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“Walmart and Jet: The Hidden Audit Risk for Suppliers” is a new white paper published by Harvest Revenue Group, examining the impact of Walmart’s acquisition of Jet.com on suppliers.

Based on past history, Harvest believes the stage has been set for Walmart – and more specifically, it’s third-party auditors – to file audit claims against suppliers based on pricing and margin differences.

  • As competitors, both were contractually entitled to the lowest costs from suppliers. Given the size and nature of Jet, they may have had access to lower item costs, especially at end of life liquidation on some items. As Walmart now has access to all of Jet’s purchasing data, it opens the door to Walmart billing a supplier back for the cost difference times the number of units Walmart purchased.
  • Walmart and Sam’s Club have been conducting margin audits quite a bit in recent years, essentially coming to suppliers saying “We didn’t make what we think we should have on your product” and requiring payment.
    • The dynamic pricing of Jet’s “smart cart” technology drives prices – and thus, margin – lower on virtually every transaction.
    • Jet charges less for debit card transactions by lowering the price of goods for the consumer - it’s a lower margin purchase, but Walmart pays less in swipe fees on debit than credit, so they actually netted more. Will they charge the margin difference back?
    • Prices on Jet on non-grocery items appear to trend lower than those on Walmart.com and in store. It’s likely they aren’t making their desired margins on items sold in that channel.
  • Suppliers trying to audit against Jet are in for a challenge. In one example in the white paper, we found three price moves in the base price of a single item within a 90 minute time frame.
The report also offers some recommendations for suppliers to help insulate themselves from these types of headaches.

Suppliers and manufacturers of merchandise sold to national retailers, as well as members of the media and academic community, are invited to download the report at no cost.
 

Do you have a question or want to learn more about our company and services? Please contact us at:

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