Walmart’s (WMT) decision this year to raise the wages of its lowest-paid workers may be having a ripple effect that the retailing giant’s suppliers don’t like. Bloomberg is reporting some of those suppliers are pushing back against fees Walmart announced in June, which require them to
pay to use Walmart’s distribution centers, warehouses and for shelf space in new stores. Walmart says the changes will benefit suppliers. But the vendors complain it’s really about helping Walmart pay for those higher wages.
Yahoo Finance Senior Columnist Michael Santoli finds Walmart’s argument a bit dubious.
“Look, all money is fungible,” he explains. “Sure they’re paying more money to workers on the floor but it doesn’t mean it’s a one-for-one thing that they have to go and have that made up by suppliers.”
However, Santoli certainly understands the reasoning.
“With general costs going up, with Walmart trying to struggle with very low growth --in fact, no growth in the core customer-- and obviously expenses rising and margins being squeezed, they’re going to hunt wherever they can,” he says. “Obviously the supply chain is one place where historically Walmart has made a big priority of trying to get efficiencies.”
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Bloomberg says several of Walmart’s suppliers have hired lawyers to fight the new charges. And two unnamed vendors of brand-name products have refused to sign on, hoping to use their size as leverage to work out a better deal.
A Walmart spokesperson tells Bloomberg the higher fees are part of an overall effort to improve its U.S. business…and denies they are designed to offset the wage hikes. Back in February, Walmart announced that beginning in April, it would raise the minimum salary of its lowest-paid associates to $9, and increase it to $10 by next February.
Santoli notes some governments are moving to get the floor even higher, such as New York’s recent decision to gradually require a $15 minimum wage for fast-food workers. However, he doesn’t see that coming nationwide anytime soon.
“$15 will be a regional or municipal thing,” he argues. “You go to the rest of the country and $15 as a minimum will probably sound kind of outlandish. But in certain areas there is a little bit of a push for bringing the federal minimum and other regional minimums up to something approaching a living wage.”
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