Wal-Mart plans US$50 billion ’buy American’ push

PUBLISHED : Wednesday, 16 January, 2013, 12:48pm
UPDATED : Wednesday, 16 January, 2013, 1:07pm


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Wal-Mart Stores will buy an additional US$50 billion in US-made products over the next decade in what it called a bid to help boost the US economy, although the announcement is unlikely to appease critics who say the world's largest retailer imports too much from low-wage suppliers in countries like China.

Wal-Mart, the largest private employer in the United States, also said on Tuesday it plans to hire 100,000 newly discharged veterans over the next five years, at a time when the US unemployment rate is at 7.8 per cent.

Wal-Mart said the plan to buy more US-made goods is an effort to create US jobs and spur economic growth. Critics countered that the company and other retailers could help the economy by paying better wages and offering workers more regular hours.

The moves come as the US economy continues to grow slowly 3-1/2 years after the end of a severe recession. An average of US$5 billion a year in spending is a drop in the bucket for the US$15 trillion US economy, and the question is how many other retailers could do the same.

Terry Lundgren, chief executive of Macy’s and until this month the chairman of the National Retail Federation, told Reuters that Wal-Mart’s plans to buy American were good but that cost would still be an issue.

“We would all love to do that, the customer will not pay more,” Lundgren told Reuters on the sidelines of an NRF event where Wal-Mart presented its plans.

Retailers like Walmart could provide the nation with a much needed economic boost by paying higher wages and providing stable scheduling - while still remaining profitable and continuing to offer low prices
Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union

The moves received a cool reception from critics who claimed Wal-Mart does not pay its workers enough and slammed the retailer for selling too many goods made in lower-cost countries like China. The company is also under pressure over its sourcing practices, particularly after a deadly fire at a Bangladesh factory that made Wal-Mart clothes.

Wal-Mart’s US unit says about two-thirds of the goods it buys for its stores are made, sourced from or grown in the United States, citing data from its suppliers. It did not give a dollar amount for how much it pays for those goods, or what percentage the increased domestic sourcing would bring.

The company has previously run “Made in America” campaigns, and in the early 1990s it was criticised for promoting foreign goods as domestically made.

Last year, 55 per cent of Walmart US sales came from groceries like food and drinks as well as other products that are typically sourced locally. Only 7 per cent of Walmart US sales were of apparel, jewelry and accessories, which retailers typically get from lower-cost countries.

To the extent Wal-Mart buys more US-made goods the company would have otherwise imported, it would reflect the recent shift in the US commercial relationship with the rest of the world.

Both economic output and net imports declined sharply during the 2007-09 recession. While gross domestic product has rebounded, net imports have not, a sign the United States is meeting more demand for goods and services domestically.

The company said its Walmart US and Sam’s Club warehouse chain will increase what they already buy in the United States in categories like sporting goods, basic apparel, storage containers, games and paper products.

Wal-Mart is not a member of the NRF, a major industry trade association that has promoted the importance of retail jobs in the United States. The NRF asserts that 25 per cent of American jobs are supported by the retail industry.

Along that line, the company said starting on Memorial Day in May, it plans to hire 100,000 US veterans over five years, a move supported by First Lady Michelle Obama.

“We’ve developed a national paralysis that’s driven by all of us waiting for someone else to do something,” Walmart US chief executive Bill Simon said in prepared remarks for the NRF. “But if we’re waiting on government, we’re waiting on a process that can’t act with the same speed as business.”

Veterans’ issues are of personal interest to Simon, who served 25 years in the US Navy and Navy Reserve. The company said it will offer a job to any honourably discharged veteran in the first year after active duty.

Depending on the time of year, there are anywhere from 15,000 to 50,000 job postings at Walmart. The company said it promotes about 170,000 people each year to jobs with more responsibility and higher pay.

About 75 per cent of its store management started as hourly associates, and now earn an average of US$50,000 to US$170,000 a year. The highest earning store manager last year made more than US$250,000. Wal-Mart has repeatedly claimed its pay and benefits are in the top half of the retail industry.

Starting wages for Walmart US store employees vary by market. Simon said that in his first job as a dishwasher in a restaurant, he made US$2.10 an hour.

Walmart US also said it would give part-time workers the first shot at full-time positions. It also plans to make scheduling more transparent, giving part-time workers the ability to choose more of their own hours.

Simon had barely finished speaking at the NRF event before critics responded to the new spending and hiring plan.

“Retailers like Walmart could provide the nation with a much needed economic boost by paying higher wages and providing stable scheduling - while still remaining profitable and continuing to offer low prices,” Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union, said in a statement. “By part-timing their workforce, they’re hurting both workers and our economy by fuelling underemployment.”

Sales for Walmart US rose 1.5 per cent to US$264.19 billion in fiscal last year, which ended in February last year, and accounted for 59.5 per cent of the company’s total sales.