Walmart, the largest retail company in the United States, has recently decided to invest in a major shift from sourcing products from China to importing from India, in search of cheaper production costs. This decision is part of the company’s long-term strategy to maintain its competitive edge, while leveraging the cost benefits of their new suppliers.
As the second-largest economy in the world and considered as the ‘back office’ of global manufacturing, India represents a major alternative to Chinese suppliers. The long-established manufacturing infrastructure, budding talent pool and its geographical advantages mean the country provides a tremendous opportunity for Walmart to drive down their buying costs. In addition, India has a wholesome legal framework in place to protect the interests of foreign investors, providing a much-needed peace of mind to the company in its new venture.
To make the most of their new suppliers and to ensure a successful switch, Walmart’s strategy is to source products from Indian manufacturers that complement, while also supporting their current offering from China. This regimen is expected cut down their imports costs by as much as 15-20%.
While the retail giant’s decision is widely welcomed by Indian manufacturers and local industry experts, some pundits have expressed doubt on the sustainability of the move. Businesses across the world have long had trust issues with the reliability of Indian supply chains, due to their complex logistics. Additionally, concerns have been raised about the difficulties Walmart might face in making the transition from goods made in China to quality products from India.
Overall, however, Walmart’s transition to India is an exciting new development for the emerging economy. The company’s long-term strategy could pave the way for a surge of supplies coming from India in the coming years, and bring about a climb up the value chain for its Indian suppliers. With its vast pool of talent and efficient regulatory system, India is now in a prime position to claim a more dominant role in the world of international trade.