Wal-Mart Stores, Inc. (NYSE:WMT) will soon charge its suppliers extra charges for storing items in new stores and using the warehouse inventory of the retail corporation. The change will be uniform and will be applicable to all suppliers. The proposed change in charges might just be the direct result of hike in wages of all workforces at the Wal-Mart Stores.
Wal-Mart and Suppliers Relationship
For years, Wal-Mart has maintained a successful relationship with the suppliers. The store has succeeded in getting the lowest value from the vendors for the goods featured in its stores. The reason of this success has to do with the fact that the company charged nominal fees for storing and warehousing inventory. This allowed it to bargain for lower price.
There have been changes to supplier agreements before. Though these changes involved extra charges to suppliers, these charges were not applicable to all suppliers. This time, the changes will affect all the suppliers. The payment terms have also been modified. These changes will affect nearly 10,000 suppliers in the US stores of the company.
Move To Keep Costs Down
Wal-Mart Stores, Inc. (NYSE:WMT) has been struggling to keep the costs down. The recent hikes in wages have created a new challenge to keep the operating costs down. The company which boasts of lowest prices with their tagline “Save money .Live Better” has to save money for itself if it is to keep costs down.
The company has chosen a way to do just that by charging its suppliers so that it will get fees from large number of vendors at once, which may solve its problem. This way, while may be statistically correct, poses threat to the supplier relationship. The company has historically got great deals from suppliers by not charging such fees.
According to some experts, it is common practice for retail companies to charge for new stores and warehouses. For Wal-Mart Stores Inc. (NYSE:WMT), this may be a new initiative.
