the merchant and the vendor. And we've definitely seen scenarios where an email can be taken out of context and it looks like you offered a price that ultimately was never agreed to or something like that. And that can lead to an audit that's going to cost you a lot of money. Unless you're able to provide the full context to say, no, no, no, here's the full email chain. They never agreed to that price. So hanging onto that type of information is really critical.
Maybe a little less tactical, but really something that's a best practice regardless of the retailer you're dealing with is, working collaboratively across departments within your company. So, often we see these types of issues fall onto the lap of the AR team. Because they're seeing the remittances, they're seeing deductions withheld, and if you want the money back, it's on them to go figure out how to make it right. And that's just not really the way to handle this. In today's day and age.
The most mature vendors that we see are the ones where the AR team has a direct line to that supply chain team who has a direct line to that sales or account management team. Because so many of these issues, just because the problem pops up, with remittance, what actually caused that problem happened way, way further up the chain, with something, that was negotiated, by the sales team or in fulfilling the order with the supply chain team.
So if you're not working with those teams, you're really missing out, both in terms of being able to go out and prove that a fine or a penalty was invalid and get paid back. But more importantly, like you said, Paul, Stop the bleeding, and fix issues that can be fixed further upstream. And that's really hard to do if you're not all kind of working from the same page.
Paul Sonneveld
Yeah, yeah. Absolutely. A lot of these certainly from my own retail background, these are complicated issues and you need people who are sort of across the situation who can dig up an email, who can help certainly, someone in a separate department is just going to struggle to get through it unless you sort of put all your heads and experience together in relation to that particular issue. For sure.
Eric Smith
Absolutely.
Paul Sonneveld
Great. Well, we're almost out of time. I love these topics. For some of them might be very detailed, but this is kind of the challenging bits around the retailer relationship in many instances for suppliers. We haven't spoken much about what you do Eric and actually SupplyPike and how they help vendors in this space. Do care to share a little bit around how Supply Pike really helps with revenue management?
Eric Smith
Yeah, so these topics are near and dear to my heart because here at SupplyPike, we are a software company and our focus is specifically around what we would call revenue management. So, areas where suppliers are losing money, doing business with retailers. Our approach is we want to make those types of issues visible so that you know where the leakages are. We automate the validation to understand what was valid, and what was invalid, as well as the dispute process. So being able to go out and challenge those invalid type deductions and be paid back and that recovery is a really powerful piece of our software.
And what's really unique about our approach is recovery is hugely important, but that's just the base of the pyramid. Like we've talked about earlier, prevention is even better, right? So, our approach is we want to help suppliers get paid, but also get better. So our software serves up insights, it picks out and identifies areas where you have common root causes that can be addressed and we can help your company go out and fix those types of issues.
So, our software is tailored to be very specific to the types of retailers that we work with. So we went deep into Walmart today, but you know, whether it's Amazon or Target or Kroger, they all look kind of different. And our software is definitely set up to be very unique to each of those so that you can be most effective. We don't believe there's truly a one size fits all type solution for this. And if you're trying to skim across the surface, you're not going to be as effective as you could be. So we go really deep into the retailers we support.
Paul Sonneveld
Excellent. Yeah, certainly one of the clear things you've left me with today is how different just Walmart and Amazon are when it comes to these sorts of issues. And well, it's a) complicated and b) different and
Eric Smith
Yeah.
Paul Sonneveld
You mentioned some other retailers there and we could probably do another separate session on some of those.
Eric Smith
Sure.
Paul Sonneveld
Because they'll have different processes and portals and systems and all of that again.
So, but on that note, we are past half an hour mark. So Eric, as we wrap up, I want to just thank you so much for agreeing to be a guest on the show today. Thank you so much for the amazing experience and just that detailed, gritty insights and knowledge that you were able to share with myself, my audience today around how does Walmart really deal with all of these, deductions and shortages and various other things that come with it. So, I just want to say thank you so much for being with us and I look forward to doing another one soon maybe on Kroger, or we'll pick another, retailer out of the hat.
Eric Smith
There you go. Yeah. Thanks, Paul. Enjoyed it.
Paul Sonneveld
Thank you so much. Take care. All right everyone. That is it for today's episode. I hope you found that enjoyable and more importantly, I hope you've walked away with some really great knowledge and practical insights in how you can improve your Walmart 1P business. Until our next episode, see you then. Take care.
