Walmart Prioritizes Profits Over Low Costs Online

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Walmart boxes fulfillment center

Walmart is learning that when it comes to price, you can’t out Amazon Amazon.

While the e-commerce giant’s diverse revenue stream gives it the luxury to earn slim to no margins on some orders in exchange for boosting customer loyalty, Walmart can’t afford to have fulfillment costs eat into profits any longer.

Since the retailer’s Jet.com acquisition, its online sales have surged but the increase has not been without costs. As a result, the Every Day Low Price leader is now looking to boost prices online.

The big-box retailer is calling on suppliers to provide goods with a higher price tag for its online business, according to Reuters. The news service reports Walmart hosted a series of meetings last week with leading CPG players, alerting them that it intends to focus on goods that meet at least a minimum price threshold.

“They are no longer saying ‘give us the lowest priced product for dot com,’” an attendee at one of the meetings told Reuters. “They want items that retail for more than $10; those are the products that make money for them online.”

[Read about the ways Walmart and Amazon have been battling it out online: Infographic: The 2017 Amazon, Walmart Turf War]

The request runs counter to the company’s long-time demand of lowest cost—but it only applies online where shipping costs have been an issue.

“Walmart has started to understand it cannot make money if they offer the lowest prices online on every item and then spend $4 or $5 trying to ship it over,” one supplier is quoted as saying. “It is not sustainable and more importantly their shareholders won’t allow it.”

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Under the new initiative, the company is reportedly zeroing in on dry grocery goods, general merchandise items and home goods to help.

While Walmart didn’t elaborate on the conversations it’s having with suppliers, a company spokesperson told Reuters, “We are constantly looking for opportunities to expand our assortment with new items, and want to ensure that the items we add to the assortment are a great value but also make economic sense for the channel.”

The question remains whether current Walmart shoppers will be turned off by the higher price tags. The retailer has been attempting to expand its consumer bases through purchases of brands like Bonobos and ModCloth along with its new alliance with Lord & Taylor, which will begin selling on the site this spring.

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