The major problem faced by Vlasic is the devaluation of their premium brand pickle jars by Wal-Mart. Vlasic built a strong brand over the years and convinced its customers to pay premium prices for their pickles (Lerner, 2018). Wal-Mart sold a gallon of these premium pickles for only $2.97, a “years’ worth of pickles,” across the US (Fishman, 2003). Vlasic could not oppose Wal-Mart’s sales plan because the retailer is the largest in the world. Therefore, Wal-Mart greatly influences its suppliers, and backing out of the deal would send Vlasic to bankruptcy. The retailer’s customer base and market share are attractive to manufacturers around the globe, making it easy to replace Vlasic (Wiltshire, 2021). Hence, Vlasic had no choice but to accept the devalued prices for their premium pickles.
Since Vlasic’s pickles lost value under consumers’ perception, they could not sell other products at high prices, leading to profit declines. Although Vlasic’s financial problems cannot be entirely traced back to Wal-Mart, they filed for bankruptcy soon after Wal-Mart allowed them to reduce the quantity sold at the price of $2.97 (Fishman, 2003). Wal-Mart was responsible for Vlasic losing its premium branding and accompanying profits.
For Wal-Mart, lowering Vlasic’s pickles price was not an ethical supply chain decision. The lower prices devalued Vlasic’s brand and reduced its profit margins worse than anything else. A retailer should strengthen its vendors and suppliers rather than kill them (Wiltshire, 2021). After doing such business, suppliers who leave Wal-Mart experience difficulties continuing to be profitable. According to the article, several suppliers face more negative outcomes than positive ones when supplying Wal-Mart but realize that pulling out of the deal is suicidal for their companies and future (Fishman, 2003). Most companies cannot comment on their relationship with Wal-Mart for fear of losing business. Wal-Mart’s decision is not sustainable because Vlasic cannot afford to pay its employees and buy fresh produce from farmers at acceptable prices if they sell their products at throw-away prices (Lerner, 2018). Wal-Mart’s requirement that prices go lower yearly is unsustainable for almost all vendors, forcing most suppliers to relocate production to low-labor countries like China. The only sustainable ethics is that Wal-Mart always pays their vendors on time, enabling them to clear their bills.
Wal-Mart has harnessed significant influence over the retail industry, controlling major suppliers in the US and outside. The article reveals that a business can affect its suppliers to a great extent depending on its power in the market. The example of the company Wal-Mart replaced with China-made products shows how suppliers might relinquish everything profitable to stay afloat (Fishman, 2003). Since Wal-Mart drives customer buying behavior, suppliers adhere to their survival rules, including Walmart’s access to financial records and computer systems.
While there is a conventional notion that businesses can control their suppliers to deliver better products and prices to consumers, this power must be checked to prevent the suppression of smaller companies by the big firms. Wal-Mart has killed manufacturing in the US by forcing companies to keep lowering costs to meager prices (Wiltshire, 2021). Instead of letting prices be determined by demand and supply forces, Wal-Mart is forcing suppliers to underprice products and reduce prices yearly. Regulators and consumers must hold large firms like Wal-Mart accountable to protect the American manufacturing industry and economy (Lerner, 2018). Job losses due to cheaper imports and outsourcing are key results of suppliers’ pressure.
References
Fishman, C. (2003). The Wal-Mart, you don’t know. Fast Company. Web.
Lerner, M. B. (2018). The death of liberal internationalism? Donald Trump, Walmart, and the two Koreas. Journal of American-East Asian Relations, 25(2), 169-197. Web.
Wiltshire, J. C. (2021). Walmart supercenters and monopsony power: How a large, low-wage employer impacts local labor markets. Job Market Paper.