The price of fuel in the U.S. is so high, even retail giants like Amazon and Walmart are feeling the crunch. Now, due to the runaway price of fuel, Walmart is going to charge some suppliers for the fuel Walmart uses to haul products from supplier warehouses to the retailer’s own’s depots and stores, as Reuters reports.
Walmart will start charging new fuel fees and impose a “collect pickup charge” to certain suppliers. These new charges apply on August 1 and on, according to a memo Walmart sent out. It exposes a fascinating — and often overlooked — dynamic between the companies that make the stuff we buy at Walmart and the retail giant itself, which leads in U.S. grocery sales.
Basically, this is Walmart handing over a lump of money to suppliers, then taking another lump of money back, because someone has to pay for gas in order to move the goods Walmart just bought, and it’s not going to be Walmart. This year, the company expects fuel costs will be $160 million more than it anticipated. Whoops! Moreover, Walmart’s earnings dropped by 25 percent — in part due to higher fuel and labor costs.
Fuel and transportation surcharges are nothing new in the world of e-commerce and retail, but Walmart will now base these on daily fuel prices instead of an agreed-upon (fixed) cost, according to Bloomberg. The memo said this is how the company is “adapting” to changes in the industry. And, oh my, I hope auto dealers don’t see the memo and start calling markups “market adaptations.”
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Walmart went on to say new fuel surcharges will let it share accountability with suppliers, which sounds entirely reasonable, right? Sure, right up until the part where Walmart U.S. CEO John Furner also said that passing on the higher costs of fuel and shipping “protect the margins where appropriate,” per Reuters.
I guess you don’t become the biggest U.S. retail chain or the biggest e-commerce company — Walmart and Amazon, respectively — by eating any costs, let alone that of fueling up trucks full of goods to be sold in your superstores or online marketplace. Yup. It must be nice to make your own suppliers and workers subsidize the costs of doing business.