Chinese Suppliers to Wal-Mart: Quit Bullying Us

This post from BloggingStocks comes on the heels of the Chinese government’s announcement that it plans to raise environmental standards for exporters. From the Wall Street Journal:

“The products are shipped abroad, but the pollution is left in China,” said Chen Guanglong, a senior official in the ministry. “Export prices don’t reflect the true costs, which is one of the reasons for our unreasonable trade surplus.”

This all may be a sign that China is finally standing up for itself, but what it really illuminates is how desperately Wal-Mart needs lax environmental laws and unfair labor condition to keep its prices low. If China were to start taking care of its environment and its workers, Wal-Mart would be up the creek without a paddle.

For a better translation of the article BloggingStocks discusses below, click here.

Wal-Mart prices too low, say Chinese suppliers [BloggingStocks]

You might be surprised to hear Chinese suppliers complaining that the prices at Wal-Mart Stores, Inc. are too low, but that is just what this translated article appears to be saying. The complaint is related to the retailer’s classic fallback position of slashing prices across the board in order to boost sales whenever revenue performance is lagging.

Although Wal-Mart has tried to increase profits by recruiting a different kind of customer—one who is interested in more fashionable clothes and name-brand products and has the money to buy them—its classic price chops continue to serve as an old, reliable crutch. In other words, it will likely never recover from the “always low prices” mantra it has built for itself.

So it’s interesting that many of the retailer’s largest Chinese suppliers are now saying they can’t continue to supply Wal-Mart with the “low prices” it requires of them. It’s quite a retail epiphany when a Chinese supplier says that it can’t supply products as cheaply as a retailer requires. Only Wal-Mart has this kind of power, and if these vendor and supplier feelings are true, then signs of desperation are probably starting to swirl in the hallways of Bentonville right now.

Is this a sign of price increases in Wal-Mart stores soon? Such a move would be applauded by Wal-Mart competitors but perhaps also at the company itself. Customers who are used to only shopping Wal-Mart for cheap goods may have little choice to change and many would most likely continue shopping at Wal-Mart, even at raised prices. Overall, this kind of move would be a good one, and Wal-Mart’s increasing margins (hopefully) would help the retailer make more profit on the back of more revenue. Wal-Mart was responsible for a good portion of China’s economic growth in the last five-plus years (almost single-handedly, in many respects), but you can only chew down suppliers—even in China—down so much.

Posted by Alex Goldschmidt on Thursday, November 01, 2007

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