This is part of it, but a bigger part is simply that Walmart approached suppliers with a proposed volume that would require the company to rebuild themselves as an operation in order to meet that demand and the required service levels, at the price Walmart was willing to pay.
If they succeeded (many didn't, ending in bankruptcy), the supplier was now trapped: no one could offer Walmart levels of volume, which the supplier now had to operate at to make a profit. Walmart could come back next year and demand lower prices. They famously joked amongst themselves that their goal was to drive out all profit for their suppliers.
Vlassic Pickles is the classic example of a company that took the offer, rebuilt themselves, and became massively larger than they were before.
I worked at a manufacturer for several years in IT. Walmart was a customer, but only in a limited way (i.e., without requiring huge volumes and service levels[0]). Our main competitor, Rubbermaid, was a tier 1 supplier. When Rubbermaid's main factory in the segment burned down, Rubbermaid withdrew from Walmart as a supplier, citing low profit margins. We got the call to come to Bentonville, where they offered us the chance to replace Rubbermaid, which would mean a fundamental restructuring of our entire operation to service them. We (wisely) declined.
[0] An example of the service level required: Walmart would send an order by EDI that would include a two hour window for delivery, 24 hours out, for a store. That meant you had to have inventory and drivers within a certain distance from every Walmart location so that you could immediately pick the order, get it on a truck, and arrive at the store within that two hour window.
I remember a claim (from Vlassic itself?) also that Walmart pushed them into producing larger volume SKU's, against their (Vlassic's) detailed data on usage, shelf life, etc. Result: more mouldy pickles in peoples refrigerators. Hurt Vlassic as a brand, not really in consumer interest, but Walmart could advertize a $/volume nobody could match.
I met an independent trucker who said he sometimes did pressure relief for a large logistics company but would refuse any Walmart deliveries (not to the stores, to central warehouses). He claimed they gave you a 15 min delivery slot on a cross country route, they only way to avoid penalties was to aim to be there hours early and wait on your slot. He said it basically added 3-6 unpaid hours for every trip, and wasn't worth it.
If they succeeded (many didn't, ending in bankruptcy), the supplier was now trapped: no one could offer Walmart levels of volume, which the supplier now had to operate at to make a profit. Walmart could come back next year and demand lower prices. They famously joked amongst themselves that their goal was to drive out all profit for their suppliers.
Vlassic Pickles is the classic example of a company that took the offer, rebuilt themselves, and became massively larger than they were before.
I worked at a manufacturer for several years in IT. Walmart was a customer, but only in a limited way (i.e., without requiring huge volumes and service levels[0]). Our main competitor, Rubbermaid, was a tier 1 supplier. When Rubbermaid's main factory in the segment burned down, Rubbermaid withdrew from Walmart as a supplier, citing low profit margins. We got the call to come to Bentonville, where they offered us the chance to replace Rubbermaid, which would mean a fundamental restructuring of our entire operation to service them. We (wisely) declined.
[0] An example of the service level required: Walmart would send an order by EDI that would include a two hour window for delivery, 24 hours out, for a store. That meant you had to have inventory and drivers within a certain distance from every Walmart location so that you could immediately pick the order, get it on a truck, and arrive at the store within that two hour window.