Walmart Cutting Prices

I noticed this in a WSJ article today on Walmart aggressively cutting prices on 3,700 items.

“Chief Marketing Officer Stephen Quinn said Walmart expects to expand the number of price cuts in coming months, with help from suppliers. Walmart 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 Walmart."

Our company counts many Walmart suppliers as clients. We provide sales reporting and inventory analysis services for them, and I can tell you many are already being preassured by Walmart 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 working 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.