Blog: Leonie BarrieWal-Mart sourcing shifts

Leonie Barrie | 21 September 2012

In the same way that retail organisations are in a constant state of flux, Wal-Mart's decision to change the terms of its supply deal with Li & Fung shows that sourcing policies, too, have to shift in line with the changing needs of a business.

Back in January 2010, when Li & Fung set up a new sourcing unit for Wal-Mart called Direct Sourcing Group, it was said to have the potential to buy goods worth about $2bn in its first year of operation. The world's largest retailer was focused on cutting costs by consolidating its global sourcing operations, so moving away from the Hong Kong firm's wholesale operations and tapping instead into Li & Fung's vast buying operations around the world was one way of doing this.

But Wal-Mart, with its mix of products, brands and countries of operation, has probably the most complex buying needs of any major clothing retailer. It continues to buy some clothes direct, some own-branded clothes through wholesalers, and some specially developed brands from branded companies. Each is bought in a way best suited to the product concerned, the market it's bought for and the country it's bought from.

And meeting these needs now requires a new change of direction - at least as far as its relationship with Li & Fung is concerned. The Direct Sourcing Group will continue as the main direct resource for the retailer's Sam's Club warehouse format in the US; and it will provide buying agency services to Walmart in the US and some international markets in specific categories.

Another of Li & Fung's subsidiaries will move to a supplier relationship with Walmart's international markets, where it will provide design, replenishment and other services "that could not be provided as a buying agent."

Li & Fung is playing down the change of arrangement. "Wal-Mart is now one of the group's largest customers," it says, adding that the new agency agreement "will allow the group to build on this relationship."


New initiatives to tackle climate change

After Nike and Wal-Mart last week pledged to source 100% of their electricity from renewable energy, more initiatives are being embarked upon to combat global climate change....


Navigating potential risks ahead of TPP

As the second largest footwear supplier to the US, Vietnam is already an important part of the production portfolio for many US footwear companies. But with growth being fuelled by the possible Trans-...


Nike and Wal-Mart join renewable energy pledge

Nike and Wal-Mart have used the annual Climate Week in New York to pledge to source 100% of their electricity from renewable energy, joining H&M and M&S as part of the RE100 campaign....


Special offer for just-style registered members

just-style has just launched an exciting offer for registered members: A full-year subscription with a saving of over one third on the usual price AND a free, 33-page report on how to develop a compre...

just-style homepage

Forgot your password?