Chapter 8: The Profits and Perils of Supplying to Wal-Mart{0}
Having a supplier’s contract with Wal-Mart has advantage and cost to it, suppliers should consider before applying for the contract. The advantage of supplying to Wal-Mart is that they have a wide base customers and a large corporation that will not order and not pay for it. The cost of supplying to Wal-Mart is that they only accept the lowest price and best quality out of the lowest price. This means that suppliers will not be able to profit much compare to selling to other companies. Wal-Mart also requires suppliers to have at least three other entities including Wal-Mart to prove that the supplier knows about their own market.
Wal-Mart has about 57,000 US suppliers, usually a few suppliers for a same type of product to provide customers variety of choice. Wal-Mart generally starts out smaller suppliers in a local market, delivering goods to up to 50 stores, as a test run. If the supplier provides a high-selling product and proves reliable, it might be considered for national distribution. As most of us know, Wal-Mart’s return policy is great. However, Wal-Mart does not take the lost of the returned products, they transfer it to their suppliers. In Wal-Mart’s supplier contract, the supplier has to take the lost of the returned products. Many suppliers did not read and understand fully the long contract rules before signing the contract with Wal-Mart.
In my opinion, a company that can survive supplying to corporations like Wal-Mart is on the right track. Despite the high cost of supplying to Wal-Mart, the company becomes more competitive and their brand will be more popular because of Wal-Mart’s wide base customers. A supplier becomes a top company when they sell their product to the best of the best corporations.
Reference:
Emily Schmitt.July 14, 2009. The Profits and Perils of Supplying to Wal-Mart. Business Week.
Retrieved from:
http://www.businessweek.com/smallbiz/content/jul2009/sb20090714_270767.htm