Walmart updates supplier pricing tool to manage tariff costs

Dive Brief:

Walmart has added options to its digital Cost Change Scenario tool so vendors can submit price increases needed to offset the recent rounds of China tariffs, according to materials obtained by Bloomberg. Walmart uses this data to set prices for consumers.
Cost Change Scenario replaced an Excel spreadsheet that suppliers had to fill out manually until roughly one year ago, Fortune reported. It allows suppliers to enter a reason for price increases from a menu including "tariffs, labor, transportation, and raw materials," in the first time the retailer has offered this reason for a price change, according to the same report.
The retailer was largely untouched by the first and second round of tariffs, but the current 25% tariff on $200 billion, increased from 10% last month, and the pending 25% tariff on $300 billion of Chinese goods impacts clothing, shoes, electronics, and furniture — major product categories for the company. Walmart CFO Brett Biggs expressed near certainty that prices would have to increase as a result of May tariff changes on an earnings call last month.

Dive Insight:

"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," Walmart's CEO Doug McMillon said in a presentation to analysts last week. Walmart has reported that it plans to mitigate the tariff impact by negotiating with its Chinese suppliers in an attempt to keep costs down.

The new tool for suppliers is proof that the price hikes Biggs predicted are not just likely, but that the system designed to enable them is already in place.

Walmart is not alone in this challenge as the current tariff schedule and the impending approval of a fourth tranche has impacted major retailers' calculus on pricing. Other fashion brands that, like Walmart, depend on China to manufacture apparel, Calvin Klein and Ugg in particular, are facing significant price increases on the supplier end. Analysts predict roughly 25-50% of those back-end costs could be passed on to customers.