You might be surprised to hear Chinese suppliers complaining that the prices at Wal-Mart Stores, Inc. (NYSE: WMT) are too low, but that is just what this translated article appears to be saying. The complaint is related to the retailer's classic fallback position of slashing prices across the board in order to boost sales whenever revenue performance is lagging.
Although Wal-Mart has tried to increase profits by recruiting a different kind of customer -- one who is interested in more fashionable clothes and name-brand products and has the money to buy them -- its classic price chops continue to serve as an old, reliable crutch. In other words, it will likely never recover from the "always low prices" mantra it has built for itself.
So it's interesting that many of the retailer's largest Chinese suppliers are now saying they can't continue to supply Wal-Mart with the "low prices" it requires of them. It's quite a retail epiphany when a Chinese supplier says that it can't supply products as cheaply as a retailer requires. Only Wal-Mart has this kind of power, and if these vendor and supplier feelings are true, then signs of desperation are probably starting to swirl in the hallways of Bentonville right now.
Is this a sign of price increases in Wal-Mart stores soon? Such a move would be applauded by Wal-Mart competitors but perhaps also at the company itself. Customers who are used to only shopping Wal-Mart for cheap goods may have little choice to change and many would most likely continue shopping at Wal-Mart, even at raised prices. Overall, this kind of move would be a good one, and Wal-Mart's increasing margins (hopefully) would help the retailer make more profit on the back of more revenue. Wal-Mart was responsible for a good portion of China's economic growth in the last five-plus years (almost single-handedly, in many respects), but you can only chew down suppliers -- even in China -- so much.











Reader Comments (Page 1 of 2)
11-01-2007 @ 11:59AM
Jon Neely said...
Gosh, what a shock. Of course they think Wal-Mart prices goods too low. It seems Brian White and the Chinese are of one mind on how unfair Wal-Mart treats its suppliers.
Well, I think it is totally unfair to keep on bashing Wal-Mart, after all, they really do save us money and it is a real achievement for them to become # 1. Yea Wal-Mart!! JonN
11-01-2007 @ 12:20PM
mark said...
I love Wal-Mart
11-01-2007 @ 12:22PM
Richard said...
Wal-Mart sucks.........the life out of your town. Great documentry "Is Wal-Mart Good for America?". Answer, no. They are good for the lower socio-economic tier of people who can't wait for their government check to arrive so they can load up on candy, cheap clothing, cds etc. that they shouldn't buy. Walmart also causes small family owned business in small rural communities to close after decades of being ran by families. Employees for Wal-mart are not treated as well as the company lets on. For my money I go to Target for the same items close to the same price as the greedy Waltons charge.
11-01-2007 @ 12:22PM
allan said...
Gee, Walmart cutting prices to vendors! What do you think thet did to put all domestic suppliers out of busdness?
Short term profits, long term hurt!
US consumers get a cheaper price then we all lose jobs!
Duhhhhh.....
How dumb are we?
11-01-2007 @ 12:24PM
mark said...
You dont like Wal-Mart dont go. You dont like their pay dont work there! Are they running you out of business... Well lower your prices or get a job ....Thats Economics Bro...
11-01-2007 @ 1:25PM
CLG said...
WALMART HAS BEEN A BIG HELP TO ALOT OF CONSUMERS WHO REALLY NEED A GOOD PRICE. THEY HAVE ALSO AS STATED BEEN BIG PRESSURE ON LOCAL AND OR SMALLER BUSINESSES WHERE THEY HAVE LOCATED. ITS A MIXED BAG BUT I THINK WAL MART IS JUST A PLAYER IN THE BIG PICTURE VYING FOR YOUR BUSINSS AND MINE AND MANY TIMES ACTUALLY PUTS A DECENT PRODUCT IN MY HANDS AT A FAIR PRICE. I HAVE NO REMORSE FOR THE CHINES WHO HAVE A VAST INTEREST IN THIS BECAUSE THEIR ECONOMY IS BEING UPHELD BY US AND OTHERS WHO ARE BUYING THEIR GOODS. WE DONT MAKE MUCH OF OUR OWN STUFF ANY MORE AND THE RESULT IS THAT THOSE WHO MAKE IT CAN EXCERCISE GREAT POWER OVER THOSE WHO WANT IT AND THOSE SELLING IT. WE ARE NOT AS STRONG AS A NATIONAL ECONOMY AS WE ONCE WER WHEN ALMOST EVERYTHING WAS PRODUCED HERE BUT WE STILL THINK WE OWN THE MARKETPLACE. THIS IS A BAD PLACE TO BE
11-01-2007 @ 1:26PM
CLG said...
WALMART HAS BEEN A BIG HELP TO ALOT OF CONSUMERS WHO REALLY NEED A GOOD PRICE. THEY HAVE ALSO AS STATED BEEN BIG PRESSURE ON LOCAL AND OR SMALLER BUSINESSES WHERE THEY HAVE LOCATED. ITS A MIXED BAG BUT I THINK WAL MART IS JUST A PLAYER IN THE BIG PICTURE VYING FOR YOUR BUSINSS AND MINE AND MANY TIMES ACTUALLY PUTS A DECENT PRODUCT IN MY HANDS AT A FAIR PRICE. I HAVE NO REMORSE FOR THE CHINES WHO HAVE A VAST INTEREST IN THIS BECAUSE THEIR ECONOMY IS BEING UPHELD BY US AND OTHERS WHO ARE BUYING THEIR GOODS. WE DONT MAKE MUCH OF OUR OWN STUFF ANY MORE AND THE RESULT IS THAT THOSE WHO MAKE IT CAN EXCERCISE GREAT POWER OVER THOSE WHO WANT IT AND THOSE SELLING IT. WE ARE NOT AS STRONG AS A NATIONAL ECONOMY AS WE ONCE WER WHEN ALMOST EVERYTHING WAS PRODUCED HERE BUT WE STILL THINK WE OWN THE MARKETPLACE. THIS IS A BAD PLACE TO BE
11-01-2007 @ 1:30PM
John said...
Wal-Mart lowers the quality of the merchandise to raise profit margins, ie $1.20 childs socks at 60% mark up, supplier is forced to drasticaly lower the quality of the product, outsource to China to lower labor cost, Charge 1.19 per pair and gain 90% mark up. Now we have US less jobs, less average wages, less competitors, etc. Thank you Wal-Mart.
11-01-2007 @ 3:26PM
Mike said...
Some of you people have an unbelievably warped understanding of economics.
But let's bring it down to the Econ 101 level.
Wal-Mart never put a SINGLE "mom n' pop" out of business. Not one.
The CONSUMER did. Why? Because they were able to fill their needs cheaper at Wal-Mart and other large retailers. (Yes Margaret, Target sources from China too...)
So what were Mom n' Pop to do? They could lower THEIR prices (read: margins) to compete with these new retailers, or they could compete by offering a different product mix or by providing better, more personalized, customer service.
So at the end of the day, who put Mom n' Pop out of business? You did. Yes You. The fella who thinks he's saving the world by shopping at Target now.
The marketing folks at Target must be absolutely BRILLIANT to have pulled the wool over your eyes.
Target is just another retailer.
They source from overseas...
They pay retail wages...
They provide retail benefits...
They compete with Mom N' Pop...
They provide entry level jobs...
There is no material difference between the two retailers. And for what it's worth, i'm GLAD that Mom N' Pop have been put out of business. I work too hard for my money to throw it away on their inflated margins!
Newsflash: We don't live in a Norman Rockwell painting.
11-01-2007 @ 8:03PM
Cheryl said...
My family is at the very low end of the middle class. My husband is less than 2 years from retirement. After being a victim of "downsizing" several times, our income remained stagnant for close to 10 years. Our 26-year old daughter (with a disability) and her daughter, age 6 (autistic) both continue to live with us. Years ago I never even walked into a Walmart Store. When we were buying diapers for the youngster, we started going to Walmart for the deals. Now, with the way we have been squeezed from every which way ... astronomic gasoline prices, huge heating bills, health insurance that we pay $300 a month for, with big deductibles, big out-of-pocket limits and $40-60 co-pays for medicines ... WE DON'T HAVE A CHOICE.
The over-time he used to get is almost non-existent. We don't take vacations or cruises or have the luxury of dinners out, going to ball games, etc. and have literally no social life. We live from pay to pay and struggle to make the bills (basic necessities). We don't have all the bells and whistles that other people lay claim to ... no HD wide-screen TV's, etc.
This is what's happening in America. Our government makes no effort to protect the middle class from which they extract the taxes from, and thus it is disappearing. There's no more juice in the lemon to be squeezed. If this government isn't careful, they may be facing some sort of a revolution, because people have no where to go with this, and they keep looking for more ways to avoid helping the people they've destroyed.
11-01-2007 @ 9:33PM
Brockage said...
WAL-MART - MOVE TO MAYLASIA WHERE THEY'LL BE HAPPY TO SUPPLY YOU. There is never a shortage of people who think the prices we pay should be higher, the taxes we pay should be higher, and the cost to them should be lower. Carumba!
11-05-2007 @ 7:24AM
Tom said...
People and vendors have a right to say no. If a supplier cannot lower prices then just say no. Employee's have a right to say no. If the wages are not high enough "just say no". Issue is that people fail to educate and then rely on others to save them (unions, government) If the best job you can get is minimum wage then who is to blame for that? Stop watching TV and start reading, go to night school and stop wishing that somebody is going to save you. Nobody is going to save you. Wal Mart has an advantage no doubt for buying 10,000 TV sets from a supplier verse mom and pop with 10 sets. Sorry mom/pop but the world has changed and you did not. Who's fault is that?
11-05-2007 @ 8:57AM
eric said...
walmart meat cutters werent being paid fairly,decided to organize walmart throws them out and brings in packaged meat. and all the chemicals to keep it red and fresh.screw your health lets stay profitable SCREW WALMART!!!
11-05-2007 @ 9:03AM
allan said...
Walmart never forced mom and pop out of business ...the consumer did...and guns don't kill people do,,and drunk drivers don't kill alcohol does..
Reality is there is no free trade...read that again, NONE! Suppliers in the US pay more taxes, social security, workers' compensation insurance, environmental mandates, minimum wage requirements, 40 hour work weeks, child labor laws and the list goes on...China has none of thse rules, so how can a product here compete in free trade? We CAN"T!!
So, if jobs lost in manufacturing, insurance (Walmart doesn't buy from your neighbor's casulty company), plumbing, heating, roofers etc..all because they do not support the small locals but use mega suppliers..they kill US jobs..
BTW, the US dollar is pitiful in foreign exchange cause all we do is send money out and trade for useless products and debt...these bad dollars make oil which is traded in dollars cost us more, yet others less..
So,,,support Walmart, love the Chinese workers, pay $100 per bbl for oil, and wear your imports!
11-05-2007 @ 9:31AM
ozgood said...
China....I've had enough. Our Dumps are FULL of Poisoned Chinese Garbage. Nobody needs MOST of the things China Produces. Cut - It - Out.
We can make the needed products right here in America.
11-05-2007 @ 10:18AM
dan said...
Dont tase me bro
11-05-2007 @ 12:45PM
jeff said...
Not sure where you all are referring to. But in this area Wal-mart is very high priced. If you do see a low price, it doesn't last. either the price goes up or the item is no longer carried after a few weeks.
11-05-2007 @ 1:28PM
Joe White said...
Everyone pisses and moans about Wal-Mart. Well, Target isn't any better, nor is Sams Club, Costco, or any of the other 'Big Box' companies. And if you don't like it, shop at Macy's and pay 100 - 300% markup. You, the consumer made these giants, and now you piss and moan about them, want to impose child labor laws in other countries, everything. Well, when that kid loses his job because of your interference, where is he to go for his needed income? Across our border, of course. And Elliot Spitzer suck my balls Governor of NY wants to give them NY Drivers Licenses. Out of the goodness of his heart and country? Hell no. These are his potential voters! Take away American rights, and give them to the ILLEGAL immigrants. What part of ILLEGAL don't you get? Well, we're a country of immigrants. Yes we are, but the immigrants that came here legally through Elllis Island and other ways weren't provided with free health care, welfare, bilingual education, food stamps and a host of freebies at our expense. In fact, fully 30% of the immigrants who couldn't make it here returned to their country of origin. No need for that now, we'll pay the freight, just as long as you toe the line, and vote Democrat, vote early and often as Mayor Daly of Chicago used to say. CA is a good example, in the last National Election, they had 103% turnout, early and often, and don't forget the dead, they vote too!
11-05-2007 @ 1:29PM
Elizabeth said...
Again, I love walmart. Honestly though, I hate buying from China. I hate it as much as I hate putting gas into my sav. Thinking big oil & the middle east are getting paid. What can I say though my life is not conducive to growing my own cotton crops & manufacturing my own textiles or riding a bicycle where ever I go. I'm a slave to it but I do what I can. If given the choice I buy American. If the retailers started carrying more Anerican we'd have no choice but to buy. If prices are going to be raised for China's crappy lead invested products, why don't we just go American? I'd love to cut off a big part of China's profits (thanks to us) but that would probably cause a war in the long run I hate the way things are run but in reality it's an even keel accross the board no one wants to rock the boat too much.
11-05-2007 @ 4:37PM
BILLY AMERICA said...
Greed will be the downfall of this country. We don 't look at the security issues. If Alkida wanted to strike here it wouldn't be to hard. Put deadly chemicals in bicycle/tricycle/scooter/lawnmowers/motorcyles.
before they get to our shores. Squirt poison into fruit or any imported eatable item. America needs a strong middle class. NAFTA and this world economy crap is a bunch of bull that only benefits the rich. This country is in a state of imperialism all of our elected officials are millionaires. Middle classes are moving up all over the world at the expense of our Middle Class. Wal Mart should be made to buy all products within a 100 mile radius where and when possible.