Wal-Mart Spend Management Notes

It's been two weeks, but I've finally gotten around to typing up my notes from the luncheon I attend where H. Scott Lee, Wal-Mart's President and CEO, spoke to the Executive's Club of Chicago.

As an outsider looking in (with little expertise in retail), I attended the lunch hoping to learn more not only about Wal-Mart's global sourcing initiatives from a Spend Management perspective, but also to gain insight on retail trends in general.

On the Spend Management front, I learned that Wal-Mart is more than embracing China as a low cost sourcing region -- they're also opening stores that sell into regional markets. But the demographics and average receipt is quite different than in the US. For example, in Bejing, the Wal-Mart store's average receipt is $4-5, and consists mostly of food-related items and only a little apparel and electronics.

On the supply side, Wal-Mart is also thinking about supplier sustainability in China. They believe the Chinese government is holding them to higher standards (which they believe is a good thing) when it comes to evaluating suppliers for waste, safety, and other production requirements. By embracing the right type of Chinese suppliers, Wal-Mart, in other words, is helping to improve production standards and worker safety while reducing harm to the environment from the dumping of waste and chemicals. With apologies to Forrester Research -- who coined the term "sustainable supply management" -- call this sustainable Spend Management, if you will.

Here’s some other random notes for the speech which you might find interesting:

- Wal-Mart has around 10% of the US retail market share

- Less than 20% of their purchases are from China ($18 billion versus $161 billion in the US)

- 20% of Wal-Mart’s customers don't have a checking account

- When Wal-Mart enters a new market, local purchasing power (especially for the poor) increases, as prices for "commodities" such as towels and detergent decreases

The event was certainly a worthwhile affair to attend. I learned that despite all the protests and outcries that Wal-Mart bring with it, the original "Spend Manager," Benjamin Franklin, would certainly have been a Wal-Mart supporter. For Wal-Mart not only embraces Spend Management principles themselves -- they also help to encourage Spend Management principles amongst their customers.

-Jason Busch

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