There will likely come a time in a supplier’s relationship with Walmart where they’ll need to negotiate a cost increase, and that can feel like a black box in how to get it accomplished. The sales account manager is probably asking:
Many suppliers have heard about the “Cost Change Scenario” app in Retail Link, but submitting this form is actually one of the last steps in the process of passing a cost increase. If the supplier has already negotiated the cost increase with their merchant, received approval, and is looking simply for the tactical steps to submit the form in Retail Link, skip below to the section titled “Step 3: Submitting the approved cost increase in CCS”.
However, if you find yourself thinking, “Wait, I need to talk to my merchant? I need to have supporting information? This is a negotiation?”, keep reading, and we will get to the form submission at the end.
If form submission is one of the last steps, what is the first step? Negotiation. To be specific, preparing for the negotiation is truly the first part. The merchant must approve all price increases, and since Walmart leadership has instructed most merchants not to accept cost increases whatsoever... suppliers have to bring their A-game. (As of the publication of this article, this caveat is especially true for grocery categories while Walmart tries to win back share in COVID-19.)
Below are the steps in executing a cost increase:
Timing is one of the most critical factors in preparing for the cost increase negotiation and most likely the piece that can be most damaging to the relationship with the supplier’s merchant.
First and foremost, Walmart requires 60 days’ notice before passing a price increase. Most often, Walmart expects to be the last retailer to reflect the increase in stores if the supplier requires a retail increase. Therefore, this notification from the supplier typically happens closer to 90 days out. However, only 60 is required. This minimum 60-day period is where the negotiating takes place.
Merchants will say the best time to talk pricing is during the line review because this is the time to talk about the next modular relay, with the effective date of the increase (if approved) being at the next reset.
However, some suppliers don’t want to risk spending the entire line review timing talking cost, and so some suppliers choose another time to start the conversation. Additionally, it can be challenging to time these conversations for all retailers’ line reviews, so sometimes it simply isn’t possible to wait until the line review meeting itself.
In preparation for communication and discussion, some questions to expect from the merchant during the negotiation are:
Once the preparation is complete, it is time to reach out to the merchant to communicate the need for a cost increase and begin negotiations.
Typically, the initial communication goes out on the official company letterhead from the leadership team, communicating the cost increase is happening across all retailers, gives specific information around the need for the increase, and lists the items affected.
After the merchant approves the cost increase, the supplier must submit it via the Cost Change Scenario (CCS) application in Retail Link to update the cost in the various systems across the Walmart universe. In the submission process, the supplier needs to complete the steps below for each item receiving an increase:
Once the merchant has confirmed acceptance of the price increase, it will not update in the system until the effective date. A best practice is to put the effective date 1-2 days before the order date so that the supplier can confirm the cost update in the system before the next round of orders.
Passing a cost increase is more than simply submitting a form within Retail Link. While this is the easiest part, it actually is the last thing to consider when approaching a cost increase.
Walmart knows it’s the biggest retailer in the world. So the best advice is to come to the table with clear and convincing evidence that the supplier has done everything they can to mitigate the cost increase internally, and passing some on to the retailer is the only option to keep their business in a healthy position.
Before implementing a cost change scenario, use SupplyPike’s Retail Intelligence – Performance Report to track your items’ sales.
Retail Intelligence – Performance Report – Unit Sales 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 ➝