Fri, Feb 09, 2018 - Page 10 News List

Walmart focusing on US$10 and up items to make e-commerce profitable

Reuters

Walmart Inc is asking vendors to supply it with more merchandise priced at US$10 and up, as part of a major push for its online business to finally turn a profit, four people with knowledge of the matter said.

The new focus at the world’s largest retailer is on dry grocery products such as sauces, soaps and general merchandise like toys and home furnishings, the sources said.

Walmart’s goal is to see higher profit margins selling these more expensive items given the built-in cost of delivering goods purchased online, people familiar with Walmart’s new strategy said.

In meetings last week with suppliers — including Procter & Gamble Co, Unilever PLC, Kimberly-Clark Corp and Clorox Co, Walmart’s e-commerce chief Marc Lore said Walmart.com wants to focus on merchandise priced at least US$5 and preferably, more than US$10, the people said.

“Walmart has started to understand it cannot make money if they offer the lowest prices online on every item and then spend US$4 or US$5 trying to ship it over,” one supplier present at the meetings said. “It is not sustainable and more importantly their shareholders won’t allow it.”

Walmart’s directive to suppliers marks a shift in strategy. The retailer for years has squeezed suppliers for pennies to drive the lowest prices for shoppers, both online and at its brick-and-mortar stores.

Walmart will continue to press for bargain-priced items to sell at its 4,700 stores, but it will now implore suppliers to provide it with more expensive goods for sale online.

Walmart declined to comment on the meetings, but affirmed its commitment to “Every Day Low Prices” and offering the best prices online.

“We are constantly looking for opportunities to expand our assortment with new items, and want to ensure that the items we add to the assortment are a great value, but also make economic sense for the channel,” a Walmart spokeswoman said.

Two people present at the Walmart meetings in Bentonville, Arkansas, who were not authorized to speak on the record, said Walmart wants to avoid selling products online at a loss like rival Amazon.com Inc, where there is much less of a focus on retail profit.

Seattle-based Amazon profits on many, but not all transactions, depending on price-matching, an order’s size, shipping speed and other factors.

Amazon accounted for 43.5 percent of US e-commerce sales in the 12 months to October last year, compared with Walmart’s 3.6 percent, according to digital research firm eMarketer.

Walmart.com has tripled the items it sells to 70 million in the past year. It is looking to grow that fast, as it plays catch up with Amazon’s more than 300 million products for sale.

For some suppliers, Walmart’s directive will entail going back to the drawing board and coming up with new items to sell on Walmart.com. That, in turn, will require planning and investment in new product design, packaging, marketing and sales.

One Walmart vendor said that more than 95 percent of its merchandise for sale on Walmart.com is priced between US$3 and US$8.

Procter & Gamble, Kimberly-Clark and Unilever declined to comment.

Clorox did not respond to requests for comment.

“They are no longer saying ‘give us the lowest-priced product for dot com,’” one person present at the meetings said, referring to Walmart.com. “They want items that retail for more than US$10; those are the products that make money for them online.”

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