Wal-Mart pressuring suppliers to cut costs


Suppliers in the crosshairs.

Source: www.businessinsider.com

 

Wal-Mart’s renewed focus on offering the lowest prices is putting pressure on suppliers. 

 

The retailer has been telling suppliers to stop investing in joint marketing and give them the goods for cheaper instead, The Wall Street Journal reports.

 

The people who supply Wal-Mart’s goods are worried about the new strategy. 

 

"While lowering prices by shaving down marketing budgets may help Wal-Mart draw more customers, it gives suppliers less control over how their products are displayed or promoted, and less ability to make them stand out against store brands or other rivals," WSJ writes.

 

Being in a business that supplies WalMart stores I get to see WalMart from behind the scenes. WalMart has long had a reputation for low prices mainly by strong arming the suppliers into cuts to their own profits in order to remain on the stores shelves. Being such a large retail presence in many markets suppliers are reluctant to take a strong stand against WalMart because, to be honest, they need the business.

 

Oft times vendors, who have to service a WalMart store, must put up with rude receiving personnel and sometimes ridiculous check-in policies which all adds time and expense and loss of revenues to many of these independent food vendors. All this hassle for less profit than they get at another major food store in the area, who treat them kindly and with respect. Granted all stores want to get the best price they can get from a supplier and suppliers want to offer a good product at a competitive price to remain on store shelves. But when suppliers are basically told that you will cut your cost or else you will be kicked out of the store, it makes for a very tenuous business relationship.

 

WalMart’s reasoning I guess is they are the big dog in town and if you want to be in their store then you will play by their rules. It is okay for a supplier to lose money just so WalMart can remain on top.

While WalMart is asking suppliers to cut their profit margins to lower the acquisition costs to the stores Wal-Mart has been investing in higher wages, meaning they are increasing their cost of doing business on the backs of their suppliers.

Of late, Walmmart has been feeling that its price advantage against competitors has eroded and is losing market share in the U.S. after the recession ended. The rivals, including Kroger Co. and Costco Wholesale Corp gained good share, according to consultancy Kantar Retail. Even, many dollar stores and other discounters are undercutting Walmart in price, which is the chief selling point. 

 

Wal-Mart rolled out an app last year called Savings Catcher, which helps shoppers compare prices on merchandise and then pays them the cost differences on a gift card.

About half of the receipts that the app has processed so far have qualified for a refund because it found lower prices at different stores.

 

Competition is a good thing in America, and when you are number one there are many who will try to take your spot. Since I have been  servicing WalMart stores my shopping preferences have changed. I seldom shop at WalMart any more.

 

There are many reasons for this, one is since the death of Sam Walton and the new corporate policies and leadership, WalMart is not the same community minded store it once was. Now it seems the only thing they are interested in is profit. I have been treated very rudely both as a vendor to the chain as well as a customer. It does not take too many bad experiences to sour a person on a store even if they advertise low prices, which this report shows is not actually true.

 

In addition to the lack of customer service, when you do need to inquire about a product their product knowledge is lacking in many areas. If you know what you want and just want to grab something off the shelf and wait in long lines to check-out then WalMart is the place to go, but if you want, or need, actual customer service steer clear

 

Meanwhile, many were surprised at Walmart’s open stand on gay issues. It has publicly urged Arkansas’s Republican governor to veto a bill that allegedly discriminates against gays and lesbians. This position of the retail giant marked a turning point in its own journey in gay rights.

 

It may be recalled that when Sam Walton started the company in 1962 in Rogers, Arkansas, it was full of small-town conservatism.

 

The retailer was even reluctant to sell music with explicit lyrics. That conservatism engulfed matters of sexual orientation also. Over the years, it has changed and Walmart made significant shifts in its LGBT stand and extended its anti-discrimination policy to gay and lesbian employees in 2003. Responding to the new policy on gay rights, a Walmart spokesman said the company “has a long history of working with our associates to build a diverse and inclusive environment that respects all individuals.”

The only thing they are not including in their business decisions are all the conservative customers they have to do business with. So these conservative customers, suppliers and shoppers alike, are looking to take their business elsewhere. And many apparently are.

Since WalMart took such a strong stance against Religious liberty in their home state, I will shop at WalMart if I can not get what I want anywhere else, which is pretty unlikely. I do not mind paying a few cents more to be treated with respect, both as a customer and as a vendor.

And that is the way I see it! What say you?

Disclaimer: I have dealt with some really great WalMart stores with friendly personnel as well as some stores with rude and even mean management. Therefore not all stores are bad, many are but not all.

I have been around long enough to notice a definite change in the WalMart philosophy since the death of Sam Walton.

See on Scoop.itEagle Views

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