Dive Brief:
- Walmart will begin charging some of its suppliers pickup and fuel fees starting August 1 due to increased transportation costs, according to a July 1 memo sent to suppliers.
- The charges will be part of a formalized "Collect Pickup Program" only affecting Collect suppliers, or those letting Walmart handle shipment pickup and delivery into the retail giant's network. The program and corresponding fees will help Walmart “meet our everyday low price commitment to our customers,” the retailer said in a statement.
- The pickup charge is calculated as a percentage of the cost of goods Walmart has received from the supplier, though the memo did not specify the exact percentage. The fuel surcharge factors in "daily fuel price changes that are matched against geographic locations and each shipment day."
Dive Insight:
Climbing fuel and transportation costs have led retailers to push the added expenses onto vendors and customers.
Amazon implemented a 5% fuel and inflation surcharge in April for third-party sellers using its fulfillment services. Now, rival Walmart is passing on added costs to suppliers after inflation pressured the company's Q1 profits.
"The first quarter was one of the most challenging periods yet related to supply chain disruptions, increased cost, and persistently high inflation," said CFO Brett Biggs on a May earnings call.
Monthly deductions from the Collect Pickup Program will start in September for August's cost of goods delivered to distribution centers, per the memo. The retailer said it's critical it remains "diligent in reducing expenses where we can in order to deliver for our customer," adding that the changes will allow it "to share cost accountability" with suppliers.
Walmart is also evaluating its Collect program's trailer utilization and shipping alignments to trim transportation costs further, per the memo.
Major retailers that haven't begun charging for fuel, inflation and transportation surcharges "are likely to do so shortly," Benjamin Gordon, founder and managing partner of Cambridge Capital, wrote on LinkedIn.
"If you are a logistics company, retailer, or shipper, you should have a strategy for these ever-increasing layers of fees," Gordon wrote.
Walmart's internal supplier website said suppliers can switch from Collect to prepaid shipping, according to The Wall Street Journal, which first reported on the memo. With prepaid shipping, suppliers handle and pay for shipping to Walmart.
