The giant S.S. Wal-Mart is finally steaming home. After decades of sourcing goods from foreign ports, Wal-Mart has discovered America — manufacturing, that is.
In a nearly 3,700 word speech before the National Retail Federation in New York City, Wal-Mart U.S. CEO Bill Simon described his company’s “American renewal” with the fervor of a born-again retailer. Wal-Mart has pledged to increase its American-made products by $50 billion over the next decade.
“I know,” Simon admitted, “according to urban legend Wal-Mart’s shelves are filled with foreign products. But the truth may surprise you.”
Here is Bill Simon’s surprise: “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 Walmart U.S.” The finger on the scale here is Wal-Mart’s food sourcing. “Don’t forget, we run a pretty large grocery business,” Simon explained.
But the truth is no surprise. According to a 2007 brief by the Economic Policy Institute, the total U.S. trade deficit with China reached $235 billion in 2006. “Between 2001 and 2006, this growing deficit eliminated 1.8 million U.S. jobs…The world’s biggest retailer, U.S.-based Wal-Mart was responsible for $27 billion in U.S. imports from China in 2006 and 11% of the growth of the total U.S. trade deficit with China between 2001 and 2006. Wal-Mart’s trade deficit with China alone eliminated nearly 200,000 U.S. jobs in this period.”
As early as 2004, the China Business Weekly estimated that 70% of the textile merchandise inside Wal-Mart was from China. The Weekly reported that if Wal-Mart were an individual economy, it would rank as China’s eighth-biggest trading partner, ahead of Russia, Australia and Canada. More than 5,000 Chinese enterprises had established supply contracts with Wal-Mart.
Before his death, Sam Walton admitted in his autobigraphy, ironically titled “Made in America,” that Wal-Mart was “a huge purchaser of imported merchandise from overseas.” He said Wal-Mart had no choice, because “a lot of America-made goods simply aren’t competitive, either in price, or quality, or both.” That was in 1992. Walton rejected the idea of “buying American at any cost,” which he described as a “blind patriotic idea.” “We, like any other retailer,will only buy American if those goods can be produced efficiently enough to offer good value. We’re not interested in charity here;”
Walton sent an open letter to his suppliers, inviting them to work with him to increase American sourcing. “It turned out that if Wal-Mart committed to high volume purchases well in advance of shipping dealines,” Walton wrote, “a lot of American manufacturers could save enough on the purchase of materials, personnel scheduling, and inventory costs to realize significant efficiency gains.”
At the same time, Walton said his company “took a close look at our overseas buying practices and discovered a number of hidden costs.” Wal-Mart “developed a formula which enabled us to make a true apples-to-apples cost comparison of buying something overseas versus buying it at home.”
Walton even promised that if an American manufacturer could get within 5% of a foreign producer, he would “go with the American product.” But even before Walton died, Wal-Mart went on a twenty year China binge, much to the detriment of the American economy. o
Now, according to Bill Simon, the curtain is falling on the Chinese era. “In previous decades, investment mainly went to Asia. Wages were low. The price of oil was low. And new factories sprung up out of the ground. But today, some of those investments are nearing the end of their useful lives…Labor costs in Asia are rising. Oil and transportation costs are high and increasingly uncertain. The equation is changing.”
America is starting to look better to Wal-Mart.
Simon told the story of a factory in Georgia owned by a company called 1888 Mills. Simon says Wal-Mart went over the financials line by line, and “with a little capital” from the supplier, Wal-Mart decided the numbers “looked pretty good,” and by this spring, 1888 Mills towels from Georgia will be sold in 600 Wal-Mart stores. The textile industry in the U.S. has been ravaged by Asian suppliers, but one factory in Georgia is hiring back workers!
Such anecdotes will never mask the enormous job migration caused by what Sam Walton called “a pattern of knee-jerk import buying.” His company is rightfully concerned about their inefficient global supply chain, the unpredictability of the value of the yuan, and the inevitable rise in foreign labor costs.
We can be sure of one thing: Wal-Mart says its coming back home again — and its not for a blind patriotic reason. But it will take more than one or two decades to undo the damage to American manufacturing caused by Wal-Mart’s knee-jerk purchasing .
Readers are urged to email Wal-Mart’s corporate headquarters at:
with the following message:
“I was so glad to see Bill Simon promise to buy $50 billion more in American-made products. He would have made Sam Walton proud — because Sam promised the same Made in America promise — but he never delivered on the promise.
I am not sure what took Wal-Mart 20 years to rediscover America, but its hard to take this company’s promises seriously after your prolonged binge buying from China. Sam Walton never kept his promise, why would Bill Simon’s word be any better?”
The giant S.S. Wal-Mart is finally steaming home. After decades of sourcing goods from foreign ports, Wal-Mart has discovered America—manufacturing, that is.