This article is part 2 of the discussion around cost increases at Walmart. If you’re looking for Part 1, see our article on negotiating a price increase.
Two follow-up questions often asked when in the negotiation period of a cost increase are “Can we increase the retail price along with this cost increase?” and “What if my merchant doesn’t approve the cost increase?”. Both are great questions that have answers filled with nuances.
One of the major metrics Walmart/Sam’s Club is concerned with is margin – both item markup percent (%IMU) and penny profit (Retail - Cost). So, when considering a cost increase, it seems the easiest way to mitigate margin erosion is also to raise the retail price.
Since pricing is the sole discretion of the retailer, it is crucial to manage these conversations to pose retail increases as merely a suggestion versus telling the merchant the retail price. While this might sound extreme or intense, it is impossible to be too careful when working with the #1 retailer in the world.
To be certain no confusion exists, suppliers should enact the best practice of starting this conversation with something like, “As always, pricing is the sole discretion of the retailer, but we have noticed increasing the retail from ____ to ____ would…”.
Typically, Walmart is against raising retail at all costs. However, we have seen a couple of instances in which it can occur:
Ultimately, when suggesting a retail increase to coincide with a cost increase, suppliers must remember that pricing is the sole discretion of the retailer, and the merchant’s biggest concern is often maintaining margin (penny profit and/or %IMU).
When it comes to cost increases, we’ve seen time and time again situations where merchants just simply say, “No, I do not accept an increase.” Typically this is an attempt to force the supplier to choose how necessary the increase truly is. Below are some scenarios for how this has played out:
Unfortunately, if this situation arises, there’s no silver bullet on exactly how to proceed. With its compass pointing the retailer to “Save Money, Live Better” for consumers, it is understandable Walmart is always driving to maintain Everyday Low Cost (EDLC) to offer Everyday Low Price (EDLP). The best case scenario is to find a mutually beneficial solution where both parties win.
Negotiate your cost increase armed with data! With SupplyPike’s Retail Intelligence app, you can download a report showing your retail sales compared with your shipping costs.
Retail Intelligence – Sales vs. Shipping metric
Kelsy has over 6 years of experience in headquarter sales, helping suppliers manage their businesses at Walmart/Sam’s Club, specializing in grocery categories.Visit their Website ➝