Walmart Asks Suppliers To Cut Marketing Costs And Ads: Aims To Become “Low Price” Leader To Beat Competition

The U.S. retail giant Walmart has asked suppliers to cut costs by slashing advertising spend in its stores and offer the customers better prices. The retailer is looking determined to reclaim its position as the low-price leader and ward off the pressure of competition and perk up the sluggish sales in many U.S. Consumer products like laundry detergent. These products are known for spending a big portion of their budget to market them at Walmart in online advertising as well as store displays.

New Focus

Deisha Barnett, a Walmart spokesperson, confirmed the strategy and described it as a "reinvigorated focus." Walmart told suppliers to forgo investments in joint marketing and plough back the savings to translate them into lower prices. From diapers to yogurt, a price relief to customers will be possible, by putting brakes on eye-catching product displays and online advertisements, reports Wall Street Journal.

Heavy Competition

Of late, Walmmart has been feeling that its price advantage against competitors has eroded and is losing market share in the U.S. after the recession ended. The rivals, including Kroger Co. and Costco Wholesale Corp gained good share, according to consultancy Kantar Retail. Even, many dollar stores and other discounters are undercutting Walmart in price, which is the chief selling point.

Though Walmart is hoping that lower prices, borne by slashed marketing budgets will bring it more customers, it can harm the suppliers as they start losing control over how their products are displayed or promoted, with their ability getting handicapped to make them stand out against store brands or rivals.

Walmart’s new pricing strategy is being spearheaded by its Chief Executive Doug McMillon and U.S. head Greg Foran, who are keen to turn around its core domestic business, which booked $288 billion in sales in the year ended on Jan 31 and comprise 60 percent of the company’s total sales.

Foran and McMillon conveyed the pricing message, during a meeting with the suppliers in February. They urged suppliers to operate the same everyday low cost model that Walmart employs from top to bottom. Foran, who is a Kiwi, has also been meeting former executives to understand what gave the retailer an edge in its heyday.

In line with the new policy, Walmart reportedly put pressure on Procter & Gamble to lower prices of its popular “Tide” detergent. It then struck a deal with Henkel AG to introduce a new, exclusive premium-priced detergent brand, Persil, for its stores. Now, Walmart is selling Persil at the same price as Tide and displaying it prominently on the shelves next to Tide.

Defends Gay Rights

Meanwhile, many were surprised at Walmart’s open stand on gay issues. It has publicly urged Arkansas’s Republican governor to veto a bill that allegedly discriminates against gays and lesbians. This position of the retail giant marked a turning point in its own journey in gay rights.

It may be recalled that when Sam Walton started the company in 1962 in Rogers, Arkansas, it was full of small-town conservatism. The retailer was even reluctant to sell music with explicit lyrics. That conservatism engulfed matters of sexual orientation also. Over the years, it has changed and Walmart made significant shifts in its LGBT stand and extended its anti-discrimination policy to gay and lesbian employees in 2003. Responding to the new policy on gay rights, a Walmart spokesman said the company “has a long history of working with our associates to build a diverse and inclusive environment that respects all individuals.”

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