South-Western - Management  
The Long Road to Wal-Mart
Topic Entrepreneurship
Key Words Wal-Mart, entrepreneur, supplier, manufacturing
News Story

No bricks and mortar retailer reaches more shoppers than Wal-Mart. For an entrepreneur, getting a product into Wal-Mart takes hard work and a plan.

PenAgain was invented as an ergonomic alternative for people who find a traditional pen difficult to hold or uncomfortable to use. It is shaped like a wishbone. Partners Roche and Ronsse began selling their pen to small retailers, then attended major trade shows, showing their product alongside entrenched competitors. From there, they were hooked up with buyers and distributors and worked less-obvious channels, like doctors who treated patients with hand troubles. In their quest for Wal-Mart, this helped them by establishing a sales history.

Last year, PenAgain had $2 million in revenue, from independent stationary and office-supply stores, some larger chain stores, Europe and the Internet. This breadth helped them to be considered by Wal-Mart because Wal-Mart doesn't like to account for more than 30% of a supplier's total business.

Next, the company needed to lower its prices and have high-volume manufacturing capacity, which meant moving production to China. That allowed them to expand their distribution channels without fear of being unable to deliver.

The company then expanded the product line to include a pencil, highlighter, hobby knife, white-board marker, and children's writing instrument in a wide array of colors and textures. This was a big selling point with Wal-Mart because they had not a product, but a line of products.

Finally the owners finagled a meeting with the Wal-Mart buyer and convinced her to give them a trial period for 6 weeks, with the expectation that PenAgain would sell at least 85% of the product displayed in that time to warrant more permanent shelf space. Over the past 10 months, they have completed the intensive paperwork required to become an official Wal-Mart vendor.

Now they wait to see if their product sells and the relationship continues.

Questions
1.

The company invested money to insure that it could quickly increase production of its products. Why is this important for a small business? Can a company grow too fast?

2.

Explain this statement: "PenAgain's design was radical - something of a Catch-22 for the entrepreneurs."

Source "The Long Road to Wal-Mart," The Wall Street Journal, September 19, 2005, p. R1.
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