Under pressure to boost its earnings, Walmart is changing several vendor policies, including greatly extending its payment terms and now saying many vendors will be charged a fee for moving their products through Walmart's distribution network.
The policy changes were detailed in a letter being sent to some 10,000 of Walmart's suppliers beginning June 17. Vendors are being asked to agree to the new terms by July 1.
While many retailers have a complex web of discounts and chargebacks, the idea of in effect adding an inventory carrying change is a concept that could take hold at other retailers besides Walmart.
The City Wire newspaper reported last week that among several changes, the retail giant is asking for extended payment terms on so called "slow moving" items. Walmart also wants an additional 1% cash discount for paying early - even if it doesn't pay early.
A Walmart spokesperson told The City Wire that being an everyday low price retailer is difficult and sometimes the retailer has found itself sort of stuck in the middle.
"We are getting back to a place where we focused on 'everyday low cost' and 'everyday low price' in an effort to best serve our customers," said Deisha Barnett told the paper.
Walmart is said to be asking suppliers for an additional 1% discount for quick payment, bringing the total to 2% - except it now intends to pay in 90 days, not the 20 day timeframe previously needed to trigger the rapid payment discount. As with consumer goods companies that have stretched out vendor payment terms in recent years to 90 or even 120 days, Walmart is said to be lining up low cost financing options for suppliers based on the receivables coming from Walmart. By doing this under the Walmart umbrella, that financing should be lower cost than a supplier would likely be able to obtain on its own.
In addition, Walmart is said to be the adding a new 1% handling charge for products that enter a distribution center. It applies to the vast majority of the products Walmart carries. Exempted items include things like liquor and perishable items such as produce and flowers.
Another Walmart spokesperson, Molly Blakeman, told Multichannel Merchant magazine that there are three main points of the new rules: More closely aligning payment terms with inventory days on hand; bringing consistency to the collection of allowances related to the growth of suppliers' business and use of Walmart's network, including new stores, warehouses and distribution centers; and aligning allowances with rates of return on defective or unsalable merchandise.
"These types of fees are not new, but what is new is more consistently executing them across our US supplier base, to drive consistency and simplicity across the terms," Blakeman said. "We're working with our suppliers every day to serve our shared customers, having on-going conversations to make sure we're delivering everyday low costs to enable our promise of everyday low prices."
(Supply Chain Trends and Issues Article - Continued Below)