Inside This Issue - Opinion
The next move is up to Walmart
September 23rd, 2013
by David Pinto, Editor
The most stunning news to come from the mass retailing community thus far this year was Walmart’s stated intention to spend up to $50 billion on U.S.-produced goods over the next five years.
To document that intention, the world’s largest retailer invited some 500 suppliers to a "summit" in Orlando, Fla., last month, there to hear a variety of speakers, from both within and outside the company, praise the retailer for its proposition. Indeed, Walmart’s senior managers repeatedly insisted that it sincerely intends to pay more attention to products produced in the United States than it has in the past.
Perhaps most persuasive in all this was Walmart’s contention that a set of sound economics lay behind this decision. In truth, many facts were laid out in support of Walmart’s claims: Growing wages in Asian countries; growing obstacles to safely producing quality goods in Asian countries; increasing costs in shipping Asian-produced goods to the United States for consumer consumption; a growing consumer commitment, at least in theory, to buying American-made products, with the implied sidebar that small price discrepancies would not deter these customers; and a growing certainty in the United States that business has gone too far in committing to off-shore production at the expense of the American worker.
Granting the validity of these statements, one question remains: How seriously is Walmart committed to pursue this initiative and, more to the point, how prepared is the retailer to back its commitment with solid programs that put its reputation on the line?
That’s a serious question, especially viewed from the supplier perspective. Truth is, fairly or not, mass retailing has become increasingly suspicious of Walmart’s intentions. Too often in the past the retailer has failed to understand, remember or behave in a way that reflects its status: Despite its size, dominance and leverage, Walmart is a member of a more important group, the U.S. mass retailing community.
Still, there is no denying the impact Walmart continues to exert on that community. Present at the Orlando summit were the U.S. Secretary of Commerce, the chief executive of General Electric, a handful of state governors, several important retail consultants, and senior representatives from two significant retail trade groups. That attendance, in addition to representatives from some of America’s most prestigious supplier firms, as well as emissaries from each of the 50 states, there to solicit commitments from suppliers to commit to construction projects in their state, made the event a must-attend for a significant segment of the retailing community.
However, it must be added that Walmart extended invitations to other retailers to attend the meeting. None came, though Walmart continues to hope that other retailers will join the crusade once it gathers momentum.
Still, it’s a stretch to believe that retailers, approached properly and at the right levels, would unanimously turn down this invitation. After all, an initiative to return to America the manufacturing capability that once made this country the envy of the world would be difficult for even the most hard-hearted Walmart competitors to ignore. Indeed, should America once again become a production machine comparable to what it once was, every segment of society would stand to benefit — particularly the retail segment.
So the deal is on the table. Walmart has challenged the supplier community to commit to producing goods in the United States. By implication, it has also challenged the entire U.S. retailing community to sell those goods. But the next move must come from Walmart. Between now and year’s end, the Bentonville, Ark. retailer must make its intentions clear. If, for example, a company not now producing goods in the United States makes a serious commitment to do so, what can that supplier expect in return from Walmart — at least initially?
In other words, as has become the case in any situation involving Walmart, the world’s largest retailer must be prepared to initially give up more than it expects to gain. That’s what the retailing world has become, and that’s how it will remain — unless and until Walmart again changes it.