No joke – Walmart asks CPGs for higher priced products

Photo: Walmart
Feb 12, 2018
Matthew Stern

Walmart is known for its commitment to low prices, but the company is discovering that shipping the lowest-priced products is making it tough to turn a profit with e-commerce. So, the chain has begun encouraging vendors to provide higher-priced items to sell on

Last week, Walmart eCommerce CEO Marc Lore informed big-name CPG companies like Proctor & Gamble, Unilever and others that wants to focus on selling items that cost at least $5 and preferably more than $10, according to Reuters.

The rationale is that if a customer orders, for example, a $15 bottle of shampoo rather than a $1 bottle of shampoo of the same size, the shipping cost is the same. The $15 bottle will leave a profit after the cost of shipping, whereas the cost of shipping will exceed the value of the $1 bottle.

Walmart is notorious for demanding ultra-low prices from suppliers to keep prices low on its store shelves. Just last year, vendors expressed frustration that Walmart had grown even more demanding on pricing over the previous 18 months. Suppliers reported not being allowed to increase prices despite being able to demonstrate rising costs on the manufacturing side.

The new demand for higher-priced products for e-commerce sales does not appear to be having any impact on Walmart’s demands of its vendors for low-cost products for their brick-and-mortar operations.

While the company did not explicitly name its main e-commerce adversary, two people at the meetings at which Mr. Lore gave the directive quoted by Reuters said that Walmart wanted to avoid selling products online at a loss like Amazon sometimes does.

While Walmart is trying to limit the goods online that it sell for less than $10, Amazon seems to be trying to move more products at that price point. The e-commerce giant recently launched a “$10 or Less” microsite offering free shipping on listed items in that price range. The goal may be to see if Amazon can be competitive with dollar stores and deep-discount websites like

DISCUSSION QUESTIONS: Will selling more expensive products on be a successful way to mitigate the shipping costs associated with e-commerce and avoid selling products at a loss? How will customers react to more expensive products appearing on

"The answer will depend on whether or not Walmart can attract the slightly different demographic they have publicized they are going after."
"All of America wants affordable luxury and that is what Walmart is asking for … the better and best alternatives to good CPG products."
"This revelation exposes the severe cognitive dissonance afflicting Walmart and"

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26 Comments on "No joke – Walmart asks CPGs for higher priced products"

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Bob Amster

It may not sound very accommodating but consumers will have to suck it up and deal with reality. If the economics don’t work, Walmart is not go into bankruptcy because the consumer would like the cheapest products shipped for free.

Mark Ryski

Walmart can certainly offer more expensive products, but it doesn’t mean people will buy them. Walmart’s move is telling — if Walmart is struggling to make money selling low-cost items online, consider what it must be like for every other retailer — impossible. While only Walmart is remotely close to competing head-to-head with Amazon, they are still disadvantaged in a number of ways, and most notably because Amazon has other sources of revenue like AWS to offset losses and Walmart does not.

Dr. Stephen Needel

Don’t confuse higher prices and higher-priced products. Walmart wants to have the lowest price for a product. We’ve shown them, through our research with their vendors, that adding higher-end products (at low prices relative to other retailers), is a good thing for them. Doing this takes them out of the deep discounter/cheap stuff positioning and into the low price/choose your quality position. That’s a good thing.

Max Goldberg

While I understand Walmart’s desire to make money from its e-commerce operation, selling only higher-priced products online might damage its consumer brand image. Walmart’s brand is lower prices. Negating that image online could impact brick-and-mortar sales.

Phil Chang

Walmart is also going to have to keep testing its “why.” Why do I say that? because they’re stuck between a rock (Amazon) and a hard place (Costco). The dynamics of pricing and profit only re-configure so many ways. Bigger packs and bigger dollar rings take them into Costco territory.

In a lot of senses, Walmart worked themselves into this corner by seeking the lowest retail price in the market. I think what would probably make a better pitch to CPG companies is to get them to help Walmart up the value of the consumer’s shopping basket so that deliveries are sizeable enough to offset the cost of the little items.

Byron Kerr

It feels like a changing of the flag from a Walmart perspective. Instead of squeezing margins, they want to offer up more compelling, higher-priced products. While this will help alleviate some of the pressures of e-commerce shipping costs, the type of customer who looked for those bargains may be turned off by higher-priced products. What does this mean? More incentive to go in-store and experience their click and collect omnichannel approach (many times incentivizing with cheaper prices for buying in-store).

I applaud this move by Marc Lore and team and it reinvigorates brands to get their cachet back after decades of being beat down on margins from Walmart.

Brandon Rael

As the e-commerce arm of Walmart continues to evolve and mature, we should expect an expanded assortment and more expensive product offerings to provide incremental revenue opportunities. This will not only mitigate shipping costs but also will expand the company’s reach beyond their traditional customer segments. If there is any place for Walmart to experiment with their assortments and pricing strategies, it’s online and mobile.

As evidenced by Walmart’s acquisitions of, Bonobos and other digital-native brands, the retail giant is taking a very serious stance in the dot-com and mobile commerce game. Considering how ubiquitous Walmart’s latest e-commerce ads have been during the Super Bowl, and now the Winter Olympics, we should expect the company to significantly invest in the online platform and expand their customer base with new product offerings, especially around lifestyle products.

The consumer may just prefer to shop online, and if the pricing and shipment capabilities are competitive, we should expect this channel to accelerate rapidly for Walmart.

Robert DiPietro

It’s not only a way for Walmart to drive margin potentially but also to drive revenue. I wonder if they are looking to hit a top-line number as well. It does seem as if Amazon pack sizes are creeping up at least in my consumer experience.

Customer reaction will likely be muted.

Steve Montgomery

Walmart’s desire to sell higher-priced items is a classic case of the dichotomy between what the retailer would like to sell and what the customer wants to buy. With e-commerce it is exacerbated by the added cost of shipping. Walmart may want to sell higher-ticketed items but that does not mean they won’t offer it at a lower price than their competitors. The question is, how long will it take before potential customers realize those items are available via

Dave Nixon

The answer will depend on whether or not Walmart can attract the slightly different demographic they have publicized they are going after. If the new shopper demographic will support a higher “priced” product (but lower than other retailers) then YES, this will work for Walmart but it will take time to do so. Those shoppers are used to additional costs for better CX and for the service they expect. If the prices are still lower than other retailers, this move could work out very well for them, long-term.

Michael La Kier

It seems as if Walmart is no longer in e-commerce investment mode. Do you think Amazon will follow? Probably not until they get a stronger foothold in grocery.

Ken Lonyai

This is where the hype meets the reality. We’ve seen all the PR on Walmart’s initiatives as if they are in lockstep with Amazon, but this is an indicator that they are not. It solidifies the argument made in the concept article that without a cash cow like AWS, it’s not so easy to challenge the leader.

One would think that Walmart knows its consumer demographic very well, yet this doesn’t sit with what I know about it. It doesn’t sit with the “shrinking middle class” statistics either.

I have three takeaways:

  1. E-commerce is not working well enough for a company primarily serving the lower middle class on down vs. a company primarily serving the middle class on up.
  2. CPGs can absolutely expect that once higher-priced items are on the shelves that Walmart will put the screws to them the same or worse than with every other product.
  3. So far there has been no meaningful impact from the Google Home partnership, which is as expected.
Doug Garnett

It is good to see reality acknowledged — because it is hard to make money as an online retailer. And while $1 products are the extreme, costs of pick and pack as well as shipping make online economics weaker than those at the store regardless of price point. (In brick-and-mortar, consumers do the pick and pack AND the shipping for buying AND for returns.)

That said, I struggle to believe that a different online strategy from in the store one will be smart. Consumers want to see as an online extension of the Walmart store. This move intentionally attempts to create the opposite of what consumers want and that’s not a good strategy.

Tom Dougherty

The chickens are coming home to roost. If I wanted a high-priced product, I would not buy it from Walmart.

This is good news for those trying to beat the Goliath of retail. As long as they don’t try to out-Walmart Walmart.

Dave Bruno

I hope this long-overdue reality check helps change the culture of discount retail. Walmart has played a major role in setting shopper expectations for low prices regardless of margins, and perhaps they can now be a major player in helping bring sanity back. The old adage “I lose a nickel on every sale but make it up in volume” obviously never represented a sustainable model, and I certainly hope this is the first step back to sound pricing practices.

Camille P. Schuster, PhD.

Of course selling higher-priced items online mitigates shipping costs but only until customers figure out that they only get low prices at Walmart if they go to a physical store. Then consumers will go back to purchasing online from Amazon. In addition consumers will not be happy that Walmart has two stores: a physical store with items that have low prices and an online stores with more expensive items.

Lisa Goller

Everyday low prices (EDLP) and e-commerce are tough to sustain, so Walmart needs higher margins to cover shipping costs. Walmart’s recent e-commerce investments are intended to fuel growth by attracting shoppers who don’t frequent the physical stores. While affordability still matters, these relatively younger, urban and more affluent consumers may be willing to pay a reasonable premium for quality products and the convenience of e-commerce.

Charles Dimov

Walmart’s best bet is to continue its current offering and infuse the more expensive goods into the stream. Then use analytics to experiment and watch what takes place. Do people buy the costlier brand-name goods? Can they ultimately phase out or reduce the low ticket item online orders? It is all about taking a scientific approach to category management and retailing. Then remind customers about the option to pick up their items right away in-store. Each consumer who picks up their purchase saves Walmart on shipping costs.

Approaching it this way would also mean that customers might not even notice the gradual shift. Naturally, they will only shift when they see the desired results (or they drop the experiment altogether).

Sara Mays

Marc Lore drove Walmart’s online sales increases using free two-day shipping without a membership fee. Clearly expecting lower margins during the early implementation with a variable of strategies to manage once online traffic was optimized. Increasing selection to higher price points would be a simple step to grow margins but long-term Walmart must figure out how to improve the service end of their online business. Personal experience reflects that their customer service has not yet adopted those standards of a truly integrated retailer.

Ryan Mathews

It’s not a bad strategy, but it will only work if Walmart continues to offer lower/lowest cost alternatives. If Walmart’s base customer — even their digital customers who may be a slightly different group than those found in physical stores — see Walmart breaking faith with the core principle of their brand promise it could be a critical mistake. Again, there’s nothing wrong with offering more item online — even some with higher prices — provided Walmart isn’t seen as over-promising them or letting them replace “high value” alternatives.

Cynthia Holcomb

Most consumers know Walmart will squeeze every penny out of its suppliers. Adding a broader range of brands, products and prices to bring in new customers, for whatever reason (mitigate shipping costs) is a good thing for combating Amazon and building NEXT-GEN Walmart.

BUT…. Now Walmart needs to get busy and fix the awful user experience! Shopping both and are akin to physically sorting through a monstrous, old warehouse of junk to find what you want to buy. Time-consuming and frustrating.

Joel Rubinson

This makes sense. All of America wants affordable luxury and that is what Walmart is asking for … the better and best alternatives to good CPG products. They will never charge more for good products than other retailers. It serves their customers and helps them manage the cost structure better.

James Tenser
This revelation exposes the severe cognitive dissonance afflicting Walmart and Its physical store business is highly optimized for the movement and distribution of goods at everyday low prices. Many fast-turning items that deliver positive GMROII in store (a $1.97 bottle of shampoo is a good example) are likely to have ship-to-home costs that far exceed their margins. For the Great Wal, commitment to digital means going several steps beyond adding a new way for its traditional customers to buy the same stuff. It means engineering its online business to appeal to different sets of shoppers and/or purchase occasions. That’s what the and Bonobo acquisitions seem to be about. Club store operators can tell you that on known-value consumable products, higher price points mandate larger package sizes. If your intent is to foster a click-and-collect model instead, then you need to offer the same items that are actually on store shelves. Here’s a notion — maybe consumer packaged goods just aren’t made for delivery. These products that are exquisitely designed to fit the distribution… Read more »
Naomi K. Shapiro

Dr. Stephen Needel pointed out what I was going to point out: Don’t confuse higher prices and higher priced products. The nuance not mentioned in the BrainTrust question is also whether the lower price on the item will be available at the store … driving, what we know, is more store traffic and people buying more while they are in the store.

Joel Goldstein

We have also seen this trend skew towards a more curated approach to product. The demographics of the consumer are shifting so fast as younger consumers have more disposable income budgeted towards products like higher-quality shampoo.

Jeff Miller

A couple of key conflicting concepts here. It seems strange to constantly demand lower and lower prices for brick and mortar from your key vendors over your decades of existence and then flip the script for e-commerce products only. If I were a CPG partner of Walmart (or if Amazon did not something similar) I would be very weary of this as they both have big aspirations in their own private label business, including launching its own private label.

Must be an interesting pitch to CPGs. Please have higher priced items that consumers may not buy so we can turn a profit on those products because shipping (go figure) is expensive. Then please advertise all over the place (including with us) your higher priced products. At the same time we will create lower priced private labels and when a shopper uses Alexa, Google Home or search online we will show our private label lower cost products right next to your higher priced ones.

"The answer will depend on whether or not Walmart can attract the slightly different demographic they have publicized they are going after."
"All of America wants affordable luxury and that is what Walmart is asking for … the better and best alternatives to good CPG products."
"This revelation exposes the severe cognitive dissonance afflicting Walmart and"

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