Sweeping organizational changes are coming to Wal-Mart U.S., from its stores to its apparel sourcing.
In a flurry of developments Thursday, Wal-Mart Stores Inc. said it is realigning its U.S. organization and redefining the way it procures merchandise, which includes consolidating an initial $2 billion of its $300 billion product budget under Hong Kong-based manufacturing giant Li & Fung.
And in another sign the world’s largest retailer is stepping up its attention on fashion, WWD has learned Lisa Rhodes, who was executive vice president and chief merchandising officer of Maurices and left the Duluth, Minn.-based chain last week, has been appointed Wal-Mart’s senior vice president and general merchandise manager of apparel. She’ll report to Dottie Mattison, the company’s senior vice president and general manager of apparel.
The changes at the Bentonville, Ark.-based group consolidate power under two of the company’s rising stars — Bill Simon and John Fleming — and include combining real estate, store operations and logistics into one unit; developing a new merchandise execution organization, and pairing store-planning with customer experience to accelerate the speed with which new retail formats are brought to market and new markets are penetrated.
Deutsche Bank retail analyst Bill Dreher called the moves “the biggest changes at Wal-Mart U.S. since 1995 and the introduction of SuperCenters.”
Between the organizational changes and the Li & Fung news, there are bound to be layoffs, however. Last week, Wal-Mart’s Sam’s Club division said it was closing 10 U.S. units and laying off 11,000 employees. Observers said there could be up to 3,000 layoffs in Bentonville due to the changes in sourcing. The company could not be reached for comment.
Wal-Mart said it created a consolidated global sourcing structure built around new global merchandise centers.
Ed Kolodzieski, president and chief executive officer of Wal-Mart Japan Holdings G.K. and Seiyu was named executive vice president of Wal-Mart’s global sourcing, reporting to Wal-Mart vice chairman Eduardo Castro-Wright. Wal-Mart’s goal of restructuring its relationships with suppliers is cost savings and leveraging its scale. “The core of the company’s overall global sourcing strategy is direct sourcing for the company’s private brands,” said Castro-Wright, noting private label represents more than $100 billion in purchasing annually.
For Li & Fung, the Wal-Mart deal is worth up to $2 billion of business in the first year.
“Obviously that’s a big number for any first year, but in the context of what Wal-Mart’s size is, it’s a good start,” said Bruce Rockowitz, president of Li & Fung (Trading) Ltd. “Our expectation, I think on both sides, is it will continue to grow.”
Rockowitz, the first outsider to run the $14 billion Fung family business in more than 100 years, said 20 to 30 percent, or $400 million to $600 million, of the venture’s first-year sales could be in apparel, with footwear, home goods, toys and other goods making up the balance. The open-ended agreement does not include any volume commitments from the retailer, which can still buy directly from factories.
The arrangement does, however, give Wal-Mart the option to acquire the sourcing arm, dubbed WSG, in 2016.
“We probably won’t start shipping until the end of the first half,” Rockowitz said. “We see plenty of opportunity to bring a global sourcing network to bear right away. From our viewpoint, we’re going to be bringing better quality and prices to the table as well as helping product development.”
Exhibiting the complexity of apparel sourcing, Li & Fung has more than 80 offices globally and sources goods in more than 40 countries. The company will continue its existing wholesale relationship with Wal-Mart.
Rockowitz said Li & Fung would help Wal-Mart keep its prices down.
“We’re headed into an inflationary environment, where all the costs have been taken out of the supply chain over the last years and a big deflationary driver was China, and China is not the low-cost country anymore,” he said. “You need a global sourcing network and, quite frankly, on a direct basis, Wal-Mart wasn’t as global as they could be. We’re going to drive costs down somewhat, or at least hopefully stop the inflationary trend for our customers.”
The deal was generally seen as a good one, especially given the breadth of Li & Fung’s sourcing base.
“They can move production if a natural or political problem occurs like no other,” said one trade expert, who requested anonymity. “It also gives Wal-Mart fewer vendors and reduces their reputation’s potential exposure from bad actors on environmental and labor issues.”
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews