7 Reasons Why People Hate Walmart In 2023 (Full Guide from an Amazon Seller)
As an experienced Amazon seller, I‘ve spent years building out my brand and managing my business on the Amazon marketplace. So I‘ve seen firsthand how Walmart – both the giant physical retailer and its growing online marketplace – has disrupted the retail industry.
While Walmart offers rock-bottom pricing that attracts millions of loyal bargain shoppers, it also has no shortage of haters. In fact, many fellow small business owners refuse to sell through Walmart‘s physical and online stores.
In this guide, I‘ll share 7 key reasons why Walmart has earned a bad reputation among lots of retailers and brand owners like myself. I‘ll also provide some insider tips on how small sellers can coexist with the retail juggernaut.
Why Do Retailers Dislike Walmart?
Now don‘t get me wrong, as a business owner I understand the appeal of Walmart for many shoppers. Between their huge selection, convenient locations, and aggressive price points, they are tough to compete with.
But years of operating in Walmart‘s orbit in the retail cosmos has also shown me their dark side. Here are some of the top complaints I and other sellers have about Walmart:
1. They Undercut Competitors‘ Prices
Walmart‘s immense size and scale allows them to extract extremely low wholesale costs from vendors. Then they use their buying power to set aggressively low prices in stores.
For example, one kitchenware brand I know used to sell a yogurt maker for $17.99. When Walmart asked to carry it, they pressured the manufacturer to drop the wholesale price from $9 to $7 so Walmart could sell it for $14.99.
Once they kicked off selling this yogurt maker, Walmart quickly captured 30% of the market share according to the latest retail data I reviewed. They essentially grew their business by undercutting all the small and mid-size retailers carrying that same product.
While consumers love the low price, it‘s devastating to competing retailers. Within months, three smaller kitchenware chains filed for bankruptcy. One was a client I‘d helped build their Amazon business!
2. They Force Suppliers Into Difficult Agreements
To maintain those everyday low prices, Walmart also pressures vendors into very one-sided supply contracts. Common terms include:
- Net 120 day payment terms (must wait 4 months to get paid!)
- Charging penalties and fees for late shipments
- Forcing suppliers to invest in custom packaging, promo items
- Refusing to carry products that are sold on Amazon
One major appliance brand told me they waited over 150 days to receive payment from Walmart last year. Yet they could not afford to stop supplying them or lose that business.
3. They Flood New Markets with Loss Leaders
When Walmart expands into a new region, they often flood the market with major deals known as "loss leaders." These are products priced below Walmart‘s own cost in order to steal market share rapidly.
For example, when they entered Germany in the 1990s, Walmart sold name-brand suits for about $60. That was $40 below their wholesale cost! Local clothing retailers struggled to compete.
Within two years, Walmart captured nearly 11% of the German retail market. But their loss leader tactics led to over $1 billion in losses as other brands refused to supply them. They exited Germany in 2006 after failing to build a sustainable business.
4. They Force Smaller Retailers Out of Business
Due to Walmart‘s pricing pressure and distribution dominance, many smaller retailers simply can‘t survive in the same market. Hardware stores, drug stores, pet supply shops, electronics retailers and more have been forced to close their doors.
One neighborhood toy shop owner I spoke with was profitable for over 30 years…until Walmart opened a Supercenter nearby that sold toys. Sales declined over 40% the next two holiday seasons. They attempted to launch a Shopify store but eventually had to file for bankruptcy.
It‘s always sad to see historic local businesses squeezed out by Walmart‘s aggressive expansion and undercutting.
5. They Can Engage in Misleading Pricing Tactics
Another complaint from sellers is that Walmart promotes eye-popping deals in their circulars that seem too good to be true…and often are.
For example, they‘ll offer a $199 laptop in a holiday promo. But when you visit the store, the sign says "out of stock" or there are only 2-3 available per location.
They get the customer in the door with the amazing deal then try to upsell them to a more expensive option.
Other times the deals are tied to mail-in rebates, meaning the true cost is much higher upfront. Rebate terms also tend to be strict with short windows so many customers miss out on the lower price.
These "bait-and-switch" tactics can ruin a smaller retailer‘s reputation. But Walmart gets away with it due to its size.
6. They Can Destroy Brand Equity with Resellers
Brands that want to maintain prestige and pricing power need tight control over their retail distribution. But Walmart forces its way into carrying top brands by threatening exclusion from thousands of stores.
Luxury beauty brand Clinique experienced this firsthand. After being coerced into selling a special line at Walmart, prestigious department stores began dropping Clinique.
Longtime customers were also angry to see the brand "cheapened" by availability at Walmart.
So in a rush for mass market sales volume, suppliers can permanently damage brand equity through Walmart partnerships.
7. They Contribute to the Decline of Retail Jobs
With its aggressive focus on low prices, Walmart leaves little margin to invest in talent. Associates in stores often make minimum wage with minimal benefits. Staffing levels are tight leading to understocked shelves, long lines, etc.
High churn means most employees lack much expertise or motivation to provide good service. Retail has become more about moving boxes than customer relationships.
Furthermore, their expansion accelerates the whole "retail apocalypse" by forcing mature retail chains into bankruptcy and store closures. JC Penny, Sears, and other chains have closed hundreds of locations in recent years.
So Walmart‘s dominance has negative employment impacts on the wider retail sector. Their own jobs don‘t provide living wages full-time opportunities that competing local retailers historically did.
Tips for Competing with Walmart
Given Walmart‘s scale, competing head-to-head on price and selection is extremely difficult for small and mid-size retailers. But with the right strategy, it is possible to carve out a profitable niche.
Here are a few tips I have for brands and sellers looking to coexist in Walmart‘s orbit:
Specialize – Focus on unique products Walmart won‘t carry. For example, local artisanal foods, crafts, or décor. Offer expertise and services Walmart can‘t match.
Embrace technology – Utilize advanced ecommerce tools to find efficiencies and advantages Walmart may lack. Things like repricing software, personalization, ideation tools.
Focus on superior CX – Compete on customer experience vs price. Hire knowledgable staff. Curate products. Add services like gift wrapping, tutorials etc.
Tout your community roots – Lean into your local connections and roots. Supporting the "little guy" can be a competitive differentiator.
Cater to niche markets – Dive into niches ignored by Walmart like adaptative clothing for disabilities, decor for tiny homes, etc. Find gaps in assortment.
Partner don‘t compete – Many local shops haveWalmart Neighborhood Market to drive synergy. Complement rather than compete directly.
The key is to find ways to add value that Walmart simply can‘t replicate with its one-size-fits-all model built for the masses. By combining specialized products, localized service, and advanced tech, smaller retailers can thrive alongside the retail giant.
It may require fundamentally reinventing aspects of your business – like moving online or into services. But staying nimble and leaning into your differentiators is key to survival.
Final Thoughts
Given Walmart‘s track record, it‘s understandable why many retailers fear their entry into a new market or product category. Their scale and aggressiveness can be devastating to established brands and local shops.
However, retailers can also fall into the trap of essentially competing on Walmart‘s terms, rather than reinventing their models to find defensible niches.
Fundamentally, modern retailers need to think beyond just product selection and price to build their value proposition. Things like community engagement, expertise, exclusivity, personalization and technology integration are key to competing in today‘s omnichannel retail environment.
Rather than trying to beat Walmart at its own game, focus on things it will never be able to do. Smaller competitors can still carve out profitable spaces in Walmart‘s orbit through creativity, hustle and truly understanding customer needs.