Walmart wants to add $250 billion worth of Made in the USA products to its stores by 2023, an ambitious plan the retail giant says will add 1 million new American-based manufacturing and support jobs as well.
Walmart held its fourth annual U.S. Manufacturing Summit at its Arkansas headquarters this week, inviting hundreds of companies, suppliers and entrepreneurs to discuss how it was going to find and support more American products and manufacturers and accept new American manufactured product pitches.
“We are thrilled to put hundreds of new Made in the USA products on Walmart.com,” said Michelle Gloeckler, Walmart’s executive VP of consumables, health & wellness and the company’s U.S. manufacturing lead. “Walmart’s $250 billion commitment to buy products supporting American jobs is having a tangible impact on communities across the country as factories expand or open to make products for Walmart stores, Walmart.com and Sam’s Club.”
Walmart estimates this strategy will add 1 million in new jobs to the American economy by 2023 – 250,000 in manufacturing and 750,000 in the support and service sectors.
Harold Sirkin, senior partner and managing director at the Boston Consulting Group, who presented a forum on U.S. manufacturing trends and insights, said that you are starting to see manufacturing jobs returning to the U.S. because the cost to produce goods in China has “risen dramatically” over the past several years.
Sirkin said that in 2010 the typical hourly salary for a worker in the Chinese manufacturing sector was equivalent to about $0.72, but that number has steadily risen to the cost of about $6 per hour now. Compare that with the average hourly wage that an American worker in the manufacturing sector makes – between $15 and $22 an hour – and the difference in cost is basically a wash once you factor in that the average American worker is four times more skilled and productive than the average Chinese worker, he said.
Another added benefit to Walmart and other retailers with Made in the USA products is the simplicity of dealing with American workers and the companies who produce them rather than factories or plants in China, Mexico or other developing countries where language and different forms of government and regulations could result in further barriers.
“It lets you control your supply chain better,” said David Cadden, professor emeritus of entrepreneurship and strategy at Quinnipiac University.
“It’s good economics for the manufacturers,” Sirkin said. “If I can do something, and I can do it with less hassle and less risk, I think that’s a good idea all around.”
There’s also, as Cadden noted, the added “prestige” factor of goods and products made in the U.S.
“To say ‘made in the United States’ compared to say ‘made in China,’ you’ve got a tremendous perceived difference in quality right there,” Cadden said.
Sirkin recalled a test the Boston Consulting Group did for a retailer where they placed two tables in the middle of the store displaying identical white bath towels for sale: one table had a sign next to it advertising that the towels were made in the USA, the other did not.
“It turned out they flew off our shelves,” Sirkin said of the towels that were made in the USA.
Sirkin said made in the USA is suddenly coming back into vogue for retailers because it matters so much with the modern American consumer, a sentiment that Cadden agreed with.
“They’re able to capitalize now on the populist tone you’re seeing in Trump’s campaign and Bernie Sanders’ campaign," Cadden said, noting that “people are ticked off. Particularly people that shop at Walmart are ticked off. They’re probably people that have suffered from the exporting of good paying union jobs, manufacturing jobs.”
Ironically, Walmart’s purchasing strategy and demand for ever lower prices is one of the major reasons why so many manufacturing jobs began moving overseas in the 1970s and early 1980s, a fact that the retail giant now seems intently dedicated to trying to reverse.
“If somebody steals your candy and then gives it back to you, are you supposed to say 'thank you?'” Cadden wondered.