Walmart punishes its suppliers that supply Amazon in Mexico
Walmart in Mexico has penalized food companies that supply groceries to rival Amazon, a pressure that has forced some firms to withdraw products online from the world's largest retailer.
The tactics occur when the two giants fight for supremacy in one of their most important foreign markets, which currently dominates Walmart Mexico. The second largest economy in Latin America is the largest overseas market for Walmart by a number of stores.
Last year, Walmart demanded discounts from food companies whose products were at lower prices on Amazon.com's Mexican website, the sources said, although suppliers had no say in the Seattle retailer's decision to lower the price of Walmart.
Two suppliers told Reuters that they quickly withdrew their brands from Amazon so as not to jeopardize their relationship with Walmart. The companies, which sell common pantry products, said that Walmart represents more than half of its supermarket sales in Mexico.
Walmart declined to talk about its competition with Amazon in Mexico or allegations with suppliers. The company told Reuters it has no interference with customers with whom it can do business with its suppliers, but acknowledged that it always pushes for lower prices, particularly if competitors are giving buyers a better deal.
In a recent statement, the company said its policy is "not to subsidize losses in some products with profits in others".
"We can never tell anyone that they can not sell to someone else," Ignacio Caride, head of e-commerce at Walmart Mexico, told Reuters. "If we believe there is an opportunity to improve our prices because we see better prices at other retailers, we will negotiate to access this."
Walmart is the largest retailer in Mexico, with almost 60 percent of supermarket sales in the country through more than 2,400 stores of Walmart, Superama, Sam's Club and Bodega Aurrera. Its online business in Mexico is growing rapidly, but it represented only 1.4 percent of revenues last year.
Amazon launched its Mexican website in 2015 and is now one of the largest online retailers in the country. It started selling groceries through its page in August.
Supermarket analyst Bill Bishop said Walmart wants to avoid repeating the experience it had in the United States, where Amazon quickly took the lead in online grocery sales. The Walmart unit in Mexico is its second largest foreign market in sales after the United Kingdom, on a par with Canada.
The two Mexican suppliers who spoke with Reuters said they had been caught in the crossfire because although their wholesale prices were the same for both retailers, Amazon chose to sell their products to consumers at a cheaper price than Walmart. Instead of lowering retailer prices to match those of Amazon, Walmart penalized them, the same sources said.
Walmart adjusted its payments for the retail price difference, multiplied by the amount of inventory in its inventory, a measure that cost them tens of thousands of dollars collectively.
Both commented that they started conversations with Amazon shortly after to withdraw their products. They said they could not afford Walmart's financial demands or risk losing their biggest customer, despite the huge sales potential offered by the Amazon platform.
Playing with the devil
Experts say it is unlikely that Walmart's pressure on its suppliers in Mexico will have legal repercussions. Miguel Flores, a former member of Mexico's competition commission, said a government investigation into the abuse of dominant market power would be complex, long and difficult to prove.
Both Walmart and Amazon have been pushing suppliers to get the lowest prices on products from T-shirts to bicycles. And Walmart has spent a lot to catapult its shopping website, delivery system and network infrastructure to compete with Amazon.
Even so, Amazon is ahead in buying food online. Last year, it registered $ 3.4 billion in food sales in the United States, compared to Walmart's $ 2 billion in the same item in that country, according to the Boston-based research firm Edge by Ascential.
The selection of Amazon groceries in Mexico is currently limited to non-perishable products such as coffee, beer, pasta, and vegetable preserves. Walmart offers a wider selection, which includes fresh foods such as lettuce and chicken.
Walmart complained about the lower prices of its rival with several food suppliers in Mexico, including multinational firms, at the time that Amazon launched its food and beverage website, said two of the sources in the Mexican e-commerce industry who requested anonymity due to the sensitivity of commercial relationships.
They added that some of the larger firms discovered ways to appease Walmart, such as packaging their Amazon products in sizes different from those sold at Walmart. But many of the smaller companies lacked the necessary skills to negotiate.
Walmart Mexico moved 1 billion 200 million boxes in 2018
Walmart Mexico and Central America moved more than 1,200 million boxes, in 2018 an increase of 5.5% compared to the previous year.
At the same time, its productivity indicator Cajas por Hora Man showed an advance of 5.3% year-on-year.
In sum, Walmart Mexico and Central America traveled more than 306 million kilometers in a total of 963,000 trips throughout the Mexican Republic.
Supported by reverse logistics initiatives, the company made 282,000 trips, equivalent to almost 24 million kilometers.
The company obtained the Certification of Authorized Economic Operator, issued by the Tax Administration Service (SAT), becoming the first self-service company to obtain it.
This recognition places it as a reliable importer, with an internal control scheme that guarantees the agile, safe and transparent entry of imported merchandise into its supply chain.
Walmart Mexico and Central America strengthened its presence in Central America with the opening of a new distribution center in Managua, Nicaragua, as well as a new agroindustrial plant in Coris, Costa Rica.
At the same time, in Mexico, it signed an agreement in April for the construction of a new perishables distribution center in Villahermosa, Tabasco, which will allow it to better serve its stores in the region.
Likewise, it continues developing e-commerce projects that allow it to increase its capacity, reduce shipping costs and improve the shopping experience of its customers.
Finally, it implemented its Omni-Channel Shipping Process in collaboration with Zona 18, with which it connects its electronic commerce logistics network with its distribution centers and physical stores. For the third consecutive year, he was awarded the Tameme 2018 National Logistics Award, for his efforts to develop a fleet of omnichannel miles.
The leader of the sector
To this date, the commercial names of its different business formats in Mexico such as Bodega Aurrerá, Mi Bodega Aurrerá, Bodega Aurrerá Express, Superama, Medi Mart, and Prichos, are owned by Wal-Mart de México, S.A.B. de C.V., as well as the Aurrera and GRX brands.
On the other hand, the commercial names of the Walmart and Sam's Club business formats, as well as the various proprietary brands such as Great Value, Equate, Members Mark and Wal-Mart Cart, etc., are registered trademarks of Wal -Mart, Inc or its subsidiaries.
Walmart will invest 20 billion pesos in Mexico this year
The amount of Walmart Mexico investment represents 17 percent more than the amount invested last year.
This year, Walmart México plans to invest around 20 billion pesos in the country, which represents 17 percent more than what it invested last year.
Meanwhile, 13 percent of the amount will be destined for the development of e-commerce and technology, 3 percentage points more than last year; the remaining 1 percent will be for the development of the perishable sector.
At its annual meeting with investors, Olga González, the company's finance director, explained that 31 percent of that amount will be used to open new stores; 35 percent will be for the remodeling of existing units.
"We have physical and digital assets that are unique and a financial strength that allows us to deliver solid results in the short term"
Merchants of the world present their products in Walmart Central America
The company seeks to make at least 250 business appointments with traders from 16 countries, including all the countries in the region.
Some 184 companies from 16 countries will meet to present their products, food and innovations from today to boost the region's commercial activities, Walmart Centroamérica reported.
According to the company, the XIII Edition of Expo Walmart, in which SMEs, large suppliers, manufacturers and distributors will be presented, is expected to specify more than 250 business appointments.
Before 700 managers of stores of all Walmart formats and executives of the region, exhibitors from Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Argentina, Brazil, Spain, United States, Puerto Rico, France, Italy will be presented, and India.
"The objective of this exhibition is to present the associates of our stores and the commercial area with information on products and innovations that will generate value for our clients in 2019," said Lucas Somaschini, Central America Commercial Vice President.
In addition to 18 Central American SMEs, the store will open its doors to small companies to show their products and can do business and become suppliers to the Discounts, Wineries, Supermarkets and Walmart stores in Central America, the company announced.
"At a time when the economies of the area require greater dynamisation, and job creation, the event includes 243 stands, more than 150 companies that supply the Walmart stores; In addition, we have more than 15 companies interested in being part of the community of suppliers," explained Aquileo Sánchez, Director of Corporate Affairs and Sustainability at Walmart de Centroamérica.
Expo Walmart has been successfully held in Central America since 2007. The first appointment was in El Salvador, the following in Guatemala and more recently in Costa Rica, all within the framework of the Board of the Year (JIA), where The strategic pillars of Walmart for the current year are presented.
The company, which has more than 4,000 suppliers in the region, mostly Central American, will hold this Expo in the facilities of Parque Viva, in Costa Rica.