Question Answered:

Back in July, we told you about Procter and Gamble price increases of up to 16%.  We could see where P&G was coming from, with the increasing prices of raw materials and all, but we still wondered whether Wal-Mart would be able to see it the same way.  It turns out that Wal-Mart refused the price increase.  According to an article from the China Standards Information Consulting Service, P&G will supply Wal-Mart with “basically no profit”.  While a huge company like P&G might be able to weather Wal-Mart’s unreasonable demands, the article further explains that small suppliers don’t stand a chance.  “Some suppliers will have no choice: either supply Wal-Mart goods while not raising prices and wait to die or raise the prices and court death.”

Wal-Mart Raises Quality Standards, Supply Chain Profitless [China Standards Information Consulting Service via HC360]

The world’s largest retailer, Wal-Mart, announced on October 22 that it will raise China’s supply trade quality standards.  Starting November, the process will begin with clothing and will ultimately cover all goods. 

With greater concern on food safety and product quality, Wal-Mart can no doubt gain consumer confidence.  But even with the appreciation of raw materials and labor costs on the supply trade side, Wal-Mart has raised prices very little – it’s always been requested that the costs of raising standards be dealt with “in house”.  Under these circumstances, the supply trade will become even more depressed.  Some suppliers will have no choice: either supply Wal-Mart goods while not raising prices and wait to die or raise the prices and court death.

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