New Walmart System Lets Suppliers Increase Prices

Walmart has updated a tool to allow suppliers to submit cost increases related to higher U.S. tariffs on Chinese goods.

The “Cost Change Scenario” tool, launched a year ago, now enables vendors to choose the reason for a cost hike from a menu that includes tariffs, labor, transportation and raw materials, according to Bloomberg. The application is located inside Walmart’s Retail Link system, which also includes data-mining capabilities that allow suppliers to predict what items will be in high demand.

While Walmart wasn’t seriously impacted by the first rounds of tariffs on Chinese imports, this latest round increased levies to 25 percent on $200 billion of goods, including handbags and furniture. In addition, there are plans to tax another $300 billion of goods, including clothing, shoes and electronics.

Greg Melich, a senior managing director at Evercore ISI, estimated that if this latest round of tariffs becomes a reality, it will lead to rampant price increases that would “wipe out” profit growth for major U.S. retailers.

When suppliers raise the cost of a product, retailers must decide whether to take on some or all of that increase, or pass it along to consumers. For its part, Walmart recently vowed that it will do everything it can to maintain its low prices, including negotiating with suppliers and moving manufacturing outside of China.

“We’re going to do the best we can to manage through this in a way that our customers don’t feel it, pulling all the levers that we’ve got,” said CEO Doug McMillon said in a presentation to analysts last week. “I hope that this gets sorted, but we obviously don’t control that.”

However, the company has admitted that higher prices on certain items, such as bicycles, cannot be avoided. “Increased tariffs lead to increased prices,” said CFO Brett Biggs in an interview last month.