This week on Three-Minute Thursdays 8th & Walton’s Terry Clear discussed the impact that Walmart’s upcoming rollout of electronic store labels will have on suppliers, brands, and consumer attitudes.
Lainie: We’re talking about the upcoming rollout of electronic shelf labels in Walmart stores. How do you see that rollout impacting supplier operations?
Terry: The initial rollout will probably be a non-event for suppliers, but in the long term, I think it’s going to have a significant change in the way business happens. Ultimately, Walmart will use electronic shelf labels for some form of dynamic pricing.
Lainie: Oh, really?
Terry: And when we introduce dynamic pricing into the mix, how does that interaction with the suppliers change? The dynamic pricing that the suppliers have with Walmart—so while Walmart and other retailers that are doing electronic shelf labels may say that they’re not going to do dynamic pricing…
Terry: The reality is, if a company has the ability to do it, they certainly will at some point. Airlines do it, hotels do it, Uber does it. So now, Walmart can adjust prices to get the sales and margin where they need to be. If you’ve got an item in a store that’s not selling well, I can quickly take the price down and encourage sales.
Terry: How does that affect Walmart’s P&L? What is Walmart gonna ask of the suppliers in terms of cost reductions or other changes? I think this will be a much more dynamic supplier–Walmart conversation about all these price changes.
Lainie: Do you think that dynamic pricing could possibly impact suppliers in terms of the way the consumer feels—how the consumer feels about the brand, if they see a price go up for what seems to be no good reason?
Terry: It could, and so that’s one of the things that is getting a lot of negative press from consumers, because no consumer likes dynamic pricing. Even when you’re buying airline tickets, you don’t want to feel like the person in the seat next to you got a much cheaper ticket than you got.
Terry: But still, the ability for Walmart to change—or any retailer to change—the price dynamically is going to happen. It’s already happening on practically every website there is. Amazon may change prices hourly.
Lainie: Sure.
Terry: So dynamic pricing is just going to be a new fact of life for the consumer. Now, how that supplier relationship changes and how that changes the P&L for both Walmart and the supplier is going to be a challenge. And I think that’s the new space that is going to have to be worked through.
Lainie: Are there things that the suppliers could be doing now in anticipation of dynamic pricing?
Terry: Yes. So first of all, you should run scenarios: We don’t know how Walmart is going to implement this and how it’s gonna change the existing Walmart supplier relationship, but you can certainly guess. As Walmart does this dynamic pricing, there will be some additional price conversation between Walmart and suppliers. There may be something entered into a supplier agreement. So suppliers also should look at how we dynamically adjust our prices or accept price adjustments from Walmart and still remain profitable.
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