Don’t Buy Walmart

I’ll go through my experiences with Walmart as a supplier as well as an updated look at Walmart’s valuation.

Selling to Walmart (WMT) as a wholesaler to their Walmart.com division has opened my eyes to the scope of their distribution and supply chain management.

You don’t think of supply chain management as a money driver, but in Walmart’s case, it’s their bread and butter.

To put it simply;

  • It’s overwhelming for suppliers
  • It’s efficient x 100
  • It’s a money generator

Let me backtrack a bit. While I’ve been running Old School Value, my wife has built a great business designing and selling her goods. That’s how we know the ins and outs of the Amazon (AMZN) ecosystem, and now we are diving into the deep pool with Walmart.

By Walmart, I’m referring to Walmart.com division. We do not have our products in the brick and mortar stores, but supply goods to the Walmart.com as a wholesaler.

Overwhelming: the hundreds of pages of documents, guides, webinars and emails that we need to go through as a smaller business is mind-boggling. With Amazon, it’s a piece of cake. With Walmart, it’s a monster. But this leads directly to…

Efficiency: once you know the system and the process, the operations are streamlined and extremely efficient. So efficient, that make changes is difficult, but if there are no issues, you know exactly what is going on.

Stark contrast to Amazon, where entire cases of shipments are lost, inventory counts are constantly wrong.

As an investor, I can see how much money Amazon is leaking compared to the operating efficiency of Walmart.

Money Generator: While tough on suppliers, if shipment deliveries are early OR late, or there are errors with the shipment, suppliers are fined.

This is extra hidden revenue.

Big brands end up having to eat 3% of the invoice price if they fail to meet certain metrics.

There’s a KPI called OTIF which mandates 75% accurate deliveries within the allocated window.

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Disclosure: Long WMT.

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Comments

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Mike Nolan 7 months ago Member's comment

Thank you for this insight into being a seller on Walmart, as this was an area I was not familiar. But I can tell you that as a customer, Walmart is ages behind Amazon and other competitors.

Why can I get an item from Amazon in 1 to days, but on Walmart.com it can take a week or more? Why if I want to do an instore pickup, do they waste time and money to ship the item my local Walmart, when I know for a fact it's in the store already? That makes no sense.

Compare this with BestBuy. I place an order online. Within 30 minutes I'm told I can go pick it up. In under 3 minutes I am in and out of the store. I placed a similar order at Walmart. It took a week to arrive (even though it was also sold in store). Then it took an hour and half to pick it up. Why? There was no one manning the pick up counter. Even after having customer service announce over the PA system for someone multuple times, no one showed up. When someone finally did, the person didn't know how to process it. When someone finally arrived who could, they went to the warehouse for a very very long time. When I asked why, she said they had to manually scan with her eyes for my name on every box till she found it. That there was no rhyme or reason to how it was scanned. When the item was finally handed to me, the box was badly damaged as was the item inside.

This is anything but efficient! Bullish on $AMZN and $BBY, Bearish on $WMT.

James Hunter 7 months ago Member's comment

#Walmart is, and always has been, a mess.

Angry Old Lady 7 months ago Member's comment

Don't you mean you see how much money WALMART is leaking compared to the efficiency of Amazon? You wrote it the other way around.

Dick Kaplan 7 months ago Member's comment

No, he meant what he wrote. I too did a doubletake as I though Amazon was the king of efficiency, while as James son eloquentlg put it, I always though Walmart was a "mess."