Retail

Walmart's Flexes Muscles

Douglas A. McIntyre

Published: February 12, 2023 10:46 am

Walmart suppliers want more money for their inventory. The costs have risen because of global inflation. Walmart has said “no.” It wants to keep its margins high.

Walmart holds some cards most other retailers don’t have. It has private label products, priced below name brands, that sell in its stores and at walmart.com. The only other large retailer with similar leverage is Costco which relies on its in-house Kirkland brand.

Walmart has used its size to block supplier inventory increases. Because of its unprecedented revenue, suppliers cannot sell around it and make money at smaller retailers with less shelf space. Walmart has over 4,600 locations in the US. Its American revenue was over $100 billion last year. Costco’s was $53 billion.

It is hard to find an analog in any other industry. No auto company has a dominant market share in the US. The same is true with most tech companies. And most tech companies are not inventory based. The primary exception is Apple. It has used its leverage with suppliers for years.

The Walmart story points out a dilemma. As commodity and product prices rise, can they be passed along to consumers, especially by smaller retailers? Consumers who feel pinched by inflation are likely to be more cautious. Financial leverage in this kind of market goes out the window.

Walmart management knows consumers are cautious, and its solution is to batter its suppliers.

(Here are 30 Everyday Items That Are Cheaper at Dollar Tree Than at Walmart.)