If I have a product that is sold at Walmart, so to say, do I make money when someone buys my product from Walmart or does Walmart buy my product in bulk to sell and that’s how I make my money? This question has bothered me for decades, thanks!
In: Economics
Walmart buys from the producer. So the profit is made before the consumer buys the product. Walmart makes a profit when the consumer buys the product from them. So Walmart pays a lower price for a product than a consumer would.
The difference in price between the consumer and the price for Walmart is called “added value” in economics.
You make your money when Walmart buys it from you, and then Walmart makes their money when someone buys it from them for more. More people buying your product at Walmart doesn’t directly benefit you, but it does mean Walmart will probably come back to you, sooner rather than later, to buy more.
Walmart has to stock their supplies from somewhere. So they’ll buy it from you, and you make money that way. And if the product sells well, they’ll come back to you to buy more.
Essentially the second one – Walmart ‘buys’ your product and ‘re-sells’ it for more than they paid for it but there are a lot of different types of arrangements between manufacturers, distributors and retailers that make it a little more complex than this simple breakdown.
Either you sell to groceries and they sell it to customers or what i’ve seen is that groceries sell you product & stocking space and or take a % of the amount sold.
generally you sell your product to a wholesaler who marks it up and sells it in bulk to a retailer who marks it up and sells it to a customer
in the case of store brands the retailer cuts out the wholesaler and buys from the factory
The supermarket buys the product at a flat rate from the manufacturer.
So for Example I work in the food sector, Ingredient manufactures by raw produces from farmers, we then buy the packaged raw ingredients from then to make flavor powders/mixes, Food item manufactures will by our mixed ingredients from us, The supermarkets buy it from them and then you the end consumer buys it from the supermarket. Everyone is making their money from the sale to the next step in the chain.
This can cause issues as it hands the supermarkets a **LOT** of power. A part of the reason that you will often hear say dairy farmers complaining about not making enough money is the super markets often use products like milk as a “Loss leader” i.e something they sell at a loss because its an everyday item that gets people through the door and buying other stuff that they do make a lot of money on.
As a result they want to pay as little as possible to avoid the losses being to high, This narrows the profit margin of the dairy processer, who in turn puts a similar squeeze on the farms they buy from. This can play out across the supermarkets entire product range but he shorter and simpler the logistical chain the more they can squeeze as it makes it easier to move to another supplier if you wont give them the price they want
It depends on the deal you have with the supermarket. As other answers have said, sometimes a supermarket will buy stock and sell on. In that case, you get paid when you deliver your product to the supermarket. Sometimes the supermarket will cut a deal, though, and will only pay for sold inventory, and you agree to take unsold products back. Another model is for the supermarket to sell suppliers “shelf space”, then the supplier buys the shelf space and gets paid when the item is sold. Source – my wife used to be a category buyer.
As a brand, your “customer” is Walmart (et al). They are the ones buying products from you.
Walmart is very hard in negotiations with suppliers. They bully them to get the best price possible, so they can compete with the other stores. Having to deal with walmart in my previous life is a corporate warrior was a nightmare.
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