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Wal-Mart founder Sam Walton believed in having an alluring and unbeatable "opening price point" item in each category -- whether TV sets or bathing suits. The low price functioned to catch the consumer's eye and create the perception of value across the higher price points further up the aisle.

"The opening price point is clearly a foundation of who we are and how we interact with our customers," Ray Bracy, Wal-Mart's vice president of international corporate affairs told FRONTLINE.

The focus on low cost also had the effect of forcing Wal-Mart to look inward and find innovative ways to take costs out of the supply chain.

With its roots in Northwest Arkansas and the American Sunbelt, Wal-Mart would seem an unlikely leader in information technology. But it turns out Wal-Mart was often way ahead of the curve.

In the 1960s and '70s, Wal-Mart took its first big bet by building its own infrastructure and distribution network. Before Wal-Mart decided to take charge of its own distribution, retailers traditionally depended on wholesalers, who procured, warehoused and distributed manufactured products. But Walton found that none of the wholesale distributors at the time were interested in giving adequate service to a geographically remote discount retailer. Wholesalers would be shut out of Wal-Mart's business model.

Next, to take on powerful brand-name suppliers, Walton would make a massive bet in information technology. By the early '80s, Wal-Mart was one of the earliest to take advantage of the bar code to increase efficiency at the checkout counter. The aim now was to find a way for technology to help Wal-Mart come up with the right mix of goods for its individual stores, thereby increasing efficiency and lowering the company's inventory costs. The idea was to transmit point-of-sale information in real time to manufacturers. The information then could be used to examine consumer taste trends, gauge demand and eliminate the need for warehousing -- manufacturers would deliver "just in time."

And so, the cornerstone of Wal-Mart's increased efficiency was its trend-forecasting software, which tracked consumer behavior. In 1985, Walton and his chief lieutenant, David Glass, began developing a program called Retail Link. The software, and the hardware that went along with it, took years to perfect, eventually costing $4 billion. This revolutionary system delivered sophisticated information on consumer behavior, drawn from the data imbedded in the barcodes that passed through checkout counters.

Wal-Mart shared this revolutionary software with suppliers at no cost, in order to help them meet the retailer's needs more efficiently. In the early years, many Wal-Mart suppliers were American firms with factories in the U.S., and so sharing the Retail Link system dovetailed with Sam Walton's "Buy American" campaign, which focused on using domestic manufacturers. But Walton also insisted on ruthless efficiency. As he wrote in a letter to his suppliers in 1985, he was committed to buying U.S. goods whenever possible, but they would have to upgrade their operations and improve productivity to "fill our requirements."

At the heart Wal-Mart's offer to share its software program was a Faustian bargain for suppliers: Use our Retail Link program, play by our new rules and we will be your gateway to sales beyond your wildest dreams. Or refuse, and be shut out of America's dominant retail chain. In fact, by sharing Retail Link, Wal-Mart gained command over its suppliers and effectively penetrated their executive decision-making. It drew them into what Sam Walton liked to call a partnership: Wal-Mart was plugged into the supplier and the supplier was plugged into Wal-Mart.

But Wal-Mart had the upper hand: By gaining access to its supplier's books, the company was in a position to virtually dictate the terms of its contracts on price, volume, delivery schedule, packaging, and quality. And it allowed the giant retailer to set the profit margin each supplier would get. It turned the supplier-retailer relationship upside-down.

If vendors wanted their products on Wal-Mart's shelves, they had to implement Wal-Mart's "customized business plans." Each year, the big retailer handed its suppliers detailed "strategic business planning packets." Wal-Mart would grade them on weekly, quarterly and annual report cards. And when it came to discussions of price, there was no real negotiation, even for household brands.

"It was a cultural change between retailers and manufacturers," said Bobby Martin Jr., the Wal-Mart executive who developed and managed the Retail Link software system. "Part of process people went through was fear that Wal-Mart would know their business better and run their business. Some of them were not even as computer literate or capable as Wal-Mart… But the impetus behind it is the low cost commitment. This is divine discontent with cost."

Thus, Wal-Mart used its buying power and its information about consumer buying habits to force vendors into squeezing their costs and keeping their profit margins low. Over time, some suppliers -- especially middle-sized and smaller firms -- were bankrupted; and major firms moved production overseas, and increasingly to China.

 

 

The iPod MP3 player and other shiny toys are tempting even to non-tech types, but beware of the new gizmos' hipness barrier.

By LAURA MOYER
 

Date published: 12/29/2004

Two identical iPods emerged from their gift-wrapped cubes on Christmas morning.

My sister and I had been very, very good all year, and the surprise iPods were our rewards.

Neither of us considers herself high-tech, but we're both solidly upper-middle-tech--not early adopters, but capable consumers of computers, DVD players, handheld organizers, cell phones and other gadgetry that didn't exist until we were well into adulthood.

One thing we noticed right away: The modern-art packaging and the look of the iPod itself implied that this was a product for those under 30 and hip, not those over 40 and spreading of hip.

Still, we thought, even if the target iPod consumer is more likely to download Green Day's "Boulevard of Broken Dreams" than load up my sister's beloved old-time banjo music, we'd work it out.

The day after Christmas, she sat down at her computer to start learning the mysteries of the MP3 player world.

Cold water in the face moment No. 1: The iPod flat rejected her perfectly good but old computer, running Windows 98. This new 'iPod wouldn't work with anything earlier than Windows 2000.

Cold water in the face moment No. 2: Her 11-year-old daughter had the only compatible computer in the house, a gift from a family friend who'd updated it with Windows XP. The kid quickly worked out a trade of computer time for occasional iPod listening privileges.

Cold water in the face moment No. 3: Once all the software was loaded, my sister had to register the iPod's serial number. This number is printed in teeny-tiny white type on a mirrored metal surface. It wasn't clear up close. It wasn't clear at arm's length. In fact, it wasn't clear until the 11-year-old with new-generation vision came into the room and read the digits and letters out loud to the aged parent.

That done, the parent soon had her iPod up and running, loaded with the music of the West Virginia mountains.

This she recounted to me on the morning after the morning after Christmas, coincidentally the very morning I'd set aside to get my iPod up and running.

Charge it up first, she advised me. And oh, by the way, it doesn't work with Windows 98. No problem, I thought; my computer, bought in 2001, runs Windows ME. Surely, getting the iPod to work with it is only a matter of downloading an update or two.

Cold water in the face moment No. 4: It wasn't. Hours later, after Web-site visits and a few 45-minute tech support calls to Microsoft, Apple and my computer's manufacturer, I was forced to accept the truth. You can't get there from here.

Windows ME works well for me, and I don't want to change until I'm forced to buy my next computer. So back will go my iPod in favor of a less exclusionary hard-drive MP3 player, a comparable Rio Carbon that thoughtfully does run with Windows ME (even Windows 98, for that matter).

I have it on very good authority that I will like this. It's recommended by a friend's tech-savvy 13-year-old son, who researched all possible options before laying out his own money for one.

Anyone who's ever broken a dish in Granny's china or watched one of their favorite products disappear from store shelves knows the special frustration of trying to replace them. It's as if the shopping universe has slammed its doors in your face.

You're ready and willing to pay for what you want, but no one can sell you what you need.

Well, almost no one. While some things are irreplaceable, there are a number of steps you can take before giving up the good fight. Whether it's the signature scent you've been wearing for 10 years or the running shoes that provide just the right bounce, the Internet has made it easier to find items that have gone missing. Here's how to get started.

Check the source
In your panic, you may forget the obvious, like starting with the product's original manufacturer. It can help in a couple of ways: First, the maker can clear up the question of whether the product is truly being discontinued or if it's a local supply issue. And second, even if your old favorite is being phased out, the manufacturers can often help you find inventory that's still available, if temporarily, either in their own warehouses or in stores across the country. Do a general Web search or use the MSN Yellow Pages to contact the manufacturer.

Don't let retirement sneak up on you. Create a perfect plan.

Product discontinuations are so common in the makeup industry, for example, that many companies maintain Web pages listing products that are on the chopping block. You can try Lancome's "Beauty Bye-Bye" page here, Estee Lauder's "Farewell Favorites" here, and Bobbi Brown's "Bobbi's Closet" here. Clinique has a "Gone but not Forgotten" telephone number, at (646) 602-7725, though the company says it doesn't maintain inventory of discontinued products in its warehouse.

For items that you've simply lost or broken among a set that's still being produced, many manufacturers can sell the item individually. For instance, toy-and-game maker Hasbro maintains a Web page where you can order replacement pieces for many of its games and toys. For the classic Monopoly, a set of 12 hotels and 32 houses will cost $4; a replacement board is $5. They also have a selection of Monopoly cards that generally cost $1 for a partial set, including shipping and handling -- easily beating the cost of an entire new game. (If you're buying more than one piece, though, keep in mind you can find cheap games at Wal-Mart and other general discount retailers; Monopoly sells online for about $10 plus shipping.)

Try the specialty replacement sites
If your inquiry to the original manufacturer comes up empty, you may be able to find what you're looking for from a specialty replacement site. Some general sites, such as DiscontinuedItem.com, try to connect you with retailers who have what you're looking for.

Other sites specialize in certain product categories. Here are a few to get you started:

• China, silver and crystal: If your last holiday meal ended with a broken gravy boat (and what good party doesn't?), sites such as Replacements Ltd. and SetYourTable can come to the rescue. Replacements boasts 200,000 patterns -- including designs produced more than 100 years ago, so that heirloom set may not be compromised, after all. Even if you don't know the name of your china pattern, most sites will match it from a photo.
  
  Because these sites are continually buying new pieces from private sellers as well as manufacturers, it's worth checking back if you strike out the first time. And remember, if you've broken a dish from a set that is still in production, it's generally cheaper to go to a general retailer or the original manufacturer than to use a specialty service.
• House fixtures (for remodeling projects): Anyone trying to preserve the historical charm of an old house while refurbishing it has probably been on his share of wild goose chases. Check out sites specializing in architectural salvage -- old doorknobs, faucets and the like -- that other home renovators have tossed. About.com has a great index of salvage sites here. You can also find discontinued wallpaper at Wall USA. And don't forget to check with Blue Mountain Wall Coverings. It's the largest wallpaper manufacturer, with many well-known brands.
• Perfumes: The Perfume Corner in Boston and La Parfumerie in Seattle specialize in discontinued and hard-to-find perfumes. If their sites don't list what you're after, you can send e-mail and they'll try to locate the scent for you. You can also post a note in the Fabulous Fragrance forum, which has an ongoing thread on finding past favorites. Or, contact the venerable Perfume Detective, Anitra Earle, by snail mail. She's based in New York and has made it her business for the last 20 years to find elusive scents. Contact her here: The Perfume Detective, 615 Warburton Ave., Suite 7J, Yonkers, NY 10701.
• Running shoes: Runners can be fanatical about their shoes, making discontinuations especially tough. But at RoadRunnerSports.com, you can stay one step ahead by signing up for e-mail notifications that let you know when your shoes are slated to be discontinued. Bandana Running and Walking and MyRunningShoe also offer already or about-to-be discontinued shoes.

Don't forget eBay
A general search on eBay with just the word "discontinued" turns up more than 2,000 items. With eBay you're not just relying on formal supply chains -- you're plowing the depths of your neighbor's basement, so new products can come online at any time. Also, the seller may not include the word "discontinued" in his listing, so simple product-name searches will be your best bet.

As a last resort, have it made
This is usually the most costly way to go, and it fits a fairly narrow array of items. But if it's makeup or a replacement part for your bike, you could be in luck.

• Makeup: There are a number of sites that create customized makeup, including Three Custom Color, Giella and Reflect.com. Three Custom Color specializes in lipsticks -- you can send them a smidge of your old one and they promise to match it.
• Widgets: Customers of eMachineShop.com have had everything from saxophone mouthpieces to signs and parts for model helicopters and rockets made through the site. If you've broken something on your bike or you want a customized solution to a problem, you can download eMachines software and design the piece yourself. They'll make anywhere from one to 1 million copies of your design.