Mexico's Walmart pressures suppliers on pricing, forcing some to ditch Amazon
Walmart's Mexico unit has penalized food companies supplying groceries to rival Amazon, pressure that has forced some to pull their products from the world's largest online retailer, four people familiar with the matter said.
The tough tactics come as the two giants battle for supremacy in one of their most important foreign markets, one that Walmart currently dominates.
Walmart last year demanded discounts from food businesses whose products it found priced lower on the Mexican website of Amazon.com Inc, the people said, even though suppliers had no say in the Seattle retailer's decision to undercut Walmart on price. Two suppliers told Reuters they moved swiftly to pull their brands from Amazon, wary of jeopardizing their relationship with Walmart de Mexico. The companies, both of which sell common pantry goods, said Walmart accounts for more than half their supermarket sales in Mexico.
Walmart would not discuss its competition with Amazon in Mexico or the allegations made by suppliers. It told Reuters it does not dictate with whom vendors can do business. But it acknowledged it always presses for the lowest prices, particularly if competitors are giving shoppers a better deal. “We could never tell anybody that they can't sell to someone else,” Ignacio Caride, Walmart Mexico's e-commerce head, told Reuters.
“If we think there's an opportunity to lower our prices, because we see better prices at other retailers, we're going to negotiate for that access,” he said.
The company said in a statement that it aims to offer the lowest possible prices to benefit consumers, and doesn't subsidize losses for some products with revenues from others.
Amazon declined to comment.
Walmart is Mexico's largest retailer, commanding nearly 60 percent of the country's supermarket sales through more than 2,400 Walmart, Superama, Sam's Club and Bodega Aurrera stores. Its online business in Mexico is growing fast, but it represented just 1.4 percent of revenue last year.
Amazon launched its Mexican website in 2015 and is now one of the country's biggest online retailers. It began selling groceries here in August.
Supermarket analyst Bill Bishop said Walmart wants to avoid a repeat of its experience in the United States, where Amazon quickly took the lead in online grocery sales. Walmart Inc's Mexico unit is its second-largest overseas market by sales after the United Kingdom, on par with Canada.
“They're worried that Amazon will grow in Mexico,” said Bishop, co-founder of retail advisory firm Brick Meets Click in Barrington, Illinois. “They're saying: Be aware of the fact that we're not going to make it easy for you to grow here,” he said.
The two Mexican suppliers who spoke to Reuters said they were caught in the crossfire. They said their wholesale prices were the same for both retailers, but that Amazon chose to sell their products to consumers more cheaply than Walmart did.
Instead of lowering its retail prices to match those of Amazon, Walmart took it out on them, the vendors said. Walmart docked their payments by the retail price difference, multiplied by the amount of stock in its inventory, a move that cost them tens of thousands of dollars collectively, the people said. Both said they entered into talks with Amazon shortly afterward to drop their products. They said they could not afford continued financial clawbacks from Walmart.