Wal-Mart Stores Inc. is out to get other retailers behind Made in the USA.
This story first appeared in the April 17, 2013 issue of WWD. Subscribe Today.
Bill Simon, president and chief executive officer of Wal-Mart U.S., in January revealed the world’s largest retailer aimed to source $50 billion worth of additional products in America by 2020.
At the time, there were naysayers who predicted the company would have trouble finding factories with enough capacity since the push to overseas manufacturing forced many out of business. Others said the higher production costs in the U.S. would be a hindrance, while still others surmised that Wal-Mart would fulfill its obligation by buying more food domestically rather than products such as apparel and accessories.
“Two-thirds of our receipts today are for products that are made in the U.S.,” said Michelle Gloeckler, senior vice president of home, who’s been tasked with spearheading the initiative. “A lot of that comes from food. But we won’t get to the $50 billion commitment without doing new and different things. One of the benefits of having production closer to the point of sale is it allows you to chase something that’s hot and trendy in fashion.”
Gloeckler said the program will involve new production in the U.S. “In fact, we opened it up to other retailers,” she said. “We could work together to make the U.S. a sound and predicable place for manufacturing.”
Gloeckler declined to name retailers Wal-Mart might align with, but said they could be revealed at a manufacturing summit this summer. The location of the summit, which will draw suppliers and retailers, has yet to be determined, Gloeckler said.
Wal-Mart sources in the U.S. categories such as apparel basics, sporting goods, storage products, games and paper products. It will increase what it buys here in those areas. Categories with high potential include textiles, furniture, pet supplies, outdoor categories and higher end appliances, she said.
“Wal-Mart can work with suppliers on so many different levels,” Gloeckler said. “At 1888 Mills [which is manufacturing towels for Wal-Mart], they don’t have the capacity to roll out a program to all Wal-Mart stores at one time. We can identify their comfort zone and have a staged rollout plan. We’ll put towels in 600 stores this spring. We’ll add another 600 stores in the fall. Based on the sales and demand, we’ll have an idea of what we’ll do next year. It’s very collaborative. If you go through the economics, the raw materials are here and you’re saving on the freight.”
Gloeckler said the idea of doing more domestic sourcing resonated with her when “a supplier came and said, ‘Hey, we have factory capacity. We’ll share our cost structure with you. We can do this together,’” Gloeckler said. “It’s very strategic and not transactional. [The factory] asked for some long-term commitment from us. We needed to understand their costs.”
When an overseas supplier had a cost increase on a product, Gloeckler said, “We did the research and found the price of components didn’t go up nor did the price of raw materials. They could sell it in the country where it was being produced. That led us here. There becomes a volatility in producing overseas: minimum wage, freight, reliability, dependability, cost of holding the inventory and Customs.
“Our sourcing team will still work with a manufacturer because we have stores all over the world,” Gloeckler said. “There’s in-country demand. We have a great capability to navigate through all sorts of issues.”
Wal-Mart is facing increasing controversy over some of its sourcing practices in apparel, particularly in low-cost countries. Advocacy groups for survivors of the Tazreen Fashions factory fire in Dhaka, Bangladesh, in November that killed 112 workers continue to call on retailers whose labels were found at the scene to compensate the victims. Wal-Mart and Sears Holdings Corp. did not attend a meeting Monday in Geneva organized by IndustriAll to discuss how to compensate the victims and victims’ families. “At Wal-Mart, our goal is to positively impact global supply chain practices by raising our own standards and by partnering with other stakeholders to improve the standards for workers across the industry,” a spokesman said. “That’s why we are focused on investing our resources in proactive programs to address fire safety in the garment and textile industry in Bangladesh, and prevent fires before they happen.”
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“At the time of the Tazreen tragedy, Sears had not authorized use of the Tazreen factory for production of our product,” a Sears spokesman said. “Sears immediately terminated the vendor who failed to register this factory with Sears. We remain committed to factory safety. We are not planning to attend the meeting in Geneva, but as part of our ongoing efforts, we are continuing to actively train our suppliers on factory and fire safety as part of our Global Compliance Program. We are also working with other retailers and industry groups on collaborative efforts to address global factory safety issues where contributions and other proposals are being considered.”
Wal-Mart on Monday held a global sustainability milestone meeting at its Bentonville, Ark., headquarters, where it outlined its progress on existing goals and revealed new ones. Wal-Mart Stores president and ceo Mike Duke said the company is “going big on renewable energy — six times bigger.” By the end of 2020, Wal-Mart will reduce energy usage per square foot by 20 percent and will supply Wal-Mart buildings with 30 percent renewable energy.
“Every market and part of our business will be involved in this,” Duke said. “Using less energy in our stores means lower prices. It helps drive the productivity loop and takes costs out of the system. We buy a lot of wind power and a lot of solar power. We’re leveraging our size and our scale. We can save over $1 billion per year in energy costs around the world.”
Wal-Mart may have altruistic reasons for its programs, but they all have to make dollars and sense. “Research shows that customers have a strong affinity for products made in the U.S.,” Gloeckler said. “We don’t believe they should cost more. Our goal is high quality products at everyday low prices. The same thing can be said with regard to sustainability. We will find ways to make cleaner energy and use renewable energy that costs the same or less [than brown energy]. We approach it with the same business strategy” mentality.