Walmart's Buy American Campaign Could Boost Retailer's Bottom Line

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WALMART BUY AMERICAN
(AP Photo/Steven Senne) | AP

Walmart pledged earlier this week to buy more American-made goods, billing the move as a way to grow the U.S. economy.

It's not just patriotism fueling the vow. The campaign will likely help the company’s image, as the chain is facing criticism over its foreign-made goods in the wake of a Bangladeshi factory fire that killed more than 100 workers. Walmart acknowledged shortly after the fire that the factory was making clothing for the retailer. Plans for Walmart's campaign were in the works for more than a year -- or well before the fire -- David Tovar, a spokesman for the company, told The New York Times.

Perhaps more importantly, the pledge could save the company money, The New York Times first noted Tuesday.

“They’re doing it for both reasons,” Michael Levy, the director of the Supply Chain Institute at Babson College, told The Huffington Post. “Walmart’s not going to do things that are going to cost them more money.” Levy, who has studied the giant retailer for nearly 30 years, said the shift to American-made products will allow Walmart to cut costs on transportation and inventory.

Already about two-thirds of the products sold by Walmart's U.S. unit are American-made, grown or sourced, according to Reuters. But on Tuesday, the company announced it would aim to buy $50 billion more in U.S.-made goods over the next 10 years, in areas like appliances, sporting goods and towels.

Walmart didn’t return an email request for comment from HuffPost.

As the cost of Chinese labor rises and the cost of energy for manufacturers in the U.S. continues to fall thanks to cheaper natural gas options, America is becoming a more inexpensive place to produce goods, said Michael Zinser, a partner at the Boston Consulting Group. Plus, it costs less to move goods when you’re closer to the source, he added.

“That longer supply chain is going to cost more than being able to source it from here in U.S.,” said Zinser, a co-author of the company’s “Made In America, Again” report.

Walmart is the most recent retailer to announce a U.S. push. Apple said late last year that it would bring home some of its Mac production from China, and General Electric made a similar move in 2010, according to USA Today.

It’s possible Walmart -- the perennial low-cost retailer -- might even be able to get consumers to pay more for American-made products. Americans are willing to pay a premium of 10 to 60 percent on a variety of goods if they know they’re made in the U.S., according to a recent BCG survey.

“It’s another factor that helps a consumer make a purchase,” said Scott Paul, president of the American Alliance for Manufacturing. “Walmart will be able to move even more products and will be able to capture a premium -- a modest premium because it's Walmart -- for its products.”

Ultimately, Walmart wouldn’t be boosting its offering of U.S.-made products if it didn’t help the company’s bottom line, Paul said. “Walmart, or any publicly held company, isn’t in the business of altruism.”

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