A NEW ROUTE FOR MINORITY BUSINESS
Byline: Valerie Seckler
NEW YORK — Ten major retailers, seeking to raise their combined purchases from minority vendors above the billion dollar mark, have established a new venue for cutting new orders.
The 25th edition of the National Minority Supplier Development Council’s Conference at the New York Hilton was the scene for the first “Retail Alley,” an area with booths for meeting powerhouse retailers, including Wal-Mart Stores Inc., Kmart Corp., Target Stores, J.C. Penney Co., and Sears, Roebuck & Co.
The launch of Retail Alley reflects a growing desire by retailers to buy more goods and services from minority-owned companies because of their burgeoning base of minority customers. Retailers at the booths contended that their presence amounted to more than just lip service and that this effort to diversify their supplier base ran counter to the overall trend of narrowing the vendor base.
Minorities account for 26 percent of America’s population, but only 13 percent of business ownership and 6 percent of the economy’s gross receipts, according to the NMSDC.
The minority business fair, an annual event, featured roughly 500 exhibitors from different industries scattered across three floors for one day. The fair is dominated by such giant corporations as Coca-Cola, IBM, DuPont/Merck, and The Walt Disney Co., but the Alley provided a single and accessible showcase for the retailers.
“Wal-Mart recognizes that as the U.S. population and our demographics change, we have more and more stores in areas with a high concentration of ethnic consumers,” said Wayne Easterling, director of minority and women owned business development at Wal-Mart Stores Inc.
“Sure, we want to do the right thing as far as economic empowerment for minority-owned companies,” Easterling added, “but diversifying our supplier base also stimulates price competition and the creation of innovative, high-quality products for Wal-Mart.”
About 10 percent of Wal-Mart’s 77,000 vendors are minority-owned concerns, estimated Easterling, who was asked to start up Wal-Mart’s minority development program three years ago when he was director of value engineering at the Bentonville, Ark.-based company.
According to Easterling, Wal-Mart “is trying to do as much business as it can with these vendors and still meet our customers’ expectations and build our market share,” but doesn’t have a precise goal.
Kmart, however, has a clear target. The chain aims to produce 4 to 5 percent of its volume via minority vendors, said Richard Cozart, Kmart’s manager of supplier diversity. “Less than 1 percent of our business is being produced by minority suppliers, but we’ve identified where we need to be,” he said of the firm’s nine-year-old effort to develop minority-owned sourcing.
“This show is one of the best draws around for minority businesses, because of the strong corporate representation and the camaraderie among the retailers,” Cozart said, reflecting the consensus on Retail Alley.
While most trade shows are marked by a competitive spirit, Retail Alley was marked by a spirit of cooperation. Store executives regularly introduced vendors to other retailers they thought would be interested in the vendors’ goods. Wal-Mart’s Easterling, for instance, introduced a watch resource to Kmart and a vendor of lace window coverings to Carol A. Martin, director of minority and women-owned sourcing at Sears.
“Some of my vendors here today only do business with me,” Cozart related. “If they could pick up some business with a Wal-Mart or a Target, they’d become a much better [vendor] for me, too.”
Retail Alley also housed booths manned by Federated Department Stores, Nordstrom, The TJX Cos., Levi Strauss & Co., Hallmark Cards and Burlington Industries. Some, such as TJX, were shopping for minority-owned services, store fixtures and office furniture, as well as for merchandise to retail.
Although the NMSDC show produces “a big part” of Kmart’s minority sourcing, Cozart pointed out, “We don’t limit our effort to minority-specific fairs.
“The issue of developing business with minority-owned companies is coming to the forefront now,” observed Cozart, who has been part of Kmart’s effort for the past five years. “We no longer have to preach to management.
“Companies are becoming more aware of what the competition is doing.”
At the Target Stores booth, Richard R. Walker, minority vendor sourcing consultant for the parent Dayton Hudson Corp., said, “As the nation becomes more diverse and we expand, especially in our Target communities, we can support minority-owned businesses and attract more customers to our stores at the same time.
“We are letting people know, by being here, that we’re very committed to getting this done — now,” Walker asserted. “We are as committed to our local chapter — the Minnesota Minority Development Council — as we are to the national effort.”
The minority sourcing drive was initiated at DH last November, said Walker, who had been manager of distribution training at the department store division before taking his post in the company’s quality assurance, sourcing and merchant services unit.
Dayton Hudson will also extend its minority sourcing effort in a two-day fair for vendors of soft lines, to be held at the retailer’s Minneapolis headquarters in January. Walker estimated 65 companies will exhibit in DH’s corporate auditorium in the first-time event.
“We are in the process of figuring out the percentage of sales we derive from minority-owned businesses,” said Walker. “Once we have that figure, we will set a goal.”
J.C. Penney, a 25-year member of the NMSDC, is considered the leading retailer purchaser of minority-sourced goods and services. Last year, Penney’s purchased $438 million in goods from minority firms and $238 million in goods from companies owned by women, according to Susan Maxwell, manager of supplier diversity development.
“That’s a 12 percent increase over 1995,” Maxwell offered.
“The Alley partly came out of a need to up the odds of meeting new resources,” said the Penney executive, “because most of our existing vendors are based here.” Grouping all the retailers together also facilitates meeting with smaller vendors that don’t have booths at the show.
The Retail & Apparel Industry Group within NMSDC, formed last year by the occupants of Retail Alley, has received inquiries from Gap Inc., Eddie Bauer Inc. and Reebok International Ltd. about exhibiting on the Alley, Maxwell said.
Penney’s supplier diversity group in February created a steering committee comprising the most senior managers of its seven core businesses, to help keep management focused on developing a diverse supplier base.
“We need the commitment of upper management to take us beyond the $700 million level,” Maxwell acknowledged. “We partnered with our diversity relationship marketing department to gain additional support.
“We want to make sure that we use certified minority-owned and -controlled businesses,” Maxwell emphasized.
Companies that are at least 51 percent owned by minorities can be certified through 42 regional certifying councils operated by the NMSDC. Similarly, the Women’s Business National Enterprise Council has four agencies that certify businesses as owned and controlled by women.
Dealing with fraudulent attempts to gain entree to their stores is one of the biggest problems facing retailers who are seeking to boost their business with minority-owned companies. “A lot of people play games, looking to break into the business,” said Wal-Mart’s Easterling. “We strictly deal with certified minority-owned firms. In this race for equality, we ask people to play by the rules.”
Apparel has been one of the more difficult areas to cultivate, impeded by undercapitalization and not knowing what is expected by retailers. Apparel firms are often started by a designer without a business background, retailers at the fair noted.
Nonetheless, Wal-Mart is carrying Karebo, a minority-owned line of career and casualwear targeted at African-American consumers, in 400 of its more than 2,000 stores around the country.
Target’s minority vendors of apparel include Romar Smi, a tops and bottoms resource, and Amber Brown, a collection of infants’ to girls’ apparel. And Sears added the Anthony Mark Hawkins line, targeted at African-Americans, this past March.
“We don’t fight our demographics,” said Sears’ Martin. “We have a diverse customer base, so we have a diverse work force, and we’re looking to do business with a more diverse base of suppliers.”