Walmart shifts from China to India for cheaper imports - November 29, 2023 at 12:00 p.m.

Walmart shifts from China to India for cheaper imports - November 29, 2023 at 12:00 p.m.

Walmart is importing more goods from India to the United States and reducing its dependence on China, as part of its policy to reduce costs and diversify its supply chain, data shows by Reuters.

The world's top retailer shipped a quarter of its U.S. imports from India between January and August this year, according to bill of lading figures shared with Reuters by data firm Import Yeti. This figure compares to only 2% in 2018.

Only 60% of its shipments came from China during the same period, down from 80% in 2018, according to the same data. Certainly, China remains the largest country for importing goods for Walmart.

The shift illustrates how the rising cost of imports from China and escalating political tensions between Washington and Beijing are encouraging large U.S. companies to import more from countries such as India, Thailand and Vietnam.

“We want the best prices,” Andrea Albright, Walmart’s executive vice president for procurement, said in an interview. “This means our supply chains must be resilient. I can't depend on a single supplier or geographic area for my products because we constantly have to deal with issues like hurricanes, earthquakes, and raw material shortages.

In a statement, Walmart said bill of lading data only gave a partial picture of its supply sources and that creating redundancy "does not necessarily mean" it is reducing its reliance on one or other of its supply markets. “We are a growing company and are working to increase our production capacity,” Walmart said.

India has emerged as a key part of Walmart's efforts to build that manufacturing capacity, Mr. Albright said.

Walmart has been accelerating its growth in India since 2018, when it bought a 77% stake in Indian e-commerce company Flipkart. Two years later, it pledged to import $10 billion of goods from India each year by 2027. It's a goal it is on track to meet, Mr. Albright said . Currently, it imports around $3 billion worth of goods from India every year.

WORKFORCE AND TECHNOLOGY ARE MAJOR ASSETS

Walmart imports products from India to the United States ranging from toys and electronics to bicycles and pharmaceuticals, Mr. Albright said. Packaged food products, dry cereals and pasta are also popular imports from India, she added.

India, whose stock market has soared to record highs this year, is seen as the country best equipped to surpass China in large-scale, low-cost manufacturing.

The rapid growth of its workforce and technological advancements attracted Walmart, Ms. Albright said. China, meanwhile, recorded its first population decline in six decades last year.

Walmart started its sourcing operations in Bangalore in 2002. Today, the company employs more than 100 people, including temporary workers, in the country, spread across several offices of its Walmart Global Tech India unit, part of the Flipkart, PhonePe and sourcing operations.

Walmart CEO Doug McMillon met with Indian Prime Minister Narendra Modi last May, a meeting Modi called “fruitful.”

“I am happy to see India emerging as an attractive investment destination,” Mr. Modi wrote on X, formerly known as Twitter, on May 14. Mr. McMillon said Walmart would “continue to support the nation’s manufacturing growth and create opportunities.”

Walmart's rival Amazon said this month it was targeting merchandise exports worth $20 billion from India by 2025.

Freewill Sports, a small Indian supplier of soccer balls, is one of the companies that has benefited, its chief executive, Rajesh Kharabanda, said in an interview.

According to supply chain experts, rising costs of shipping goods from China have also contributed to the shift to India.

“Sourcing from mainland China has become less competitive due to increased labor costs compared to other production centers,” said Chris Rogers, research analyst at the d group. supply chain analysis from S&P Global Market Intelligence, Panjiva.

The minimum wage in China varies from province to province and sometimes even from city to city, with a range between 1 yuan per month and 420 yuan per month ($2 – 690). 198,52$). In India, average wages for unskilled and semi-skilled workers range between 376,08 and 9 Indian rupees per month ($000 and $15), according to central bank estimates.

PROBLEMS IN THE SUPPLY CHAIN

The COVID-19 pandemic has exposed weaknesses in global supply chains, showing that U.S. importers are overly reliant on a small number of markets.

“Preparing for a geopolitical event is like preparing for a hurricane,” Mr. Albright said. “What I can control is where my product comes from and how I can ensure that Christmas will still be there if something happens in our supply chain.

Pakistan and Bangladesh have also benefited from Walmart's strategy, expanding as suppliers of household products and clothing, Mr. Albright said.

Last year, at least eight shipments of Freewill were shipped to Walmart's warehouses from the Mundra port in Gujarat, India's largest private port, according to U.S. import data.

“There is renewed confidence in Indian manufacturing and the availability of industrial infrastructure,” Rajesh Kharabanda, chief executive of Freewill, said in an interview.

India's central bank expects the country's economy to grow by 6,5% in the current fiscal year. China is expected to grow around 5% this year.

“In the last 12 to 18 months, the impact has definitely been greater,” said Shekhar Gupta, whose family business Devgiri has been selling floor mats to Walmart for about a decade. “That’s when Walmart started to put in place a real strategy to place India at the center of its growth. ($1 = 7,1528 Chinese yuan renminbi) ($1 = 83,3050 Indian rupees) (articles contributed by Richa Naidu and Siddharth Cavale; articles supplemented by Casey Hall and Manoj Kumar. Editing: Matthew Scuffham and Sharon Singleton)

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