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.
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Reader Comments (Page 2 of 2)
11-05-2007 @ 4:42PM
Terry said...
Well I have never sent in a comment to any blog before but I got a chuckle out of some of your comments. First thing first. I don't care for Wal-Mart at all and I own a mom and pop company that sells Electronics.
When you people but a TV from Wal-Mart it might have the same model number as a TV that you buy from a mom and pop store but it does not always have the same quality parts in it. It might have the same features but the quality of parts are not put into the Wal-Mart merchandise. I know because we have to fix the TV's from Wally H--- and we are not always able to get parts for those TV's. Also most of the off brands that Wally H--- sells admit that their product is a disposal product. That means that when it breaks that you should buy another one and throw the old one in the dump. (well that makes for more jobs as landfill workers) I have Wall Mart bought product in my repair shop that is only 13 months old and I cannot get parts for the repairs. So in other words this customer paid $1,200.00 for a 42" Plasma Tv at Wal-Mart and it is now out of Warranty and his repair bill would be $780.00 IF I COULD GET THE PARTS. So where are his savings at? Now he has to buy a new TV since his old one is shot. If he would have paid a measly 10 to 20% more for a good TV in the first place he would still have a good working TV that is rated to last 12 to 20 years instead he is now buying that quality TV from me and we are disposing his crap Wally H--- TV in the proper manor. Oh by the way if this customer has any problems with this TV that I am selling him I will be here to provide SERVICE to him. Something that Wal-Mart does not provide.
Other than Electronics Wal-Mart pretty much lacks quality in about every product line. How do I know well I do go to Wal-Mart on occasions to buy some things. Not that I enjoy it but in a lot of cases they have run the mom and pop retailers out of business and after they did they raised their prices on those very same catagories of product. It is funny that you can go to a Wal-Mart in one town and then go to a different Wal-Mart in a different town and the pricing is different. Funny.
Well to each their own. I could go on forever and most of you won't care anyway. But whenever you get tired of it "Do something about it". cause no-one else will do it for you.
The moral to this blog is that it is my opinion that people are better off in most cases to buy a better quality product that will last them longer or work better and they will be money ahead in the long haul.
11-05-2007 @ 4:49PM
tori said...
Walmart is not just hurting suppliers overseas. It is seriosly hindering other industries in the US. Walmart has driven up costs of seafood in this country so high that many suppliers can't afford the boat prices, and then they cut the profits of the processors by buying them at 1% above cost.
This country needs to wake up, and return to the days that quality was more important that cheap prices. It's one thing to shop there when you are short on money, but in the long-run, there are much better quality products offered elsewhere.
And they treat their people like dirt. Their "employee discount" is laughable, their schedules are ridiculous, and the quality of their produce is non-existant
11-05-2007 @ 8:24PM
Joe said...
Sam Walton ran a mom & pop store in Bentonville, Arkansas. He had vision. Wake up world. You are either part of the problem or part of the solution. Go out and make a difference.
That may actually require some THOUGHT on your part about how you can contribute to positive change. It may require some actual WORK on your part.
PS. You may have to stop whining, crying, pissing, and moaning about how bad others have made it for you and do something with your life.
11-06-2007 @ 9:52AM
rf0225sf said...
Wal Mart continues to miss the point. They can lower the prices and lower the prices but they still see sales lag. This will continue to happen until they realize it is the way you service the customer that counts. I know that the combination of the two is the formula and that is where the competition fails. They provide good service but can't match the prices. Wal Mart will fall if they don't truly embrace the service side of their equation.
11-06-2007 @ 12:13PM
CHRISTOPHER said...
wally-mart wally-mart wally all the way oh what fun it is to shop at wally-mart today hey...I'm not gonna spend one fricken dime....haha
11-06-2007 @ 11:29PM
Jim E said...
Who are the morons who think that small businesses have the buying power to lower their prices as low as the largest company in the world can? If you really think that's possible, then YOU need economics 101! The game is rigged and soon the whole world will be a Wal-Mart. Enjoy.