Will Walmart Bring it Home? Reshoring Retail Spend

Earlier this week, Walmart announced an initiative to source $50 billion in additional goods domestically by 2023. Announced alongside a program to hire 100,000 Veterans, it's clear that Walmart is stepping up the PR offensive by attempting to change the conversation away from bribery allegations in Mexico to jobs on the home front. It's a message that will resonate well, but how easy will it be to source $50 billion from domestic suppliers in cases where entire supply chains have moved offshore?

The answer is that it won't be simple. But Walmart appears to have a strategy in mind by "grow[ing] U.S. manufacturing on two fronts: by increasing what it already buys here – in categories like sporting goods, apparel basics, storage products, games, and paper products, and by helping to onshore U.S. production in high potential areas like textiles, furniture and higher-end appliances."

Further, it would appear that local supplier development initiatives – Walmart is not exactly known for cordial collaborative cost take out programs, so this marks a shift in strategy – will play a role as the retail giant "is prepared to collaborate with manufacturers, give long range demand forecasts, make longer term product commitments on basic goods and help connect them with the best resources so they can make the most informed decisions about capital investments."

The question remains (given Walmart's track record) though whether it will simply mandate local production/sourcing from CPG, apparel and other suppliers or will work collaboratively with them throughout the transition to make it happen. No doubt as Walmart points that "products made closer to the point of purchase mean increased flexibility because of shorter transportation time, lead time and less freight costs" which "will offers the offer ability to save additional costs in warehousing and multiple touches through the supply chain." Yet how much Walmart opts to share in the benefits here versus rule with a domestic sourcing iron fist remains to be seen.

We'll offer a follow-up to this news next week by looking at the challenges Walmart will face when it comes to increasing domestic sourcing by $50 billion in the coming decade.

- Jason Busch

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