Wowing Wal-Mart (W100 profile)

How to transform your operations in order to meet the exacting standards of a big retailer. Photograph by Kerry Shaw

Julie Cole and her partners had spent a decade building a successful manufacturing business that sold its wares online exclusively. Now, the co-owners of Mabel's Labels Inc. were keen to get their goods onto store shelves. And not just any shelves, but those of the biggest retailer on earth.

Like countless other entrepreneurs, Cole and her three equal partners—Julie Ellis, Tricia Mumby and Cynthia Esp—were enticed by the huge opportunity of selling through Wal-Mart Canada. The retail behemoth could move vast quantities of their personalized labels for children's clothes and school supplies. But what the partners didn't realize at first was how thoroughly a Wal-Mart listing would transform their business—and how quickly.

From establishing a new supply chain from China to decoding the world of third party logistics, Hamilton, Ont.-based Mabel's Labels had just four months to reinvent the way it did business in order to meet Wal-Mart's deadline for the 2012 back-to-school season. "It was as if we were starting a second company," says Cole, vice president of public relations and mother of six kids under 12. The firm approached this task systematically, doing intensive preparations under the guidance of a key advisor and carefully executing the sweeping changes to the business needed to become a Wal-Mart supplier. The partners' experience offers insights into how other companies can meet the demands of big retailers and position their firms for dramatic growth.

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Until last spring, Mabel's Labels' entire business had been making customized labels at its plant in Hamilton to fill online orders. The firm began its push into retail by devoting two years to developing Write Away!, a line of labels it could produce cost-efficiently for retail. The line consists of durable blank labels upon which parents write their children's names in permanent marker. The next step was to find a retail and consumer-goods consultant to help them get into Wal-Mart.

The consultant they hired—Gerald Harris, principal at Calgary-based equiTrade Management Consultants—was previously director of pricing strategy and vendor development at Wal-Mart. He offered the partners, who jointly rank No. 27 on the 2012 W100, connections to help them secure a meeting with his former employer. Even more important, he knew what they'd need to do if Wal-Mart said yes.

The partners made so many changes, "It was as if we were starting a second company"

Harris spent weeks helping the executive team prepare for the pitch last January. They had just 15 minutes to tell the company's story, demonstrate the product, highlight its potential and run through their projections. Wal-Mart said yes—above all, says Cole, because it recognized a unique and high-quality product.

The Mabel's Labels team's copious preparations helped it overcome the "be careful what you wish for" moment many Wal-Mart suppliers experience when they realize how much they'll have to do to meet the retailer's exacting standards. Harris helped the partners develop realistic sales projections. From there, they determined the production volumes and capital they'd need. And they mapped out how they'd pick an overseas manufacturer to produce enough labels for 275 Wal-Mart Canada stores.

A month after the pitch meeting, the two parties struck a deal that met Wal-Mart's two key requests. One was that Mabel's Labels would charge 15% more for the labels on its website, $12 a pack, than the $10.47 that Wal-Mart would sell them for. "They need their everyday low prices," says Cole. The other was that Wal-Mart would have exclusivity on the Write Away! line among big-box stores for one year.

With the deal done, two of the Mabel's Labels partners flew to China to tour three factories recommended by manufacturers they respected. The partners had each plant manufacture a limited run of the labels, then went through a round of quality testing before making a selection.

Next, Mabel's Labels hired a China-based conduit company recommended by the Canadian consulate in Hong Kong to conduct continuous quality control. As well, Mabel's Labels hired a third-party firm in Canada to handle electronic data interchange, the paperless system that Wal-Mart uses to issue purchase orders, receive invoices, process credit memos and handle other administrative tasks. Finally, Mabel's Labels hired a third-party logistics firm to manage shipping the labels from China, taking them through customs, unloading the container, packing smaller shipments and trucking them to Wal-Mart warehouses across Canada.

The kicker? Mabel's Labels had to come up with the financing to make all of this happen months before its products hit Wal-Mart—in other words, long before the label-maker saw a cent. And while producing the labels was costly, so was hiring a retail consultant to provide the expertise and connections to get into the retailer in the first place. Cole says the upfront preparatory work that Mabel's Labels had done for the Wal-Mart pitch prepared the partners for how much credit their firm would need. They were careful to have this financing in place before pitching Wal-Mart.

"It was a huge investment," says Cole. But the outlay of time and money is already paying off big.

With two months of sales under their belt, says Cole, Wal-Mart and her firm are happy with the performance of the Write Away! line. This strong start in Canada has helped persuade Wal-Mart to carry the labels in some of its U.S. stores for the 2013 back-to school season. And by then, another enormous retailer, Target, will be carrying Mabel's Labels products in some of its U.S. stores as well.

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