Wal-Mart Stores, Inc. (NYSE:WMT) has decided to go on the offense with prices. The retail giant aims to cut the cost of its goods to fend off its competitors. The move by Walmart was first reported by The City Wire’s Kim Souza in February and again last week by The Wall Street Journal.
Both the reports reported that Walmart CEO, Doug McMillon, intended to keep the prices low to achieve market share.
Usually, it is not uncommon for retailers to pressure suppliers to reduce the price of goods. However, this time it faces significant competition from a wide range of rivals including Aldo, Costco, Dollar General Corp. (NYSE:DG) and Kroger Co (NYSE:KR).
Walmart’s increased emphasis on price was recently noted by Credit Suisse. It released a report that stated that the price gap on consumables between Walmart and its competitors grew to 17.9%, above the one year average of 16.2%.
According to Deisha Barnett, a spokesperson for the company, money should be put into keeping the prices low.
The decision by Walmart was also lauded by some member of the Brain Trust of industry who said that the move would benefit both the customers and suppliers. Professor, Gene Detroyer, is of the opinion that Suppliers will win with Walmart while competitors will lose.
Walmart has also been lauded by analysts for the ease of doing business with it. David Biernbaum, the senior marketing and business development consultant at David Biernbaum, said that low prices at Walmart come with no strings attached or hidden costs to the supplier.
Tom Redd, VP of strategic communications at SAP Global said that Wal-Mart Stores, Inc. (NYSE:WMT) is doing the right thing by using the money to drop prices.
However, not everyone is happy with Walmart’s move to use trade dollars to drop prices. Frank Dell, president of Dellmart and Company is of the opinion that Walmart’s move to strong-arm suppliers demanding trade dollars after it has been used to drop prices is illegal. Dell is of the view that Walmart’s move gets it a better deal than other retailers which is against the law.
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