The Wall Street Journal reports that Walmart "is increasing the pressure on suppliers to cut the cost of their products, in an effort to regain the mantle of low-price leader and turn around its sluggish U.S. sales. The retailing behemoth says it has been telling suppliers to forgo investments in joint marketing with the retailer and plow the savings into lower prices instead."
The story notes that Walmart's price advantage against its competitors "has been eroded, and it has steadily been losing market share in the U.S. since the recession ended, while rivals including Kroger Co. and Costco Wholesale Corp. gained share, according to data from the consultancy Kantar Retail. With the growth of dollar stores and other discounters, Wal-Mart is facing ever more competition on price, which for many customers is the most important selling point.
"The new dictate on prices is creating tension with companies that supply the hundreds of thousands of products on Wal-Mart’s shelves."
The story notes that Walmart's price advantage against its competitors "has been eroded, and it has steadily been losing market share in the U.S. since the recession ended, while rivals including Kroger Co. and Costco Wholesale Corp. gained share, according to data from the consultancy Kantar Retail. With the growth of dollar stores and other discounters, Wal-Mart is facing ever more competition on price, which for many customers is the most important selling point.
"The new dictate on prices is creating tension with companies that supply the hundreds of thousands of products on Wal-Mart’s shelves."
- KC's View:
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It was just two weeks ago that we took note of a Wall Street Journal report that Walmart "struck a deal to be the exclusive carrier of a new, premium-priced laundry-soap brand in the U.S. And it has stacked the brand, Persil, on store shelves right next to the reigning champion of high-end laundry detergent: Tide." The move was seen as noteworthy because it is a way for Walmart to gain leverage over Tide and the broader laundry detergent category.
This is all part of the same strategy - put pressure on suppliers to drive down price, and to play hardball whenever and wherever possible. The question is whether Walmart will have the discipline to stick with this approach, or will it get distracted by some other initiative that dilutes the low price focus.
The other questions: How do suppliers respond? And how do competitors respond? Because Walmart is not operating in a low-price vacuum...
