Wal-Mart: Shipping industry should price like us
Low price strategy
The vice president of inbound transportation for Wal-Mart said the container shipping industry should adopt his company's consistent low-price concept in order to reduce price and demand volatility.
Speaking Tuesday in Shenzhen at the TPM Asia conference, organized by the <i>Journal of Commerce</i>, Robert Kusiciel said liner carriers and shippers have been overly reliant on market pricing, leading to huge swings in rates that have little to do with the costs to carriers of actually providing transportation services.
He explained how Wal-Mart's pricing strategy for its in-store products differs from other retailers. The Bentonville, Ark. retailer uses consistent pricing near the low end of the pricing spectrum, while most retailers price their goods high then offer deep discounts through sales, rebates, and other promotions. He said the container shipping industry functions in a somewhat analogous way, providing little long-term consistency.
Kusiciel also said Wal-Mart a decade ago decided to restructure its ocean transportation strategy, focusing on longer term contracts (a hot button issue of late) that includes detailed forecasting for carriers. He said Wal-Mart has been able to narrow its demand projections for carriers from yearly to its current rolling eight-week projections. The rolling forecasts are 95 percent accurate, he added. In return, Wal-Mart has expected greater transparency from its carrier partners.
He also said the threat of looming service withdrawals or idled ships - moves carriers are pondering to address poor rate levels on key trades - won't significantly affect Wal-Mart because its long-term focus with its carriers means those lines will account for Wal-Mart's volume when making service rationalization decisions. — Eric Johnson