Wal-Mart Case

Founded in 1962 by Sam Walton, Wal-Mart Stores, Inc. has quickly become the largest grocery retailer in the United States, employing over 1.8 million people worldwide (Fishman). Walton modeled his company in a way that it would bring the cheapest prices at whatever the cost. Wal-Mart is well known for insisting that prices of basic consumer products drop 5% a year (Fishman). Price cuts have to happen somewhere in order for Wal-Mart customers to buy their products at lower rates. As a result of the retailer working towards their own goals, it becomes nearly impossible for suppliers to constantly supply low cost products to Wal-Mart and still manage to make a profit. If a business is not supplying to Wal-Mart, their low price offerings of well known brands such as Levi’s, Welch’s, and Black and Decker, make it very hard to compete.

What are the challenges associated with selling to Wal-Mart?

Being such a staple in the American retail industry, with so many returning customers, it is no wonder that many producers want to get their products into Wal-Mart. “Tens of thousands of executives make the pilgrimage to north-west Arkansas every year to woo Wal-Mart” (Fishman). Companies face several challenges when they partner with Wal-Mart. Once they are able to persuade Wal-Mart to make an order, this may come at a grave cost not only to their manufacturing process, their profit, the quality of their products, but also their employee morale.

Due to the power that Wal-Mart possesses, they have the upper hand over business deals with their suppliers. A dominant retailer, such as Wal-Mart, has the power to decide retail prices of products because there are so many manufacturers who are eager to sell their products through such a large and powerful merchant. Wal-Mart is often able to use its market power to set the price for their products, going against supply and demand, but price cuts must affect business negatively, somewhere, to allow customers to buy their products...