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Two Walmart Suppliers Refuse to Accept Terms of New Policy

It’s been nearly three months since Walmart first announced it would amend payment terms and charge storage fees to roughly 10,000 of its suppliers and now some vendors are demanding a better deal.

Two big suppliers with well-known brands told Bloomberg that they have refused to accept the terms and plan to use their size as leverage to negotiate.

The world’s largest retailer laid out the conditions in June, citing a need to bring “consistency to the collection of allowances related to the growth of our business and suppliers’ use of the Walmart supply network.” But some vendors have viewed it as a way for the company to offset the cost of increasing wages for more than 100,000 of its workers.

The fees outlined in the contract are common in the retail industry but while Walmart has charged similar tolls to some suppliers in the past, it wasn’t a uniform practice. The biggest change under the new terms would be the handling charge the retailer is requiring for use of its distribution centers, while the new payment schedule will be determined by how quickly a supplier’s inventory moves.

According to Leon Nicholas, a senior vice president at Kantar Retail, which advises dozens of Walmart suppliers, “What is so shocking this round is that they are being aggressive not in asking suppliers to take costs out of the system so the supplier can lower prices, but instead adding cost into the system. It looks as though they are trying to have it both ways and trying to pad their own margins where they are facing cost pressure.”

Walmart reported worse-than-expected quarterly results in August and lowered its full-year forecast as net profit fell from $3.92 billion to $3.48 billion for the three months ended July 31.