Just last week, we revisited the Wal-Mart vs. vendors saga, noting that in the wake of the retail behemoth's rather dramatic guidance cut, suppliers finally woke up to what's going on. 

"Now we know why they have been pushing so hard,"one executive at a major consumer goods supplier told Reuters.

The reference there is to Wal-Mart's move to squeeze the supply chain for every last penny of savings following the company's (possibly misguided) decision to implement an across-the-board wage hike for its lowest-paid employees. Paying those who used to make $9/hour $10/hour going forward is set to cost Wal-Mart some $1.5 billion and as we've said too many times to count, the commitment to "everyday low prices" means passing rising labor costs on to customers simply isn't a viable option. But someone has to pay the bill, and that means either i) hours will need to be cut and employees higher up in the food chain will need to be fired, ii) suppliers will have to absorb the cost, or iii) both. 

The assault on the supply chain began with a push to force vendors to plow dollars they would have spent on marketing into savings. Next, Wal-Mart moved to implement new storage fees and finally, the retailer implored its suppliers to make sure and pass along any savings from yuan devaluation.  

At a certain level, this is just econ 101. Massive, sweeping wage hikes don't occur in a vacuum and as we put it when we first reported that cuts were likely in Bentonville, "one thing that should have been abundantly clear from the start is that if ever there were an employer that could ill-afford a $1 billion across-the-board pay raise without immediately making up the difference by either firing some employees, cutting hours, or squeezing the supply chain it's Wal-Mart."

Still, some of this seems to have caught the market and the media off guard, which is fine with us because we now get to watch everyone play catch-up which means more coverage, more quotes from suppliers, and more evidence that Wal-Mart may have signed its own death certificate with the wage hike. Here's WSJ with the latest:

At the U.S. chief's direction, the retail behemoth has already removed about 15% of store displays over the past year, and the average Wal-Mart supercenter—home to around 120,000 products—has about 2,500 fewer items than a year ago.

Some of the changes have put Wal-Mart at loggerheads with vendors who worry they will result in tens of millions of dollars in lost sales. But fixing U.S. stores is becoming ever more crucial. Earlier this month, Wal-Mart Stores Inc. surprised investors by predicting that profits would drop as much as 12% next year as it spends heavily to raise wages, boost online sales and overhaul inventory systems. In the wake of the announcement, the retailer's stock fell 10% in a single day and is on pace for its worst year since 1973.