Wal-Mart is seeking price cuts from suppliers that produce goods in China, saying the retailer should share in the savings generated by China's devaluation of the yuan, people with knowledge of the matter said.
Wal-Mart managers in recent weeks have contacted more than 10,000 suppliers in various countries, all of which have manufacturing facilities in China, seeking cost cuts of 2 percent to 6 percent on mainly general merchandise including home furnishings, apparel, health and beauty products, appliances, electronics and toys, according to a consultant who advised Wal-Mart on the move and spoke on condition of anonymity to protect his relationship with the retailer.
The company is telling suppliers that they should pass on the savings arising from the yuan devaluation so Wal-Mart can achieve EDLC, or "everyday low cost," its term for the tight cost controls needed to keep prices low for consumers, according to executives at two vendors of durable goods, who also requested anonymity. Both were asked for cuts in the lower half of the 2 percent to 6 percent range. Both said they planned to negotiate a reduction in the proposed cuts.
Wal-Mart spokeswoman Deisha Barnett declined to comment on whether the company was seeking price cuts in China-made goods. With almost $500 billion in annual sales and a globally diversified supply chain, Wal-Mart holds tremendous sway over its vendors, which could risk their business with the retailer by pushing back too hard on its requests to lower costs