The Supply Side: Is Wal-Mart asking suppliers to fund Savings Catcher?

Consultants to the supplier community have told The City Wire that after Wal-Mart greatly reduced or abandoned co-marketing agreements with suppliers that some Wal-Mart buyers have asked for funding help with the retailer’s Savings Catcher program. 

Winning on price has been one of the major mantras for Wal-Mart Stores CEO Doug McMillon this year who told suppliers at the Year Beginning Meeting that Everyday Low Price (EDLP) will be the standard for deals made in the future. He said buyers would be asking for supplier’s best prices and staying away from promotional pricing agendas as a rule noting that EDLP is crucial to winning the trust of shoppers over time.

Wal-Mart spokeswoman Molly Blakeman said she was not unable to substantiate claims about supplier support of the Savings Catcher program prior to publishing this report.

The Savings Catcher price match application was rolled out nationally in August 2014 and it guarantees the lowest price against competitor’s sale prices or it refunds the difference.

Last year Wal-Mart said it had budgeted for Savings Catcher and had no plans to share the debits and credits involved because they are not deemed financially material. Over time the retailer said it did plan to share data collected via Savings Catcher with its supplier base.

The most recent update from Wal-Mart on savings generated by customers through the program was in September 2014 with $2 million in savings reported. The retailer declined to provide an update for this story. 

The retail giant recently downsized the scope of the price match to better align with like products, namely consumer packaged brands, and staying away from bakery and produce items that don’t have consistent UPC codes. Wal-Mart also veered away from drug store competitors like Walgreens and CVS saying these store are not typically used for grocery shopping.

In Wal-Mart’s effort to win to on price consistently, experts say it’s understandable that the retailer would ask suppliers to help fund the cost of its Savings Catcher program.

“At this point, suppliers have clearly gotten the memo that Wal-Mart expects Everyday Low Costs from them so any pricing games should already have been wrung out of the system or any suppliers daring to engage in high-low games are playing high-stakes roulette,” said Carol Spieckerman, CEO of newmartketbuilders in Bentonville.

She said given Wal-Mart’s data capabilities and control over retail prices, the actual accountability for price discrepancy would seem to rest more heavily on Wal-Mart. But that’s not to say Wal-Mart doesn’t have the right to ask suppliers to defray the cost of running the program just as they can with other promotional or advertising programs like price rollbacks.

Jason Long, CEO of Shift Marketing Group in St. Louis, said it’s not a matter of who should pay, but instead it reflects the leverage Wal-Mart has with most suppliers.

“It makes sense that Wal-Mart would start to lean on suppliers to share in the cost of Savings Catcher. Especially with Wal-Mart's recent push for suppliers to cut back on
promotional spend and instead put that money toward price reduction,” Long said.

He said that both initiatives — Savings Catcher and reduced supplier promotional spending — have connections to print circular ads.  

“Savings Catcher aims to eliminate the need to price check using circular ads. Circular ads aren't cheap and some question their value. Wal-Mart would surely like to see some of that spend reallocated to Savings Catcher and price reduction,” Long added.

Others say shoppers already know who has the lowest prices and they don’t mind shopping multiple retailers to save money, which means Savings Catcher may not convert true value seekers.

A recent study by IRI found that 41% of consumers routinely shop multiple retailers to ensure they get the lowest prices. Sue Viamari, a retail expert with IRI, told The City Wire that shoppers who are price sensitive do not mind shopping multiple retailers where they perceive they are getting consistent values. 

“This shift in behavior began during the economic downturn and consumers have stayed with it. This is no longer a one-solution-fits-all world” Viamari said.