Wal-Mart Cutting Prices

I noticed this in a WSJ article today on Wal-Mart aggressively cutting prices on 3700 items.

“Chief Marketing Officer Stephen Quinn said Wal-Mart expects to expand the number of price cuts in coming months with help from suppliers. Wal-Mart is encouraging them to reduce what they charge the chain in exchange for having it spotlight their products as part of its price "rollback. It forces them to sharpen their pencils a little bit and see what they can do to be a part of this," Mr. Quinn said. "Obviously they are competing with each other to get space and visibility at Wal-Mart."

Our company counts many Wal-Mart suppliers as clients. We provide sales reporting and inventory analysis services for them and I can tell you many are already being preassured by Wal-Mart to cut their prices. It’s a tough spot for a vendor, don’t cut your price and risk loosing a huge platform for distribution, or cut your price and reduce the profit. We are workign with these vendors to create price elasiticy models to hopefully avoid price cuts but in the case they do agree to a price cut study the effect. Remember not all products sell more with a lower price, and certainly the margins are reduced. Carefully analyzing the data and presenting your business case to the buyer will be critical to avoid a “rollback” becoming a permanent price cut.

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