Black Friday action at Walmart – Photo: Walmart
Inflation has become enough of an issue to rattle Walmart’s everyday low price positioning and the chain is considering taking a drastic move that may keep its customers happy, but likely have the opposite effect on some of its suppliers.
Walmart is considering allocating more space in the center store to private labels and tertiary brands, taking the slots of products from those suppliers who refuse to keep their prices in check, according to Food Navigator.
The retailer sees inflation as being more stubborn in center store as in fresh, where prices on commodities like beef, fruit and vegetables have been experiencing some deflation. While the chain sees potential ways for suppliers to reduce costs, such as using more efficiently packed trucks and rail cars, many such solutions were already implemented in the earlier waves of inflation.
Tensions between suppliers and retailers have intensified over the past two years as the two sides of the value equation vie to make their margins at a time when customers grow more cash-strapped. Walmart is not the first major grocer to consider harsh moves against suppliers to control prices.
Loblaw and Metro in Canada, for instance, have been avowedly pushing back against supplier price increases.
At the beginning of 2022 the situation at Loblaw escalated. Frito-Lay Canada halted shipments to Loblaws stores due to the reported dispute.
But Walmart had a reputation for a willingness to squeeze vendors long before the series of shakeups brought on by the pandemic.
For instance in 2015, Walmart sent notices to 10,000 vendors telling them it would be charging stocking fees for products stored in new warehouses and stores. Walmart maintained that it had operated similarly in the past and was merely extending the practice to the entirety of its base of suppliers. In April of that year, the chain also reportedly planned to ask suppliers to fund its Savings Catcher program.
Inflation continues to be a major issue in grocery. While, as a whole, inflation has slowed to a 7.1 percent increase in November, grocery prices were up 12 percent year over year according to Yahoo Finance.
- Walmart mulls strategies for lowering center-store grocery prices, including replacing higher-priced, slower moving brands with private label and tertiary options – Food Navigator
- Retailers are using newfound clout to put the squeeze on suppliers – RetailWire
- Frito-Lay stops deliveries to Loblaw in price dispute – RetailWire
- Walmart adds supplier fees to cover costs – RetailWire
- Not all inflation news was good: Grocery prices jumped 12.0% in November – Yahoo! Finance