How Wal-Mart buried Huffy – That’s just one of the anecdotes revealed in
this Boston Globe book review of “
The Bully of Bentonville.” Huffy had to cut costs to the bone to meet Wal-Marts price demands, ended up moving operations from Ohio to China, but still went bankrupt. It’s assets were sold to a Chinese creditor and – as a final insult – Wal-Mart built a supercenter on the site of the abandoned Huffy plant in Ohio.
3 comments:
This desire to supply Wal-Mart seems to ensnare a woebegone manufacturer every few years. They borrow to ramp up production to meet the huge orders the first year. The next year they borrow again for new machinery but also cut prices. After a few years Wal-Mart or someone else will tell the company to lower its prices again or they will order from someone cheaper. Now the company will either move its own facilities overseas, like Levi, because they can't borrow more or service the debt on the previous round of borrowings and expansion. Soon they are either in receivership or South China. And Wal-Mart finds its bikes or jeans from a new starry-eyed supplier.
Wal-Mart isn't the only one doing that.. other supercenters include Home-Depot and Home Base.. they all know their huge markets are the 'dream account' to any vendor and they play rough.. but, as others have said, the allure to 'get in the door' is overwhelming to many manufacturers.. the smart ones are the companies that know when they aren't making money and just say no
personally, I think many companies have used those resellers as a way to eliminate competition.. they'll cut their prices down to breaking even and then say they won't go any lower (which is Accounting 101).. and then let their competition undercut them at a loss to themselves
When I first entered the realmm of manufacturing thirty years ago, Sears was notorious for devouring small manufacturing firms. They would offer the opportunity to produce some Kenmore or Craftsman item, and once the company was hooked, squeeze them till they popped, then find another. In fact, the practice goes back to the days when Mr. Sears hired Mr. Roebuck to fix watches for him. Back then manufacturing was very much subject to retailer-driven boom-bust cycles.
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