Two Tough Companies Learn to Dance Together
The word on the street has always been that Procter &. Gamhle and Wal-Mart are two tough companies with whom to do business. Historically, Procter & Gamble has used its enormous power to dominate the trade. P&.G would bring its breathtakingly comprehensive research on consumers to retailers and use it to argue for increased shelf space for its brands. Before retailers developed sophisticated point-of-sale systems, which generate a wealth of information on consumers, they were unable to dispute P&G's analyses and resented P&G's control over the retail trade. Over the years, P&.G built up a reputation for being a "selfaggrandizing bully of the trade.'" For its part, Wal-Mart was renowned for demanding that its supplying manufacturers offer it rock-bottom prices, extra service, and preferred credit terms. In 1992, it instituted a policy of dealing directly with manufacturers, rendering intermediaries such as brokers and manufacturer representatives superfluous. It would do business only with vendors that invested in customized electronic-data-interchange technology and put bar codes on their products. However, because of the volume and growth Wal-Mart delivered, manufacturers had little choice but to fall into line. Over the last ten years, however, these two giants have developed a partnership that has become the benchmark for manufacturer-retailer relationships. It is based on mutual dependence: Wal-Mart needs P&G's brands and P&.G needs Wal-Mart's access to customers. The relationship took time to mature and has gone through its share of growing pains, but mutual trust has been instrumental in the companies' development of an effective long-term relationship. In the bad old days, P&G would dictate to Wal-Mart how much P&.G would sell, at what prices, and under what terms. In turn, Wal-Mart would threaten to drop P&G