Will Walmart spark a reshoring movement?

Discussion
May 01, 2015

When a business as big as Walmart makes a move, it has the potential to have serious repercussions on both competitor behaviors and the economy at large. This was recently illustrated by the retailer’s pay increases to hourly workers, which were quickly followed by a number of other chains. This may foreshadow a snowball effect that could circulate a hefty chunk of cash through the economy. Another Walmart initiative, involving efforts to bring manufacturing jobs back to the U.S., could also have a significant economic effect if it inspires other retailers to push reshoring among vendors as well.

Walmart released its "Global Sustainability" report in April, which in part discusses the progress of the company’s reshoring efforts. The initiative, which began in 2013, seeks to source $250 billion worth of products from the U.S. by 2023. The City Wire reports two examples of its relative success. One case is Nuk pacifiers, which with a commitment from Walmart was able to expand its manufacturing in the U.S. while moving some of its production out of Europe. Kent bicycles invested $4.3 million into a new manufacturing facility in South Carolina, onshoring some of its operations formerly located in China.

Companies that reshore can take advantage of local tax incentives for manufacturing in the U.S. and, presumably, also experience a bump in sales volume from getting placement in Walmart.

WMT Made in America campaign

Source: Walmart

Boston Consulting Group claimed that the initiative should create one million jobs in the U.S. in manufacturing and related industries between 2013 and 2023. However the numbers have fallen far short of that. Reports indicate that only 10,000 jobs have been created, while 100,000 a year would be required to hit one million by 2023.

A Huffington Post article released before the Global Sustainability report suggested the slow growth was due in part to a loss of manufacturing knowledge and infrastructure since the trend of offshoring began.

As with wages, however, there could be a tipping point at which reshoring becomes a major trend, and other retailers join in.

On the other hand, the economic landscape could look quite different by Walmart’s 2023 reshoring deadline. Some fear that the controversial Trans-Pacific Partnership Agreement could pave the way for more offshoring, and it’s unclear what effect such an agreement would have on Walmart’s incipient attempts at reshoring.

Could Walmart’s move eventually lead other retailers to promote reshoring among branded and private label manufacturers? What would the tipping point have to be for reshoring to catch on as a nationwide trend?

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Braintrust
"Walmart could and should lead other retailers to promote reshoring its suppliers. As its history has shown us, Walmart got its start as a company that promoted "American Made" products but that soon changed. Walmart and a lot of other major retailers have the opportunity to put more Americans to work."
"I suspect several retailers follow everything Walmart does as a close second."
"I believe so. One could argue that this move is designed to prop up its sagging sales and improve its PR image. Regardless of the intentions, if Walmart succeeds in restoring a quarter of a billion dollars of merchandise in the next eight years it will have a pronounced effect on the economy (jobs) as well as the competitive landscape."

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17 Comments on "Will Walmart spark a reshoring movement?"


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Frank Riso
Guest
7 years 23 days ago

Walmart could and should lead other retailers to promote reshoring its suppliers. As its history has shown us, Walmart got its start as a company that promoted “American Made” products but that soon changed. Walmart and a lot of other major retailers have the opportunity to put more Americans to work. As we have just heard and seen in Baltimore, Philadelphia and in our Midwest, more Americans are looking for jobs — good jobs, and jobs in an American factory means great jobs.

I can see once again that “American Made” products mean quality and could command greater exports to Europe and Latin America.

The tipping point would be a major reduction in unemployment and for Walmart it would give them more locations to open new stores in the inner cities. So creating jobs means more business for Walmart and other retailers that make the investment into reshoring and relocating into these cities with newly middle-class Americans.

The challenge is: will they do it?

Jerry Gelsomino
Guest
7 years 23 days ago

I suspect several retailers follow everything Walmart does as a close second.

Richard J. George, Ph.D.
Guest
7 years 23 days ago

I believe so. One could argue that this move is designed to prop up its sagging sales and improve its PR image. Regardless of the intentions, if Walmart succeeds in restoring a quarter of a billion dollars of merchandise in the next eight years it will have a pronounced effect on the economy (jobs) as well as the competitive landscape.

Mark Heckman
Guest
7 years 23 days ago
As Walmart struggles to compete with its crazy-good growth of the past, they are pulling out all the stops in terms of re-inventing themselves in their domestic approach to business. Reshoring as it is called is not only a great way to create new, higher-paying jobs for specific markets and thus create more spending power for potential shopping at Walmart, but also great PR. One should also not dismiss the fact that the manufacturing labor market is not as unionized or as demanding in terms of compensation and benefit packages as it has been in the past. The timing appears to be right for this move. It is also difficult to have a discussion about the repatriation of U.S. manufacturing jobs across all U.S. companies without noting that the 35 percent corporate tax rate still is an obstacle for many to bring manufacturing jobs back to our shores. However, if the 2016 election goes the way of the conservative, supply-side minded candidates, we may see the corporate tax rate come down and even a rush… Read more »
David Livingston
Guest
7 years 23 days ago

Raising wages, reshoring and greenwashing are all just buzzwords for things Walmart and other retailers were going to do anyway, but are just taking advantage of the good press they get from it. Sure if the government is going to pay you to open manufacturing plants in the U.S. it will for sure catch on.

Walmart is not going to be raising wages or buying products made in America out of the goodness of their heart. Quid pro quo is taking place. It’s gotta pay for Walmart to play.

Paula Rosenblum
Guest
7 years 23 days ago

Not gonna happen.

Other retailers may do it too, but that’s because it’s the only way to get faster, and faster is the imperative, especially in apparel.

Walmart has no real need to get faster. But they do enjoy getting the industry into a spin over their potential moves.

I still think there will indeed be a reshoring movement. Millennials tend to be more socially responsible than previous generations as well. But Walmart will not be a leader.

Gordon Arnold
Guest
7 years 23 days ago

Are we confusing job creation with redistribution in this discussion? And will this redistribution create a net effect of one million higher paying jobs? Let’s take a look at where the money is likely coming from. Walmart more recently announced the elimination of an entire store management classification. This was a large population of full-time employees that were by many standards earning a true minimal living wage. These employees were absorbed using an expanding supervisory position(s), attrition and in the limited best of cases a promotion into a higher management position. The surplus from this and other moves will be spent on higher wages the company is committing to with the probability of lowering the financial exposure through the expanded use of part-time positions. So as a company they will show an increase in hiring far beyond the number of new faces and no job loses except for the ones forced to leave for whatever reason(s). Not a bad day’s, work is it?

Tom Brown
Guest
7 years 23 days ago

No chance. No one will remember Walmart’s blatant PR attempt by 2023.

Tony Orlando
Guest
7 years 23 days ago

If they can actually bring in $250 billion back here then I would tip my hat to them, but I am skeptical of this happening. Are they going to pay more for the product, even if it is only a little more? We’ll see what happens, but hey it’s great PR.

Gene Detroyer
Guest
7 years 23 days ago
I have been reading how manufacturing is coming back to the U.S. for the last 3 years. But it is never going to be a full blown trend. Once upon a time, off-shoring was all about cost. While it continues to have a cost component, it is also about quality and technology. Look around and note the high-quality goods and products that you are using that are not only made in Asia, but in Europe as well. People will say that U.S. productivity is making up for low labor costs. But the fact is that today, productivity innovation is available globally. Productivity innovation is not a long-term advantage. Let’s remember that companies aren’t people and they are not patriots. They have a different agenda. For a retailer, it is to deliver the optimal product at the optimal price. If one component of that is a label that says “Made in U.S.A., so be it. But that is only one component and in the end, the consumer will chose a better product at a better price,… Read more »
Mohamed Amer
Guest
Mohamed Amer
7 years 23 days ago

Let’s look at this from a different perspective. Walmart’s goal is $250 billion in sourced products over a 10 year period (2013-2023). This may sound like a sizeable chunk of business (and it is); however, put in context of Walmart’s annual sales ($485B in FY2015) or cost of goods sold ($356B) then the overall proportion of US made goods suddenly underwhelms. It’s big enough to notice and pay attention to, but not sufficient to make for a tipping point.

The “onshoring” movement is picking up steam due to economic reasons (on total landed cost, tax incentives, and speed to service dimensions) and secondarily as a PR moment. The former drives the latter and not vice versa.

Gajendra Ratnavel
Guest
7 years 23 days ago

Moves from big corporations that have a ripple effect almost always has to do with competitiveness. In the case of reshoring, this might not be something that other retailers jump on. It is a far more complicated formula than just raising wages. It will require government involvement to make this movement more widespread.

Al McClain
Guest
Al McClain
7 years 23 days ago

Regardless of the impact on Walmart and retail, or whether this is likely to succeed, the fact is the US needs it to succeed from a societal point of view. We need more blue collar (and white collar) jobs in many economically depressed urban and rural areas.

Now, the fact that these jobs aren’t actually created but moved from countries usually in worse shape than we are is a whole ‘nother conversation.

Kai Clarke
Guest
7 years 23 days ago

This is a poor economic move. “Reshoring” or national based purchasing, minimizes the global advantages which proven economics have demonstrated for over 100 years. Embracing a country’s strengths to leverage key products is not just good business, but also good for the consumer. John Maynard Keynes was right all along….

Verlin Youd
Guest
7 years 23 days ago

I applaud Walmart’s focus, accomplishments, and goals in this area, because it’s good for business, which means it provides value directly to Walmart shoppers, both in terms of merchandise value (price and quality), driving domestic job creation, and maybe most importantly motivating other retailers to follow suit. The tipping point will occur when at least three other top 10 US retailers commit the same level of effort and drive similar results. The rest of the industry will follow.

However, in today’s global economy there will always be a balance of domestic and international manufacturing, that is critical to ongoing global growth and foreign relations.

Naomi K. Shapiro
Guest
Naomi K. Shapiro
7 years 23 days ago

1. I hope so.
2. Momentum and leadership by retailers such as Walmart.

Sandy Montalbano
Guest
Sandy Montalbano
7 years 19 days ago

According to Reshoring Initiative data, Walmart has driven the largest number of reshored jobs and that we know of with 37 companies that attribute their reshoring to Walmart.

The reshoring efforts by Walmart are good for the U.S. economy, American manufacturing and job creation. Wal-Mart’s 10 year $250 billion initiative to supply its customers with more Made-in-USA goods is the biggest opportunity one company has provided to U.S. manufacturing.

We encourage suppliers to visit the Reshoring Initiative website to see if reshoring makes economic sense for them.

In order to help companies decide objectively to reshore manufacturing back to the U.S. or offshore, the not-for-profit Reshoring Initiative’s free Total Cost of Ownership Estimator can help corporations calculate the real P&L impact of reshoring or offshoring. 

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Braintrust
"Walmart could and should lead other retailers to promote reshoring its suppliers. As its history has shown us, Walmart got its start as a company that promoted "American Made" products but that soon changed. Walmart and a lot of other major retailers have the opportunity to put more Americans to work."
"I suspect several retailers follow everything Walmart does as a close second."
"I believe so. One could argue that this move is designed to prop up its sagging sales and improve its PR image. Regardless of the intentions, if Walmart succeeds in restoring a quarter of a billion dollars of merchandise in the next eight years it will have a pronounced effect on the economy (jobs) as well as the competitive landscape."

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