Jul 26, 2022 - Business

The new cost of Walmart's transportation

Illustration of a dollar sign peeking out of a tractor trailer.
Photo Illustration: Lindsey Bailey/Axios; Photo: George Frey/Getty

Some Walmart suppliers will have to shell out more money to make a profit, according to a document exclusively seen by Axios.

What's happening: The retailer will begin charging a sliding fee to suppliers that rely on its fleet to move their goods to Walmart distribution centers or stores. The extra line item, along with a fuel surcharge, will go into effect on Monday, Aug. 1, the Wall Street Journal first reported.

Why it matters: Even though rates to move freight are falling, companies are looking to offset higher-than-normal transportation costs. This means consumers will end up paying more in the long run amid record inflation that shows no sign of slowing.

Zoom out: Citing inflation on food which is cutting into what consumers can afford for other merchandise, Walmart on Monday lowered its profit outlook for the second quarter and its 2023 fiscal year.

  • The retailer will have to reduce prices on its inventory, particularly apparel, it said.

Context: Only suppliers using Walmart's collect service — where they rely on Walmart to pick up their goods — will be charged the new fee. Other suppliers have a prepaid shipping arrangement in which they pay a third-party to move their goods or operate their own fleets.

  • Suppliers that ship collect have the option to become prepaid, the WSJ reported.
  • Amazon added 5% fuel and inflation charges to items shipped using its fulfillment services in April.

Details: A list of the new charges seen by Axios shows 98 product categories — from maternity clothes to automotive items — and what the percentage charged for each will be. The collect fee is a percentage of the cost of the goods sold (COGS) to Walmart.

  • The schedule ranges between 0.37% (cameras and supplies) to 5.51% (fabrics and crafts).
  • So, if a collect supplier sold $50,000 worth of fabric to Walmart, they'd pay $2,755 in collect fees, plus a fuel surcharge, which will be based on the cost to move the goods.
Data: Walmart document obtained by Axios; Table: Simran Parwani/Axios

The retailer didn't respond to Axios' questions about how often the collect fee schedule will be revised.

What they're saying: "Across the retail landscape it's pretty common," Donnie Williams, associate professor and executive director of the University of Arkansas' Supply Chain Management Research Center, told us.

  • The supply chain has been absorbing much of the increase in costs recently, Williams said. But that's unsustainable.
  • A spokesperson for Walmart told Axios that the new program allows the company and suppliers to "adapt to the dynamics of the current economic environment."

Disclosure: Reporter Worth Sparkman is a Walmart shareholder.

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