WalMart Suppliers Brace For The Coming Storm: “Now We Know Why They Have Been Pushing So Hard”
by Tyler Durden
ZeroHedge.com
10/19/2015
When Wal-Mart moved to hike wages for its lowest paid employees earlier this year, we were quick to note that the fallout would end up rippling through the supply chain. Here’s what we said in April:
The irony is that while WMT (or MCD or GAP or Target) boosts the living standards of its employees by the smallest of fractions, it cripples the cost and wage structure of the entire ecosystem of vendors that feed into it, and what takes place is a veritable avalanche effect where a few cent increase for the lowest paid megacorp employees results in a tidal wave of layoffs for said megacorp’s vendors.
Subsequently, the retailer embarked on a series of efforts to extract every last penny of savings from suppliers including i) an effort to compel vendors to forgo marketing expenditures, ii) adding storage fees and manipulating payment schedules, and iii) demanding that suppliers pass along any savings from China’s yuan devaluation.
As we’ve been at pains to explain, this was absolutely inevitable.
When “everyday low prices” is the corporate religion, you can’t pass along rising labor costs to consumers. Add it the fact that WalMart’s customers largely belong to the same tax bracket as the company’s meagerly compensated hourly employees and raising prices simply is not an option.
That means either suppliers suffer, hours are cut, people get laid off, or all of the above.
At Wal-Mart, it’s been all of the above, as workers at some stores report reductions in hours and the Bentonville office looks to cut hundreds of management level positions.
The Rest…HERE
