Exclusive: Not Made in
America - Wal-Mart looks overseas for online vendors
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[July 27, 2017]
By Nandita Bose
CHICAGO (Reuters) - Walmart.com, trailing
Amazon.com Inc in the number of goods for sale on its website, is
recruiting vendors in China and other countries to boost its online
offerings in a pivot away from Wal-Mart's Made-in-America campaign.
While there is a financial incentive behind the move, Wal-Mart's
decision comes out of necessity: not all the goods its customers want -
ranging from jeans to bicycles to beauty products - are manufactured
within the United States.
For graphic on price of patriotism click: http://tmsnrt.rs/2w39FKO
That reality pits Wal-Mart against President Donald Trump's "Made in
America" push. It also risks alienating some of Wal-Mart's existing U.S.
vendors since it runs counter to the American-made pledge the retailer
made in 2013 in a bid to win customers, and satisfy unions and other
critics who said its drive for low cost goods was undermining American
jobs.
According to two sources with knowledge of the matter, Wal-Mart Stores
Inc in February began inviting sellers from China, the United Kingdom
and Canada to list on the marketplace section of Walmart.com, where it
earns a share of revenue from goods sold and delivered to customers by
third-party vendors.
Previously, it only allowed U.S. based sellers on the marketplace site,
sources said.
Calling the unreported move a "measured approach," Wal-Mart
Vice-President of Partner Services Michael Trembley confirmed the
invite-only program. He said foreign sellers currently make up less than
five percent of its seller base.
Trembley said Wal-Mart's move is focused on meeting customer demand for
different types of products and increasing online assortment. Wal-Mart's
marketplace inventory has quintupled this year to 50 million items. That
still pales in comparison to Amazon's nearly 300 million products
online, analysts said.
Shrinking that gap is key to Wal-Mart's strategy to beat Amazon.
Launched in 2009, the marketplace platform contributes more than 10
percent to Wal-Mart's e-commerce revenue, but barely registers in total
sales of nearly $486 billion, according to data from e-commerce
analytics firm Marketplace Pulse. The data could not be independently
verified by Reuters.
Amazon's third-party marketplace, which also uses global vendors from
countries like China, contributes to nearly half of Amazon's retail
sales, analysts said.
The move brings risks beyond the impact to Wal-Mart's sales. Trump
kicked off a "Made in America" week earlier this month where he promised
he would take more legal and regulatory steps during the next six months
to protect American manufacturers, lashing out against trade deals he
said have hurt U.S. companies.
Trump's comments come as the White House is seeking to renegotiate the
23-year-old North American Free Trade Agreement (NAFTA) in an effort to
shrink the trade deficit with Canada and Mexico.
"No longer will we allow other countries to break the rules, steal our
jobs and drain our wealth," Trump said in a weekly address tweeted by
the White House on July 21. "Instead we will follow two simple but very
crucial rules: We will buy American and we will hire American."
In a statement on Wednesday, Wal-Mart proposed policy actions to boost
U.S. manufacturing which could help capture $300 billion worth of
products that are imported. The retailer urged policymakers for simpler
regulations on things like Made in USA labeling and modernize trade
agreements.
Cindi Marsiglio, vice president for U.S. sourcing and manufacturing at
Wal-Mart, told Reuters it is on target with its pledge to buy $250
billion worth of American-made products by 2023, and remains committed
to boosting U.S. manufacturing.
"AGAINST THE SPIRIT OF THEIR 'MADE IN AMERICA'"
Some of Wal-Mart's existing U.S. vendors - whom Wal-Mart has recruited
to supply goods manufactured domestically as part of its highly
publicized Made-in-America sourcing plan - are on edge about competition
with foreign goods.
"It goes against the spirit of their 'Made in America' push," said one
seller of American-made socks to Wal-Mart.com, who spoke on condition of
anonymity for fear of hurting business relations with the retailer.
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T-shirts made in the USA are for sale at the Walmart Supercenter in
Bentonville, Arkansas June 5, 2014. The Walmart Stores Inc. annual
shareholder meeting takes place June 6, 2014. REUTERS/Rick Wilking/File
Photo
Six out of seven U.S. manufacturers Reuters spoke with who are selling
to Walmart.com said they were disappointed with the retailer's move.
Marsiglio said the retailer had not heard any complaints about its move
to allow global vendors on its marketplace.
"It's bad timing to start such a program given President Trump's push in
this direction and the resources they (Wal-Mart) spend on promoting a
patriotic image," said another vendor, who sells pet products.
Darius Mir, chief executive of MIA (Made in America) Seating Corp, a
Tennessee based seller of office furniture to Wal-Mart.com, said he
supports free trade and is open to competition on the platform. But he
thinks it would help U.S.-based vendors if Wal-Mart could label "Made in
USA" items listed on its website.
"Walmart must distinguish between a 'Made In USA' product from all
others by grouping the American made product separately, and
highlighting the Made In USA label," he said.
HOLLOWED-OUT MANUFACTURING
Wal-Mart's third-party marketplace is part of an overall online
initiative that is starting to show growth, with e-commerce sales
growing 63 percent during the first quarter.
The progress has been led by e-commerce chief Marc Lore, who took over
last year after Wal-Mart paid $3.3 billion for Jet.com, an online retail
platform he founded.
Wal-Mart's Trembley said the retailer's approach to growing its
marketplace, which analysts said has been slow, has been designed to
avoid problems like counterfeit products, which is a challenge for
rivals Amazon and Alibaba.
He said Wal-Mart vets sellers to the third party marketplace and has a
high bar for selection.
The retailer has also put in place requirements for global vendors that
could create U.S. jobs. For example, foreign sellers must be able to
fulfill orders from a U.S.-based warehouse, they must use a U.S.-based
return center and have customer support operating during U.S. business
hours, Trembley said.
But finding U.S.-based suppliers remains a challenge. Beginning in the
1980s, Wal-Mart led a push to look overseas for inexpensive inventory,
and the Made-in-America push—with its implied effort to rebuild a
hollowed-out manufacturing base—has created more publicity than sales,
retail consultants and analysts said.
Wal-Mart's Marsiglio in an interview in April told Reuters that finding
U.S.-based suppliers "remains one of the top challenges across our
supplier base."
This week she said one of the ways Wal-Mart is addressing that challenge
is by working with existing suppliers and leveraging their manufacturing
capacity to produce multiple items. For example, the retailer is working
with a playing cards supplier who is now manufacturing plastic cutlery.
Wal-Mart had 10,249 sellers on its marketplace at the end of 2017's
first quarter, a substantial jump from 400 in the same period a year
ago, according to data from Marketplace Pulse. This compares to millions
of sellers on Amazon's marketplace.
But few American consumers are willing to pay higher prices for
American-made items. A Reuters Ipsos poll released on Thursday found 70
percent of Americans think it is important to buy U.S.-made products but
37 percent said they wouldn't pay more for U.S.-made goods.
"This all boils down to one thing," said Juozas Kaziukenas, founder and
chief executive of Marketplace Pulse, the e-commerce analytics firm.
"Wal-Mart's marketplace has not been a success story, but with their
renewed focus on e-commerce, they are trying to do everything they can
to change that," he said.
(Editing by David Greising and Edward Tobin)
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