SLOTTING FEES AT WALMART:
What does this mean for customers and brands?
I ran across some articles in my newsfeed about Walmart beginning to charge slotting fees. This is a drastic change to how Walmart has operated their business in the past. The goal for the retail giant which operates over 11, 000 stores in 28 countries has always been to provide the lowest price on every product.
What are slotting fees?
You may be asking yourself, what are slotting fees? This is an industry term that simply means a fee that a retailer charges a manufacturer to put their products on the shelf. This has been a common practice for the traditional grocery industry (ie: Kroger, Safeway, Albertsons, among others including their regionally named stores). When you go to the grocery store and looking for your favorite product, they have paid for that shelf space. When you are looking eye level and seeing the brand that is very popular, they have paid top dollar for that premium shelf space. Those on the top and/or bottom shelves tend to cost less. Consumers: Did you know that you were being advertised to when you were out doing your shopping?
This is a practice that Walmart has not had as a regular practice as their main concern was that their store had the lowest price available. I have been told that there are some cases where manufacturers have lost money having their product in Walmart stores. But, selling in such large quantity to the biggest retailer can open door to others.
Why is Walmart making this change?
I cannot say for sure but industry experts are saying that the largest reason is the cost of paying more in employee wages. Another reason could be lack of increased revenue as they have seen multiple quarters of U.S. sales growth. When these changes take place are uncertain but an article from the summer said it has already been informing their suppliers.
How will this affect consumers?
If you are a Walmart shopper (and aren’t we all at some point), how does this affect you as a consumer? These are only my opinions as I do not work for Walmart nor do I directly work in the retail industry. I would expect to see prices increasing at Walmart unless the retailer is going continue to be adamant about having the lowest price. Does that mean prices will increase everywhere so that the manufacturers are able to continue giving rock bottom pricing to Walmart. Only time will tell!
How will this affect your favorite brands?
Again, this is speculation on my part. My expectation will be that the amount of shelf space for some brands will decrease. Depending on the department and fees required, I don’t know how some smaller brands will be able to compete. In the beauty department, I think about brands such as Flower Beauty and Hard Candy which are sold exclusively at Walmart. Will they be able to survive or will they be given a break on fees due to them for that agreed upon exclusivity? Or, depending on their agreements, will they leave Walmart for another store? We will have to wait and see!
I have been aware of the slotting fee issue for a long time and I have to say that it has always bothered me. I am not against companies including retailers making a profit but this tactic feels like double dipping. They are making money not only on selling the product but also on housing the product on their shelf. And, I have purchased products that are not the brand leaders paying for the premium eye level space just because I know I am paying more because it costs more for the product to be in that spot. And, I would shop more frequently at Walmart because I knew they were not using this tactic.
Were you aware of slotting fees and how do you feel about this practice? Let me know your thoughts below.