Walmart Is Raising Prices. What Will Its Competitors Do?

Walmart plans to start increasing prices this month. Don’t be surprised to see other retailers follow in its footsteps.

Shoppers will start seeing higher prices at the retail giant later this month, CFO John David Rainey told CNBC last week. Smaller competitors, meanwhile, may do the same now that Walmart (WMT) has said it must pass on some of the cost of import taxes, according to Neil Saunders, managing director of retail at analytics and consulting firm GlobalData.

“As a price leader in retail, Walmart’s price increase will make it easier for other retailers to follow suit,” Saunders told Investopedia in emailed comments. “It also helps to justify increases as other firms can say, look if Walmart is doing this then it’s reasonable for us as a smaller business to do this too.”

Given its size, Saunders said, Walmart may also be better able to negotiate terms with suppliers—or to absorb tariff costs by identifying savings elsewhere in its business. The Arkansas-based business wants to limit price increases and preserve price gaps with competitors, but can’t maintain current prices on all merchandise, CEO Doug McMillon said on an earnings conference call last week.  

“We aren’t able to absorb all the pressure, given the reality of narrow retail margins,” McMillon said.

Walmart will try to avoid raising prices in the grocery aisles, and be deliberate about changes in other segments, executives said. Goods from China, such as electronics and toys, are most likely to go up in price, McMillon said on the earnings call.

“In some cases, we’ll absorb costs within a category or department and not simply pass on a tariff cost attributable to each item individually,” McMillon said.

Several companies have indicated they will increase prices in response to tariffs, including the household goods giant Procter & Gamble (PG), the luxury goods company Hermès and the toy manufacturer Hasbro (HAS). Walmart’s announcement has made more headlines, perhaps because the retailer’s low prices have been shown in studies to limit price increases elsewhere.

And competitors aren’t the only ones eyeing Walmart prices. President Donald Trump said over the weekend that Walmart should “EAT THE TARIFFS.”