No joke – Walmart asks CPGs for higher priced products
Walmart is known for its commitment to low prices, but the company is discovering that shipping the lowest-priced products is making it tough to turn a profit with e-commerce. So, the chain has begun encouraging vendors to provide higher-priced items to sell on Walmart.com.
Last week, Walmart eCommerce CEO Marc Lore informed big-name CPG companies like Proctor & Gamble, Unilever and others that Walmart.com wants to focus on selling items that cost at least $5 and preferably more than $10, according to Reuters.
The rationale is that if a customer orders, for example, a $15 bottle of shampoo rather than a $1 bottle of shampoo of the same size, the shipping cost is the same. The $15 bottle will leave a profit after the cost of shipping, whereas the cost of shipping will exceed the value of the $1 bottle.
Walmart is notorious for demanding ultra-low prices from suppliers to keep prices low on its store shelves. Just last year, vendors expressed frustration that Walmart had grown even more demanding on pricing over the previous 18 months. Suppliers reported not being allowed to increase prices despite being able to demonstrate rising costs on the manufacturing side.
The new demand for higher-priced products for e-commerce sales does not appear to be having any impact on Walmart’s demands of its vendors for low-cost products for their brick-and-mortar operations.
While the company did not explicitly name its main e-commerce adversary, two people at the meetings at which Mr. Lore gave the directive quoted by Reuters said that Walmart wanted to avoid selling products online at a loss like Amazon sometimes does.
While Walmart is trying to limit the goods online that it sell for less than $10, Amazon seems to be trying to move more products at that price point. The e-commerce giant recently launched a “$10 or Less” microsite offering free shipping on listed items in that price range. The goal may be to see if Amazon can be competitive with dollar stores and deep-discount websites like Wish.com.
- Walmart makes push to sell online goods at $10 and up to capture elusive e-commerce profit – Reuters
- Amazon launches $10 or Less store – RetailWire
- How should vendors respond to Walmart’s reluctance to raise prices? – RetailWire
DISCUSSION QUESTIONS: Will selling more expensive products on Walmart.com be a successful way to mitigate the shipping costs associated with e-commerce and avoid selling products at a loss? How will customers react to more expensive products appearing on Walmart.com?