Walmart adds supplier fees to cover costs
Is Walmart sending mixed signals? Earlier this year, the retailer indicated it would ask suppliers to cut promotional funds from contracts in an effort to get to the lowest cost of goods. Now come reports Walmart has sent notices to 10,000 suppliers notifying them that it will begin charging stocking fees for items in new warehouses and stores, seeking larger discounts for early payments and extended payment terms.
According to Reuters, one supplier received notice that it would be charged a one-time fee of 10 percent of its inventory value going to new stores and warehouses. It would also be charged an on-going fee of one percent of its inventory’s value stored in Walmart’s existing warehouses.
For its part, Walmart maintains the terms detailed in its letter are similar to what it has done in the past. The difference is that the terms are being applied uniformly across its supplier community.
When it appeared earlier in the year that Walmart was moving to a net pricing approach, industry watchers heralded the change as a return to Sam Walton’s original vision of the company. But a report in April that the company would ask vendors to help fund its Savings Catcher program — along with the latest news — suggests the chain’s approach is not quite so straightforward.
Individuals who spoke with RetailWire said a combination of factors, including investments in warehouses to support its digital efforts and higher employee wages, are driving up costs for Walmart. The company has yet to achieve the level of sales it needs to offset costs and as result is turning to suppliers to help pick up part of the tab.
Carol Spieckerman, CEO of newmarketbuilders, told The City Wire that suppliers find Walmart among the easiest companies with which to conduct business. She doesn’t expect that will change.
"These types of charges certainly aren’t unprecedented in retail yet no doubt many will portray Walmart’s ask as a slippery slope that runs counter to its everyday low price proposition," Ms. Spieckerman said. "In reality, Walmart is cleaning up its policies and applying them more uniformly across its supplier base."
- Wal-Mart to impose charges on suppliers as its costs mount – Reuters
- The Supply Side: Contract changes ask more from Wal-Mart suppliers – The City Wire
- Walmart returns to ‘playing offense with price’ – RetailWire
- Report: Walmart asks vendors to fund Savings Catcher – RetailWire
Do you see the latest news about Walmart’s vendor terms as being in line or working against its stated policy of getting to the lowest possible price on goods? What will the net result be for Walmart’s business?