In his self-published book Walmarts Egonomics: The Greed Behind the Smiley Face, Charles H. Hood documented his unsuccessful struggle to provide Walmart customers with calculators and advertising mounted on the handles of Walmart shopping carts. Hood, who retired from the ad agency business in 1990, once served as chairman of Ackerman, Hood and McQueen.
In the course of the seven-year saga, which stretched from 1991 to 1998, Hood sued Walmart for $40 million for breach of contract. After just nine months, he received a settlement of $23.6 million, but in the end was still forced to sell the shell of his company, ADDvantage Media Group Inc. (AMG), in order to cover outstanding debts. In addition to his narrative of his experience, Hoods book includes numerous documents that buttress his account.
If you have ever dreamed of having your products placed in Walmart stores, be careful what you wish for, Hood wrote in a press release and subsequently reiterated in an interview. I spent seven years of my life listening to these guys berate me, my equipment, and everything else, but then saying, Give me more money. In 1990, Hood purchased a patent for the Shoppers Calculator, a number cruncher installed on the shopping carts handle. He soon formed AMG to provide the calculators to grocery and mass-merchant chain stores. AMG made its money, he said, from advertising placed on a panel next to the calculator.
After spending $1 million on consumer testing, and sales of the calculators to several national supermarket chains, Hood said he then approached Walmart, armed with data that showed sales increased both generally and on the specific items advertised next to the calculators.
We found that if you go into a grocery store and have $50 to spend, if youre going to buy something for $1.50, you round it up to $2, mentally, Hood said. You might buy something else for $1.75, and youre actually up to $3.25, as opposed to the $4 youve rounded it off to. So youre going to check out having spent $42 or $43 on a $50 opportunity. So the retailer lost that extra margin of sales.
We did a survey with customers, asking, On a scale of one to 10, how would you rate this service the value of it? We got an 8.6. We presented that to Walmart, he said, claiming that the company conducted its own survey that got an 8.5.
Hood said that from the start, Walmart corporate buyers felt threatened by the AMG advertising on the calculator panels, and probably hadnt been informed that Walmart was to receive 60 percent of the revenue generated.
The buyers found out that some of these vendors were committing dollars to promote their products on the calculators, he said.
standard response was, You give me those dollars. I dont want you
giving anybody those dollars but me. Hood claimed he also learned from
telephone conversations with advertisers that Walmart buyers were
actively discouraging them from buying space on the AMG calculator
had about three or four of those calls, and I thought, Lets go out
and get a bunch of tape recorders and put them on all the phones, and we
did, he said. We ended up with between 40 and 50 taped phone calls
from vendors advertisers that had already committed to our program
saying Gosh, Walmart told us not to do that. We cant do that. Theyll
kick us out of the stores if we do something they dont want us to do.
In response to an email seeking comment, a Walmart spokesman said he
was unfamiliar with Walmarts Egonomics, but that Hoods account was
not typical of the companys treatment of its vendors.
have mutually beneficial relationships with thousands of suppliers. Mr.
Hood has his own opinion of his experience, said Lorenzo Lopez, a
Walmart public relations representative.
attorney Gary L. Richardson, who wrote the foreword of Walmarts
Egonomics, and has successfully represented several clients in suits
against Walmart, said Hoods unpleasant experience is by no means
final twist, attorney Tom Mars, who represented AMG in their suit, is
now executive vice president and general counsel at Walmart.
Walmarts Egonomics is available at Amazon.com.