Suppliers Feel the Pressure from Wal-Mart to Share the Benefits of the Falling Yuan

Published By : 25 Sep 2015 | Published By : QYRESEARCH

Wal-Mart is expecting price cuts from manufacturers producing goods and products in China itself. Sources have stated that the giant retailer should have a share in the total savings that gets generated in the Chinese economy which has come about because of the yuan getting devalued. Recently, most managers in Wal-Mart have come into contact with almost 1000 manufacturers in several regions and countries; manufacturers who have production facilities located in China. 

The retailer seeks cost cuts ranging between 2% and 6% mostly on general merchandise goods which includes toys, electronics, appliances, beauty products, healthcare products, apparel, and home furnishings. The company is asking suppliers to pass on the savings which arise from the devaluation of the yuan, so that Wal-Mart is able to achieve “everyday low cost”, which means tight controls over the costs of the company with a view towards keeping prices at a low level for the consumers. 

There have been suppliers who have been asked by Wal-Mart to cut costs within the initial lower half of the range between 2% and 6%. However, these suppliers have stated that they would be engaging in negotiations with the retail giant. Owing to the fact that the retail giant has annual earnings of approximately US$500 billion and a well-developed supply chain, it has been concluded that Wal-Mart has a certain sway over most of its suppliers. This increase the chances of loss that the supplier might end up incurring because of the strong requests from the retailer for cost cuts. 

The devaluation of the yuan may create several advantages for other retailers operating in the market. In order to improve the terms, the retail giant has been engaging in negotiations with quite a few of its suppliers. Certain potential savings in costs have been identified because of the decline in the Chinese currency. 

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