Insight: Wal-Mart 'Made in America' drive follows suppliers' lead

Wed Sep 25, 2013 2:54pm EDT
 
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By Jessica Wohl and James B. Kelleher

(Reuters) - Wal-Mart Stores Inc (WMT.N: Quote), whose focus on low-cost sourcing helped to fuel the offshoring of U.S. manufacturing, has been promoting a patriotic new image in recent months.

The Bentonville, Arkansas-based company says it is "leading an American renewal in manufacturing" and "bringing jobs back to the U.S." with its pledge made in January to buy an additional $50 billion in U.S.-made goods over the next 10 years.

But an examination of the company's "Made in America" campaign suggests Wal-Mart's caught on to a reshoring phenomenon that was already underway.

In many cases, Wal-Mart's suppliers had already decided to produce in the United States, as rising wages in China and other emerging economies, along with increased labor productivity and flexibility back home, eroded the allure of offshore production.

Though wrapped in the stars and stripes, the world's largest retailer's push to bring jobs back to the United States also makes business sense both for suppliers and retailers.

Some manufacturers are finding they can profitably produce certain goods at home that they once made offshore. And retailers like Wal-Mart benefit from being able to buy those goods closer to distribution centers and stores with lower shipping costs, while gaining goodwill by selling more U.S.-made products.

"This is not a public relations effort. This is an economic, financial, mathematical-driven effort. The economics are substantially different than they were in the 80s and 90s," Bill Simon, chief executive of the Walmart U.S. chain, told the Reuters Global Consumer and Retail Summit earlier this month.

The initiative is modest for now. For a company with $466.1 billion in annual sales, an additional $50 billion of spending over a decade will barely register. Also, the main Walmart U.S. unit sells mostly groceries and already procures two-thirds of its goods - including a lot of food - from U.S. sources.   Continued...

 
Michelle Gloeckler, senior vice-president of the home division at Wal-Mart Stores Inc, shows off a selection of merchandise made in the U.S. for sale at a Walmart Supercenter in Rogers, Arkansas in this June 6, 2013 file photo. REUTERS/Rick Wilking/Files