Wal-Mart is asking suppliers in the United States to cut back on advertising spending in its stores as it seeks lower prices on goods that it sells to its own customers.
The request comes as the world’s largest retailer, based in Bentonville, Arkansas, looks to reclaim its position in the U.S. market as the low-price leader amid stiff competition and perk up sluggish sales in the U.S., which accounts for more than half of the discounter’s total sales.
Historically, makers of consumer products like laundry detergent spend money marketing their products at Wal-Mart, whether by online advertising on social media or store displays. Wal-Mart’s U.S. division told suppliers in February they would rather have them cut their advertising budgets and instead “reinvest” some of that money into cutting unit prices.
Deisha Barnett, a Wal-Mart U.S. spokeswoman, confirmed the strategy to the Associated Press, and said that the discounter has made that request in the past but described the recent overture as more of a “reinvigorated focus.”
Similar in Canada
In Canada, a spokesperson said the division, which operates about 390 stores and supercentres across the country, attempts to win similar concessions from Canadian suppliers in Wal-Mart Canada’s continuous effort to keep prices down.
Roberton said the U.S. move didn’t have an immediate impact on Canadian operations, which operate independently from the U.S. parent.
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“On a procurement basis, each market finds ways to lower its operations costs,” Roberton said. “This is an example of that.”
MORE: Walmart Canada turns focus toward grinding down grocery prices
Wal-Mart’s U.S. division updated investors Wednesday on how it planned to reduce prices while revving up its assortment and improving the experience of shoppers by the holiday 2015 shopping season, the most important period for a retailer.
“We want this year to be the year of improving our stores,” Foran told investors.
Wage increase
Wal-Mart has acknowledged that it took some steps to increase productivity like reducing labour in the stores that ended up backfiring.
But the company is working to rectify that issue. In February, it announced that it was raising the starting wage to at least $10 by February 2016 and improving its training for its hourly workers.
Walmart Canada, the country’s biggest general merchandise retailer, isn’t considering hiking Canadian workers’ pay, it said on Feb. 19, saying its hourly pay is competitive and that many front-line workers collect compensation that’s “significantly above” minimum wage already.
MORE: Sorry Walmart Canada workers, no raise for you
Experts said Walmart’s decision is in part a response to a U.S. labour market on the upswing. A strengthening U.S. economy is creating more competition for workers across a variety of sectors, applying inflationary pressures on hourly wages.
In contrast, Canada’s job market has more slack amid weaker economic growth, serving to suppress wage growth.
Target Canada’s decision to shut its 133 stores means the dismissal of its 17,600 workers by the late spring, a process that will further undermine upward pressure on pay.
— with files from Associated Press
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