Report: Walmart asks vendors to fund Savings Catcher

Discussion
Apr 09, 2015

A new report by Kim Souza at The City Wire claims Walmart is asking vendors for help funding its Savings Catcher program. While this particular report would not be unusual in most circumstances, it seems somewhat curious coming on the heels of other reports saying that the retailer has instructed vendors to offer net pricing and forego the trade promotion deals that suppliers use to drive brand sales.

It should be noted that Walmart has not yet publicly confirmed or denied the Savings Catcher report. That stated, Ms. Souza reported on Walmart’s push for net pricing in February, well ahead of a recent Wall Street Journal article that caught the attention of a much wider audience.

Savings Catcher, which was rolled out nationally by Walmart in August, works by comparing the prices of items at the time of receipt with advertised prices in weekly print ads from competitors in the local market. The service works for either in-store or online purchases. If Walmart finds that a competitor has a lower price, it matches that price and gives its customers an eGift Card to make up the difference. The program, according to Walmart, had saved $2 million for Walmart’s customers through September.

The City Wire report did not offer specifics for how manufacturer contributions to Savings Catcher would work.

While those who spoke with Ms. Souza said Walmart has the greater influence over whether its prices were lower than the competition, it was not a great surprise the retailer was asking suppliers to foot all or some of the Savings Catcher bill. Walmart has that kind of leverage as the world’s largest retailer.

Are you surprised Walmart is reportedly asking suppliers to fund its Savings Catcher pricing following the news it had asked them for net pricing on the cost of goods? Does the leverage Walmart has with suppliers amount to an unfair advantage over its retail competitors or is it fair based on the volume of purchases it makes with vendors?

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21 Comments on "Report: Walmart asks vendors to fund Savings Catcher"


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Steve Montgomery
Guest
3 years 16 days ago

When you are the 800-pound gorilla you can ask for whatever you want and have a fairly good chance of getting it. Walmart wants everyday net low pricing from its vendors but unless a vendor has a reason to offer its goods to Walmart at zero profit, it realizes there has to be some profit left.

Asking for a share of that can seem reasonable when you have been and are likely to remain the largest account for almost every supplier. Potential logic: The Savings Catcher program brings in customers to Walmart and the supplier benefits from that traffic. Another justification is “because we can.”

Max Goldberg
Guest
3 years 16 days ago

Am I surprised that Walmart is being a bully? No. Will manufacturers acquiesce? Yes. Walmart, through its buying power, has leverage and is not afraid to use it. Manufacturers who want to have a presence in Walmart stores usually will not put up a fight. In many ways this does give Walmart an unfair advantage, but as long as it is legal, look for Walmart to continue to throw its weight around.

Mark Heckman
Guest
3 years 16 days ago

I am not surprised by the notion that Walmart would think it is fair and reasonable for vendors to fund price gap refunds in the Savings Catcher program. I am surprised that Walmart is said to be “asking” instead of “mandating.”

Stories of Walmart using their leverage to influence vendor pricing and even product packaging are firmly entrenched in retail folk lore. The Savings Catcher situation is just another example of how Walmart uses their size and clout to extract money and advantages from their brand suppliers.

What most of us know however, is that suppliers are resilient and will find subtle and perhaps not-so-subtle ways to recoup their loses that may be incurred by funding Savings Catcher. It will likely mean price hikes for everyone if the Savings Catcher number is significant.

The love-hate relationship between suppliers and Walmart continues!

Paula Rosenblum
Guest
3 years 16 days ago

There’s a law involved here—the Robinson-Pattman Act. The problem is that the law is not enforced at all. If it was, this wouldn’t even be a conversation.

The reason why warehouse clubs have their products packaged differently is partly to avoid being out of compliance with that law. The level to which Walmart has consistently flaunted it is staggering.

Ed Rosenbaum
Guest
3 years 16 days ago

Isn’t Walmart the poster child for retail vs. vendor bullying? There is nothing new or surprising here. Walmart, like Steve said, is the 800-pound gorilla in the room and can ask (strange word to use when it comes to Walmart and the vendors) for anything it wants. And if a vendor thinks Walmart can be their savior, they will wilt under the pressure.

Ian Percy
Guest
3 years 16 days ago
This morning I read an article titled: “The end of the Coke era.” These huge brands continue to think they are immortal and invincible but sooner or later the end comes. When you bully your vendors and have a “get” philosophy of life rather than a “give” one, that end is likely to come sooner. Really it’s just bad energy all around. Those of us who muck around in the quantum energetic field know that no marketing campaign, no ads, no discounts can stop that negative energy from seeping into our collective consciousness. Some may think Walmart is generously doing all this for the poorest of consumers. That’s largely a myth. Walmart’s approach is like taking someone else’s money so you can buy a gift for your friend. In this case it’s “Let’s take money from our vendors so we can look good to our customers.” That may work when you were six and needed money from dad to buy your mom a Mother’s Day present, but when the world’s largest retailer still behaves like… Read more »
W. Frank Dell II
Guest
3 years 16 days ago

Every Day Low Price has always had a problem. When there are no promotions in the market for an item, EDLP is generally selling for less. When there is a promotion from a Hi-Lo retailer, their price is generally lower than the EDLP price. The rationale is simply how the trade promotion dollars are allocated. For EDLP retailers it is the annual volume. For the Hi-Lo retailer it is the promotional quantity plus some forward buying. Walmart seem to be trying to have it both ways. Yes they have the greatest buying power, but legally they are entitled to the same dollar amount per item as everyone else. Walmart can ask or even demand, but they cannot have both. Suppliers that bend to their request will lose volume with Walmart’s competitors. This can be very damaging when Walmart de-lists an item and the competition no longer stocks the item.

J. Peter Deeb
Guest
3 years 16 days ago

Are we heading down the Vlasic Pickle road again? Walmart will try to squeeze every penny they can out of vendors based on their scale and importance to vendors. The problems for vendors come when they realize they have been squeezed dry and have lost money on items or lines.

Interestingly enough we have a role reversal here. Walmart’s competitors were outraged at vendors over the everyday pricing and roll back pricing that Walmart was displaying and claimed that Walmart was getting special pricing. Now the vendors are being asked to help match sale prices that they have helped fund at Walmart’s competitors. These two paths are potential death spirals for brands! I agree with the Robinson-Patman comment: What is the FTC doing? They danced through slotting, now they will dance through price matching and unfair costs.

Carol Spieckerman
Guest
3 years 16 days ago

As I stated in the City Wire article, given Walmart’s data mining and analytic capabilities, the burden of accountability for uncovering and managing price discrepancies would seem to fall squarely on Walmart. This isn’t a question of responsibility (or shouldn’t be), then, but one of partnership. In this case, suppliers are being asked to partner with Walmart on an innovative digital savings platform that has perhaps proved more successful (in terms of adoption) than it imagined. This is no different from any number of other co-op support “opportunities” that many other retailers vigorously urge their suppliers to support. When Walmart is involved, it becomes “bullying”?

Sue Patzkowsky
Guest
Sue Patzkowsky
3 years 16 days ago

No, I am not surprised to hear this. However, Walmart is given a net price by its suppliers. Other customers work off of a high low pricing, and while their everyday price is higher than Walmart, their ad prices might be lower. But over a full year, the cost to both retailers is equal. Walmart should NOT be asking for more funding from its suppliers to fund this program—that is asking for an EDLP price and a High Low price and they should not have both.

Robert Hilarides
Guest
3 years 16 days ago

An interesting repercussion of this will be on overall price/promotion strategy. If manufacturers are having to subsidize Walmart EDLP buyers down to the level of other retailers’ High-Low discounts, suddenly the cost of going to BOGO or other very deep discounts at Pathmark or Safeway becomes even greater (likely beyond payout). Manufacturers end up with two options: EDLP and High-Medium.

Though there may also be regional variations where the cost of going deep is still viable in certain categories in less intensive WM geographies.

Any way you look at it, Walmart is dictating the pricing strategy in its strongest markets

Lee Kent
Guest
3 years 16 days ago

I really can’t add anything here. No, I am not surprised. Yes, it is unfair. The aha moment came when Paula mentioned there is a law. My question and one that might get some good conversation going is, why isn’t it being enforced? Just askin’.

And that’s my 2 cents.

Craig Sundstrom
Guest
3 years 16 days ago

Surprised? Please…. At least they’re not asking their competitors to fund the program. Yet.

Dan Raftery
Guest
3 years 16 days ago

Seems to me that this is getting close to Retail Price Maintenance for any suppliers who provide funds to support it. And then there’s the question of who controls the price matching algorithms? Amazon has a major challenge with this same issue and you don’t see this 800-pounder asking for margin from suppliers. What you do see, however, is other retailers objecting strongly. So, this isn’t just a simple cost issue. Distribution is at risk.

Gordon Arnold
Guest
3 years 16 days ago

There are many importers, manufactures and distributors that have seen dozens of Walmarts come and go. When the only thing you sell is price, competitors will maneuver and attack by advertising overages in the c to d turn inventories to bring the consumer in. This is where Walmart’s guarantees come back to haunt them. Instead of refining the policy they attack the vendors with unreasonable demands. After all it is better for the vendor to go away than themselves.

As e-commerce evolves to better integrate with point-of-sale, in-store pick-up and delivery services, the volume discounters will begin to see the race for turn crushing their minuscule margins to intolerable levels. And then maybe another one bites the dust.

Martin Amadio
Guest
Martin Amadio
3 years 16 days ago

Is anyone surprised? When any business in any industry has too much of their revenue tied up with a single customer, they are headed for trouble. CPG vendors are like moths attracted to the flame of Walmart’s volume, only to be singed by the extreme heat.

vic gallese
Guest
3 years 16 days ago

No I am not surprised and no, it is not fair.

This is not about the customer, by the way. While it would not be good for overall US retail, most vendors would dance on Walmart’s grave when that day comes.

Shep Hyken
Guest
3 years 16 days ago

It doesn’t surprise me that Walmart asks suppliers for anything. They are successful for a reason. The supplier can walk away, but they recognize a thin margin on a big number is better than a bigger margin on nothing.

Andy Casey
Guest
Andy Casey
3 years 16 days ago

Of course it is not surprising WM is doing this; frankly, it is a little surprising it took them this long to get around to it. But let’s be honest, they are neither the first nor will they be the last large retailer to unfairly take advantage of their size with suppliers.

larry Wilson
Guest
larry Wilson
3 years 16 days ago

Walmart wants to be EDLP, but match the prices of Hi-Lo retailers, and then have suppliers fund this. This makes no sense for anyone, except Walmart. They forget (or chose to forget) that suppliers do not set retails, retailers do. Maybe Walmart should go to Kroger instead and ask them to fund their Savings Catcher price match program.

The bottom line is, Walmart no longer has a cost advantage on their supply chain, as other retailers have caught up. Walmart needs to focus on how to better serve their customers, but not just with price. Try improving the perishable departments and work harder at staying in stock. They have to learn to beat a different drum than EDLP, because that tune has gotten old and will not get them to where they need to be.

Robert DiPietro
Guest
3 years 16 days ago

Not surprised at all. It is a retailer buyer—give us lower pricing AND fund promotional activity.

It isn’t an unfair advantage, but one that is earned on volume. Manufacturers could create derivative products for Walmart, then there wouldn’t be a price match situation.

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