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Image-beleaguered Wal-Mart is looking for a little love on the home front. The world’s largest retailer committed on Tuesday to sourcing $50 billion worth of goods in the U.S. over the next 10 years.
This story first appeared in the January 16, 2013 issue of WWD. Subscribe Today.
That promise came from Bill Simon, president and chief executive officer of Wal-Mart U.S., speaking at the National Retail Federation’s 2013 Big Show, where he introduced several major initiatives related to job creation and the economy.
Simon challenged the notion that Wal-Mart sources most of its merchandise overseas. “Made in the U.S. accounts for two-thirds of what we sell,” Simon said. “Today, we will make a commitment to add an additional $50 billion in made-in-America goods over the next 10 years.” Wal-Mart will manufacture apparel, home, games, pet supplies and high-end electronics to start. Simon appealed to the audience of retail professionals, saying that if everyone participated, “We could source $500 billion worth” of merchandise domestically.
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“America is still the biggest manufacturer in the world,” Simon added. “I know, according to urban legend, Wal-Mart’s shelves are filled with foreign products. But the truth may surprise you. Don’t forget, we run a pretty large grocery business. According to data from our suppliers, items that are made here, sourced here or grown here account for about two-thirds of what we spend to buy products at Wal-Mart U.S. Of course, there’s room for more.”
Wal-Mart said that 54 percent of total sales in 2011 came from groceries and household products such as detergent and paper towels, which are produced Stateside. Meanwhile, Wal-Mart’s soft goods and electronics businesses — categories that are generally sourced overseas — have been declining.
“If Wal-Mart’s ‘Made in America’ announcement is real, it’s a game changer,” said Scott Paul, president of the Alliance for American Manufacturing. “No company drives retailing trends like Wal-Mart. I salute Wal-Mart for stating this commitment and hope other retailers follow suit in sourcing more high-quality products that are made in America.” But Paul was quick to note that the announcement is “hardly revolutionary when you look at Wal-Mart’s business model and overall sales volume. The company is simply responding to economics. Consumers want more made-in-the-U.S. choices, and smart observers recognize that this can be a profitable approach.”
“Taking action on the economy is our responsibility as Americans, but it’s also our opportunity as retailers,” Simon said. “Do we accept that the pie of customer dollars will remain the same each year and compete over our slice of that pie? Or can we create a bigger pie? We can break out of the zero-sum paradigm that’s been created by the recession. In a stagnant economy, there’s a difficult, almost brutal fight for market share, with clear winners and losers. In a growing economy, everyone can be successful.”
Russell Sobel, a visiting scholar in entrepreneurship at the School of Business Administration at The Citadel, felt Wal-Mart’s announcement won’t “be that stimulating as a macroeconomic effect.”
And the idea that Wal-Mart announced the initiatives to win positive publicity after months of negative press over alleged bribery charges and anger over Wal-Mart’s use of a supplier that subcontracted work to Tazreen Fashions Ltd. in Bangladesh, where a fire killed 111 workers on Nov. 24, didn’t escape some experts. “This strategy has multiple goals for Wal-Mart, including public relations and expanding the customer base for Made in the U.S.,” Sobel said, noting that anti-Wal-Mart sentiment has again been on the rise.
U.S. sourcing is a part of Wal-Mart founder Sam Walton’s legacy. Walton in 1985 launched a campaign, “Made in America,” in which the retail giant committed to buying American-made products if suppliers could get to within 5 percent of the price of an overseas competitor.
Kevin Burke, president and ceo of the American Apparel & Footwear Association, said the development was significant, adding, “What will be interesting to hear is…if there are the capabilities to produce” the key product categories.
Simon noted that the economics of manufacturing are changing. “In previous decades, investment mainly went to Asia,” he said. “Wages were low. The price of oil was low, and new factories sprung up out of the ground. Today, some of those investments are nearing the end of their useful lives. Meanwhile, labor costs in Asia are rising. Oil and transportation costs are high and increasingly uncertain. The equation is changing. A few manufacturers have even told Wal-Mart privately that they have defined the ‘tipping points’ at which manufacturing abroad will no longer make sense for them.”
Simon said he spoke with the senior vice president of home about opportunities to increase American manufacturing. A partner, 1888 Mills, was found. “On the surface, the numbers looked close,” Simon recalled. “But when we dug into it, line by line, we could see that with a couple of commitments from us, and a couple of innovations and a little capital from them, we could actually change the equation and the numbers would work. In fact, they looked pretty good.” The factory is hiring again and the towels, called “Made Here,” will be sold in 600 Wal-Mart stores in the spring and 600 more in the fall.
Simon also stated that Wal-Mart will offer jobs to the nation’s veterans. Beginning on Memorial Day, the company has pledged to hire any veteran seeking employment that has been honorably discharged within the past 12 months. Wal-Mart expects to hire 100,000 veterans over the next 10 years.
Simon also attempted to clear up some misconceptions about Wal-Mart’s employment practices as the Retail Action Network was holding a protest outside the Jacob K. Javits Convention Center. About 100 workers, former workers and union members rallied to object to just-in-time scheduling where they said Wal-Mart changes schedules a day or hours before the fact, without notification. They also criticized Wal-Mart’s definition of part time as anything from two to 30 hours.
“Retailers like Wal-Mart could provide the nation with a much-needed economic boost by paying higher wages and providing stable scheduling, while still remaining profitable and offering low prices,” said Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union. “By part-timing their workforce, they’re hurting both workers and our economy by fueling underemployment.”
“We’ll make sure part-time associates have full visibility into full-time job openings in their stores and nearby stores — and that they always have the first shot at those jobs,” Simon said.