Bloomberg reports that Walmart is facing the same challenge of rising costs as other retailers, and its size may not provide it with shelter from the storm. “Soaring costs for transportation and raw materials -- some related to tariffs -- have prompted” a number of manufacturers to raise their prices, the story says.
Now, Walmart has a choice: “It may choose to pass along those price hikes to consumers. But that’s a riskier move nowadays as shoppers can easily defect to Amazon.com Inc. or deep-discounters like Dollar General Corp. and Aldi. Walmart could also play hardball with suppliers, perhaps by demanding rebates elsewhere or promoting its own portfolio of more affordable store-brand products.”
In addition, the story says, “The tightest trucking market in years hits Walmart just as hard as its suppliers. The employee wage hike it announced earlier this year has now fully kicked in, along with other benefits like a college-tuition subsidy that could cost billions. And it’s still spending like mad to expand its e-commerce business, rolling out curbside pickup of online grocery orders and paying $16 billion to acquire most of India’s leading -- yet money-losing -- online retailer.
“Those costs have dented Walmart’s profitability and weighed on its shares, which are down about 9 percent in 2018 after two straight years of gains. Still, most analysts and investors consider the spending necessary amid the encroachment by Amazon and the brick-and-mortar discounters.”
Now, Walmart has a choice: “It may choose to pass along those price hikes to consumers. But that’s a riskier move nowadays as shoppers can easily defect to Amazon.com Inc. or deep-discounters like Dollar General Corp. and Aldi. Walmart could also play hardball with suppliers, perhaps by demanding rebates elsewhere or promoting its own portfolio of more affordable store-brand products.”
In addition, the story says, “The tightest trucking market in years hits Walmart just as hard as its suppliers. The employee wage hike it announced earlier this year has now fully kicked in, along with other benefits like a college-tuition subsidy that could cost billions. And it’s still spending like mad to expand its e-commerce business, rolling out curbside pickup of online grocery orders and paying $16 billion to acquire most of India’s leading -- yet money-losing -- online retailer.
“Those costs have dented Walmart’s profitability and weighed on its shares, which are down about 9 percent in 2018 after two straight years of gains. Still, most analysts and investors consider the spending necessary amid the encroachment by Amazon and the brick-and-mortar discounters.”
- KC's View:
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One of the questions that Walmart is going to have to answer is whether it is willing to make the kinds of long-term investments that will help the company’s viability and fuel growth, but often can hurt short-term share prices. That’s hard for a lot of companies to do, and we’ll have to see if Walmart’s cultural adjustments are up to the challenge.
