Walmart, the world’s largest retailer, is importing more goods from India and reducing its reliance on China as it looks to cut costs and diversify its supply chain, according to data seen by Reuters. The data shows that Walmart shipped one quarter of its US imports from India between January and August this year, compared with just 2% in 2018. On the other hand, only 60% of its shipments came from China during the same period, down from 80% in 2018.
The shift illustrates how the rising cost of importing from China and escalating political tensions between Washington and Beijing are encouraging large US companies to import more from countries including India, Thailand and Vietnam. In the US, shoppers face higher interest rates and high food prices, eroding household savings and prompting Walmart and other retailers to become cautious in their outlook for consumer spending.
India’s growth and potential
India has emerged as a key component of Walmart’s efforts to build its manufacturing capacity, Andrea Albright, Walmart’s executive vice president of sourcing, said in an interview. Walmart has been accelerating its growth in India since 2018, when it bought a 77% stake in Indian e-commerce firm Flipkart. Two years later, it committed to import $10 billion of goods from India each year by 2027. That is a target it remains on track to hit, Albright said. It is currently importing around $3 billion worth of goods from India each year.
Walmart is importing goods ranging from toys and electronics to bicycles and pharmaceuticals from India to the US, Albright said. Packaged food, dry grains and pasta are also popular imports from India, she added. India, whose stock market has risen to record highs this year, is viewed as the country best equipped to outperform China in low-cost, large-scale manufacturing. Its rapidly growing workforce and technological advancement were a draw for Walmart, Albright said. China, on the other hand, reported its first decline in population in six decades last year.
Supply chain resilience and diversity
The COVID-19 pandemic exposed weaknesses in global supply chains, showing US importers to be over-reliant on a small number of markets. “Planning for a geopolitical event is like planning for a hurricane,” said Albright. “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.”
Pakistan and Bangladesh have also benefited from Walmart’s strategy, expanding as suppliers of home and apparel products, Albright said. Some Indian suppliers, such as Freewill Sports and Devgiri, have seen a surge in demand from Walmart in the last 12 to 18 months. “There is a newfound confidence in the Indian manufacturing industry and also the availability of factory infrastructure,” said Rajesh Kharabanda, chief executive of Freewill Sports, a small Indian supplier of soccer balls.