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Wal-Mart: Supplier performance and market power


  • Mottner, Sandra
  • Smith, Steve


This research seeks to further the understanding of the relationship between Wal-Mart and its suppliers. 1988-1994 demonstrates Wal-Mart's market power in relation to manufacturers [Bloom PN, Perry, VG. Retailer power and supplier welfare: the case of Wal-Mart. Journal of Retailing 2001; 77( 3): 379-396.]. Wal-Mart suppliers for that period had lower profits than non-suppliers, which indicate a dependency model of market power when suppliers give concessions to a stronger retailer in order to obtain or maintain the relationship. Wal-Mart's dramatic growth and increasing marketing power since the 1988-1994 period offer an opportunity to retest previous findings and further the understanding of a major retailer's strategy for managing suppliers through the use of the strategic profit model. Initial results indicate that gross margin is significantly less for Wal-Mart suppliers than non-suppliers indicating pricing concessions and a dependency model of market power. However, a fixed-effects model controlling for unobservable firm characteristics such as strategic choice suggest that Wal-Mart suppliers are self-selecting or are implicitly pre-screened such that Wal-Mart suppliers have a low-cost strategy and choose lower returns as a market strategy. Findings indicate that small firms do experience a dependency model in that they have lower gross margin, lower operating income, and higher turnover. However, considering fixed-effects for these firms, small manufacturers experience only higher turnover as a result of doing business with Wal-Mart, thus indicating more of a partner-type model of market power.

Suggested Citation

  • Mottner, Sandra & Smith, Steve, 2009. "Wal-Mart: Supplier performance and market power," Journal of Business Research, Elsevier, vol. 62(5), pages 535-541, May.
  • Handle: RePEc:eee:jbrese:v:62:y:2009:i:5:p:535-541

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    References listed on IDEAS

    1. Trish Kelly & Martin Gosman, 2000. "Increased Buyer Concentration and Its Effects on Profitability in the Manufacturing Sector," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 17(1), pages 41-59, August.
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    Cited by:

    1. Jiuh-Biing Sheu, 2014. "Green Supply Chain Collaboration for Fashionable Consumer Electronics Products under Third-Party Power Intervention—A Resource Dependence Perspective," Sustainability, MDPI, Open Access Journal, vol. 6(5), pages 1-44, May.
    2. repec:eee:jouret:v:88:y:2012:i:3:p:412-420 is not listed on IDEAS
    3. repec:eee:joreco:v:20:y:2013:i:1:p:34-42 is not listed on IDEAS
    4. Shou, Yongyi & Feng, Yi & Zheng, Jingjing & Wang, Guofeng & Yeboah, Nyamah Edmond, 2013. "Power source and its effect on customer–supplier relationships: An empirical study in Yangtze River Delta," International Journal of Production Economics, Elsevier, vol. 146(1), pages 118-128.
    5. Olsen, Per Ingvar & Prenkert, Frans & Hoholm, Thomas & Harrison, Debbie, 2014. "The dynamics of networked power in a concentrated business network," Journal of Business Research, Elsevier, vol. 67(12), pages 2579-2589.


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