How to drive down prices

Wal-Mart isn’t just the world’s biggest retailer, it also operates one of the largest fleets of trucks on the planet. Last year alone the company saved US$200 million just by tweaking its delivery routes.

Now Wal-Mart is using its transport heft to take over deliveries from suppliers in situations where it thinks it can do the job cheaper. As it stands, between 60 and 80 per cent of deliveries to Wal-Mart distribution centres are handled by suppliers. In exchange for moving the goods itself, Wal-Mart is demanding manufacturers cut prices for their products accordingly.

Those savings, in turn, will get passed on to customers. But the best part of Wal-Mart’s plan: it could drive up costs for its competitors in the process. With Wal-Mart’s heft gone, it will cost some suppliers more to deliver to remaining retailers. Analysts expect manufacturers to pass the increased freight costs on to Wal-Mart’s rivals.