Retail

Walmart Pushes $10-And-Up To Reach Online Profitability

Walmart wants to sell more stuff worth more than $10 online, as it is pushing to finally turn a profit in its online business.

According to reports, that push has left the world’s largest retailer leaning on its vendors to supply it with more merchandise priced at or above $10, according to sources.

The push for higher-priced items seems to be an across-the-board move — sauces, soaps and general merchandise items such as toys and home furnishings are all part of the change. The increase is to account for the fact that selling — and delivering groceries — digitally is more expensive, since delivery is a baked-in part of Walmart’s costs.

“Walmart has started to understand that it cannot make money if it offers the lowest prices online on every item and then spends $4 or $5 trying to ship it over,” said one supplier present at the meetings. “It is not sustainable, and more importantly, their shareholders won’t allow it.”

The move, according to reports, is something of a change in direction for Walmart, which has been pushing its suppliers for ever-lower prices so as to make it easier to drive down costs both online and in-store.  And while Walmart will continue to push for the lowest possible goods costs for stores, its strategy for online players will focus more on slightly pricier goods generating better margins.

Walmart has no official comment on these reports, though it has reaffirmed its commitment to everyday low prices, according to 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,” a Walmart spokeswoman said.

Walmart.com already had begun to raise prices on some items sold online last year. By now enlisting suppliers to provide the company with higher-priced goods, it is taking that strategy a step further.

How risky the move is remains to be seen. A majority of Walmart’s low-income customers still tend to shop at its brick-and-mortar stores, so there is probably no risk of loss there. But digital shoppers tend to be bargain hunters at heart, and there is no promise that when Walmart’s prices go up, those shoppers won’t look elsewhere. Amazon — with its long-established comfort with loss leading in eCommerce sales — is a constant risk.

“They are no longer saying ‘give us the lowest-priced products for dot com,’” said one person present at the meetings, referring to Walmart.com. “They want items that retail for more than $10; those are the products that make money for them online.”

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