Walmart is changing its game plan by bringing in more products from India to the United States and reducing its dependence on China. This move is aimed at saving costs and making its supply chain more diverse, as per information obtained by Reuters.
In the first eight months of this year, the retail giant imported 25% of its goods to the U.S. from India, according to shipping documents analyzed by data firm Import Yeti. This is a significant increase from the 2% recorded in 2018. Meanwhile, the percentage of imports from China during the same period decreased from 80% in 2018 to 60%.
Although China remains Walmart’s primary source for imported goods, this shift indicates the impact of higher import costs from China and the growing tensions between the U.S. and China. It’s prompting major U.S. companies like Walmart to explore alternative sources, including countries like India, Thailand, and Vietnam.
“We’re always aiming for the best prices,” explained Andrea Albright, Walmart’s executive vice president of sourcing in an interview. “To achieve that, we need resilience in our supply chains. Depending on just one supplier or location for our products isn’t feasible, especially when we’re dealing with everything from natural disasters like hurricanes and earthquakes to shortages in raw materials.”
Walmart, in a statement, acknowledged that the bill of lading data provides only a partial view of its sourcing activities. The company emphasized that creating redundancy in the supply chain “does not necessarily mean” reducing reliance on any specific sourcing markets. “We’re in a growth phase and actively working to source more manufacturing capacity,” Walmart added.
India has become a crucial part of Walmart’s strategy to enhance manufacturing capacity, according to Albright.
Since acquiring a 77% stake in the Indian e-commerce company Flipkart in 2018, Walmart has been expanding its presence in India. Two years later, the company committed to importing $10 billion worth of goods from India annually by 2027. According to Albright, they are on track to meet this goal, currently importing approximately $3 billion worth of goods from India each year.
The attraction lies in the workforce and technology
Walmart is bringing in a variety of goods from India to the U.S., including toys, electronics, bicycles, pharmaceuticals, packaged food, dry grains, and pasta, according to Albright. She highlighted that India’s stock market has reached record highs this year, positioning the country as a strong contender to outperform China in large-scale, cost-effective manufacturing.
Walmart finds India appealing due to its rapidly expanding workforce and technological progress, as Albright pointed out. In contrast, China experienced its first population decline in six decades last year.
Walmart initiated its sourcing operations in Bangalore back in 2002. Presently, the company has over 100,000 employees, including temporary workers, spread across various offices in India under units such as Walmart Global Tech India, Flipkart Group, PhonePe, and sourcing operations.
In May of this year, Walmart CEO Doug McMillon had a meeting with Indian Prime Minister Narendra Modi, which Modi described as “a fruitful one.”
Modi expressed his delight at seeing India becoming an appealing destination for investments in a post on what used to be called Twitter, on May 14. McMillon assured that Walmart would “continue to support the country’s manufacturing growth and create opportunity.”
Walmart’s competitor, Amazon, recently announced its goal to achieve merchandise exports worth $20 billion from India by 2025.
Freewill Sports, a small Indian supplier specializing in soccer balls, shared its success story. According to CEO Rajesh Kharabanda, the company has experienced positive outcomes.
The shift towards importing from India is also influenced by the increasing cost of shipping goods from China, as mentioned by supply chain experts. Chris Rogers, a research analyst at S&P Global Market Intelligence’s supply chain analysis group Panjiva, noted that sourcing from mainland China is becoming less competitive due to rising labor costs compared to other manufacturing centers.
China’s minimum wage varies across provinces and cities, ranging from 1,420 yuan to 2,690 yuan per month ($198.52 – $376.08). In contrast, average wages for unskilled and semi-skilled workers in India range from about 9,000 Indian rupees to 15,000 Indian rupees per month ($108.04 – $180.06), according to estimates from the central bank.
Issues in the supply chain
The global supply chain weaknesses were laid bare by the COVID-19 pandemic, revealing that U.S. importers had become too dependent on a few markets.
Discussing this, Albright mentioned, “Planning for a geopolitical event is like planning for a hurricane. What I can control is where my product is coming from and how do I make sure that Christmas still happens if something happens in our supply chain.”
Walmart’s strategy has also benefited countries like Pakistan and Bangladesh, which have expanded as suppliers of home and apparel products, as Albright highlighted.
According to U.S. import data, at least eight shipments from Freewill sailed to Walmart warehouses from Mundra Port in Gujarat, the largest private port in India.
Expressing the positive shift, Freewill’s Chief Executive Rajesh Kharabanda said in an interview, “There is a newfound confidence in the Indian manufacturing industry and also the availability of factory infrastructure.”
According to India’s central bank, they predict the country’s economy to grow by 6.5% this fiscal year. In comparison, China is expected to see a growth of around 5% this year.
Commenting on this, Shekhar Gupta, whose family business Devgiri has been supplying floor rugs to Walmart for about ten years, mentioned, “In the last 12 to 18 months, there has certainly been a bigger impact. That’s when Walmart started putting a true strategy behind how they wanted India at the center of their growth.”
