In February, we told you how Walmart was testing out new lower prices in some 1,200 U.S. stores across 11 Midwestern and Southeastern states.
Now a new report says the nation’s biggest retailer is putting the squeeze on its suppliers in an effort to dominate the low-price landscape — even in the face of fierce online competition from Amazon.
Read more: Walmart lowers prices to compete with Aldi
Walmart is getting aggressive with suppliers
Recode reports that Walmart executives discussed aggressive new terms with their suppliers last month at the company’s Arkansas headquarters.
Walmart asked its suppliers to cut their profit margins on the goods they sell to the mega-retailer. If that happens, Walmart figures it will be able to offer shoppers the lowest price anywhere on any given item 80% of the time.
If suppliers agree, they’ll have to take a haircut and either sell wholesale at a lower price to Walmart or find cost efficiencies in other parts of their business to knock about 15% off the price of what they’re selling.
Of course, suppliers are under no obligation to do what Walmart asks. Some have said they’ll lose money if they comply with Walmart’s wishes.
However, they’re in a difficult situation because disobeying the request means Walmart will limit their distribution and challenge their suppliers head on with private label products!
Amazon has its own plan to dominate too
Meanwhile, it’s not just Walmart that wants to renegotiate with suppliers to capture more business for itself.
Bloomberg reports that Amazon has invited General Mills, Mondelez, Nike and other packaged goods makers to its headquarters in May to discuss a revolutionary idea of its own. The e-commerce giant wants these companies and others to consider bypassing stores and putting more emphasis into direct-to-consumer (D2C) online sales.
One implication of the D2C business model that Amazon is pushing is that items would require different packaging than they have now.
Laundry detergent, for example, would have to be made lighter and put in a bottle that’s less likely to crack or break while in transit. Items like cookies or crackers would require sturdier packaging so they don’t get crushed en route to your house.
Will the manufacturers and suppliers go for it? Who knows! But this much is clear: It’s a new age for retail and anything is possible.