Wal-Mart Stores Inc., the world's biggest retailer, is offering its clothing vendors a faster way to get paid that could change how struggling retailers and vendors do business together.
Wal-Mart, based in Bentonville, Ark., told its more than 1,000 clothing suppliers this month that they can be paid within 10 to 15 days of delivering goods instead of the customary 60 to 90 days, but a Wal-Mart spokesman declined to say how much the suppliers must give up for the quicker payout.
Vendors are likely glad for a faster payday as demand from struggling retailers falls.
The move comes after a major retail lender, CIT Group Inc., collapsed into bankruptcy protection in an effort to cut its own debt, leaving retailers worried about whether their suppliers would be able to get financing to fill orders.
CIT is one of the nation's biggest lenders to an array of small and midsize businesses, including retailers, energy companies, a small movie studio and operators of Dunkin' Donuts stores.
Wal-Mart spokesman John Simley said the new option lets vendors present their bill to a bank, which pays the vendor, then gets paid by Wal-Mart. Simley said it is the first time Wal-Mart has offered the payment option, and so far it is available only to clothing suppliers.
"It has been very well received," Simley said. "It works out very well because it provides us with greater surety in our supply chain _ that the products we order, we will get."
"It provides an extension of our financial strength to our suppliers," he added.
Wal-Mart's clothing vendors are a small chunk of its more than 60,000 suppliers. Simley said that so far there had been no announcements about extending the program to other vendors.
Wal-Mart's shares fell 4 cents to $53.20 on Friday.