The Bad News Walmart Issued Its Suppliers
Walmart is one of many retailers feeling the impacts of inflation, as a result, they have now given their suppliers some bad news.
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Many businesses, especially retailers, have begun to feel severe impacts due to unceasing inflation. The cost of virtually everything has skyrocketed and companies are not immune to those hikes. Even retail titan Walmart is feeling the heat. In fact, the Wall Street Journal reported that the company is being affected enough that it has decided to charge its suppliers a new fee.
Walmart informed all of its suppliers via an internal memo that a new “collect pick up charge” will be going into effect as of August 1, 2022. The charge will be applied to all suppliers who use Walmart trucks to pick up goods and transport them to Walmart’s retail stores. The retailer cited the direct cause of the new charge as steep increases in transportation costs. The new fee “is a result of Walmart adapting to the significant transformation and increased cost seen in the transportation industry over the past few years,” read a portion of the memo.
The Walmart memo went on to further detail how the new charge would be applied. The company explained that fees will vary. Each fee will be calculated as a percentage of the cost of goods that the supplier gives them. Subsequent to receiving the news, many suppliers expressed frustrations. These frustrations were mostly in regards to Walmart’s lack of transparency on the exact amount they plan to charge. Simply informing suppliers that they would be taking an undisclosed percentage is exceedingly vague. One disgruntled supplier told the Wall Street Journal that it’s upsetting to know that he now has an unknown retroactive charge to somehow fit in his budget.
A spokesperson for Walmart defended the company’s decision. The spokesperson said that Walmart saw this as a necessary change so that it could continue to offer reduced prices to consumers. The spokesperson also noted that going forward suppliers will have the option to switch to a pre-paid pickup model so that any extra charges incurred will be upfront instead of retroactively.
Walmart’s decision to start charging its suppliers an extra fee was also likely done to please investors. Walmart CEO Doug McMillon said to investors during a June meeting that the company is doing everything in its power to cut costs where possible in order to protect its profit margins and recoup any losses it sustained during this year’s first fiscal earnings quarter.
Walmart is not alone in its decision to charge its suppliers extra. Amazon responded to this intense period of inflation with a similar move earlier in the year. Albeit, they were more specific about the exact percentage of the change in contrast to Walmart’s vague memo announcement. Amazon implemented a 5% fuel and inflation charge that went into effect in April. Given that retail giants like Amazon and Walmart are now being impacted by inflation enough to offload some of those extra costs on their suppliers, it’s probable that in the coming weeks and months other retailers could follow their lead. And ultimately, Walmart’s actions directly reflect the intensity of the chokehold that inflation currently has the nation trapped in.
