What: Walmart, Amazon, and Costco leverage growing market dominance to maintain margins amid tariff pressures, forcing suppliers to absorb increased costs.

Why it is important: The retailers' ability to maintain profitability despite tariff pressures highlights their growing influence over the consumer goods sector and evolving market dynamics.

Major US retailers are demonstrating unprecedented market power in response to tariff pressures. Despite Walmart CEO Doug McMillon's public acknowledgment that higher tariffs will affect prices, retailers are increasingly able to dictate terms to suppliers rather than absorbing costs themselves. This power extends beyond generic products to major brands like Nike and Nestlé. The market recognises this strength, with retailers' shares trading at impressive multiples - Home Depot matching Meta's, Walmart exceeding Microsoft's and Nvidia's, and Costco nearly doubling Apple's. While retailers maintain relatively low operating margins of around 7% compared to suppliers' 12%, their share of combined profits is growing. This shift reflects broader industry consolidation, with the top four retailers now controlling 35% of food sales, double their share from 1990. The development of sophisticated private labels and expanded consumer choice in products has further strengthened retailers' negotiating position.

IADS Notes:The growing pricing power of major retailers reflects fundamental changes in retail-supplier dynamics. According to Inside Retail's March 2025 coverage , retailers like Costco and Walmart are actively pressuring Chinese suppliers to reduce prices amid tariff pressures, demonstrating their increased negotiating leverage. Retail Insight Network's May 2025 analysis  showed how Walmart's strong Q1 performance, with adjusted earnings of $0.61 per share exceeding expectations, validates its ability to manage pricing pressures while maintaining profitability. Fashion Network's December 2024 report  revealed Walmart's 82% surge in share value, driven by successful diversification into high-margin businesses and enhanced pricing power over suppliers. Forbes' September 2024 coverage  highlighted how major retailers are leveraging private labels to boost margins and reduce dependency on branded suppliers, with Walmart reporting over half of grocery baskets including private brand products. This shift in power dynamics has enabled retailers to maintain margins despite tariff pressures, while traditional consumer goods brands face increasing pressure to absorb costs.

Big box v brands: the battle for consumers’ dollars