Why Walmart is Asking Suppliers for Higher Priced Products

 

In the world of retail, Walmart is your millionaire uncle who cusses out the waiter for charging him an extra dollar for guacamole.

Anyway, you may wonder why the mother of all discount chains is telling some manufacturers it wants products that cost more.

Basically, nobody who talked to Reuters wants to go on record, but what the anonymous Walmart employees are saying makes sense. Despite being the lowest cost provider in almost every instance, Walmart has determined that its e-commerce operations can’t sustain selling, say, $5 to $7 items and then be spending a few dollars to ship them.

E-commerce giant and Walmart rival Amazon famously went years without making a profit as it invested in innovating every area of the business. The company became worth more than Walmart in 2015, and it is estimated that it will own 50% of the e-commerce market by 2021. Meanwhile, Walmart held only a 3.6 percent piece of the e-commerce pie last year. But that’s not to say that Walmart wants to follow in the footsteps of the online leader that lost over $7 billion in shipping costs in 2016.

Walmart has already started to ramp up its efforts towards profitability – first by slowly raising prices online last year. This year, it is in talks with many consumer products manufacturers, including the likes of P&G, Kimberly-Clark, and Unilever, asking them to provide more products in the $10+ range to allow Walmart to turn a profit. The risk, says Reuters, is not as consequential as you might think. Reportedly, Walmart’s bargain shoppers are mostly loyal to the brick-and-mortar operation, so the company believes it can court a slightly more affluent customer online - although its $10 directive may result in a significant revamp for suppliers who may need to up the size or packaging of what they are providing. One unnamed supplier, for example, told Reuters that 95% of what they currently sell on Walmart.com is priced between $3 and $8.

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