Walmart is importing more goods to the United States from India and reducing its reliance upon China as it looks to cut costs and diversify its supply chain.
The world’s largest retailer shipped one quarter of its U.S. imports from India between January and August this year, compared with just 2% in 2018. Only 60% of its shipments came from China during the same period, down from 80% in 2018. However, China is still Walmart’s biggest country for importing goods.
The shift illustrates how the rising cost of importing from China and escalating political tensions between Washington and Beijing are encouraging large U.S. companies to import more from countries including India, Thailand, and Vietnam.
Walmart’s executive vice president of sourcing, Andrea Albright, said, “We want the best prices. That means I need resiliency in our supply chains. I can’t be reliant on any one supplier or geography for my product because we’re constantly managing things from hurricanes and earthquakes to shortages in raw materials.”
India has emerged as a key component of Walmart’s efforts to build manufacturing capacity. Walmart has been accelerating 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, a target it remains on track to hit. 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 U.S. Packaged food, dry grains, and pasta are also popular imports from India. India is viewed as the country best equipped to outperform China in low-cost, large-scale manufacturing due to its rapidly growing workforce and technological advancement.
Walmart started its sourcing operations in Bangalore in 2002. Now, the company employs more than 100,000 people, including temporary workers, in the country spread across several offices under its Walmart Global Tech India unit, Flipkart Group, PhonePe, and sourcing operations.
Walmart CEO Doug McMillon met Indian Prime Minister Narendra Modi in May this year, a meeting that Modi termed “a fruitful one.” “Happy to see India emerge as an attractive destination for investment,” Modi wrote on X, formerly known as Twitter, on May 14. McMillon said Walmart would “continue to support the country’s manufacturing growth and create opportunity.”
Walmart rival Amazon said this month it is targeting merchandise exports worth $20 billion from India by 2025. The rising cost of shipping goods from China has also contributed to the switch to India, supply chain experts say.
“Sourcing from mainland China has become less competitive because of rising labor costs versus other manufacturing centers,” said Chris Rogers, research analyst at S&P Global Market Intelligence’s supply chain analysis group Panjiva.
China’s minimum wage changes from province to province and sometimes even from city to city, with a range between 1,420 yuan per month and 2,690 yuan per month ($198.52 — $376.08). Meanwhile, average wages for unskilled and semi-skilled workers in India range from about 9,000 Indian rupees to 15,000 Indian rupees a month ($108.04 — $180.06), according to central bank estimates.
The COVID-19 pandemic exposed weaknesses in global supply chains, showing U.S. 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. Last year, at least eight Freewill shipments sailed to Walmart warehouses from Mundra Port in Gujarat, the largest private port in India, according to U.S. import data. “There is a newfound confidence in the Indian manufacturing industry and also the availability of factory infrastructure,” said Freewill’s Chief Executive Rajesh Kharabanda.
India’s central bank forecasts that the country’s economy will expand 6.5% this fiscal year. China is expected to grow around 5% this year. “In the last 12 to 18 months there has certainly been a bigger impact,” said Shekhar Gupta, whose family business Devgiri has been selling floor rugs to Walmart for about a decade. “That’s when Walmart started putting a true strategy behind how they wanted India at the center of their growth.”
Why It Matters (op-ed)
Walmart’s shift from China to India for cheaper imports is a strategic move that should be applauded. This decision not only reduces reliance on China but also strengthens ties with a democratic ally.
India’s growing workforce and technological advancements make it a prime candidate to outperform China in low-cost, large-scale manufacturing. This move will contribute to India’s economic growth, bolstering a crucial counterweight to China’s influence in the region.
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