Blog: Leonie BarrieWal-Mart in sourcing shake-up

Leonie Barrie | 1 February 2010

With retail sales slowing around the world, sourcing is subject to stringent cost reviews like any other business operation. And for many firms, one of the easiest ways to shave overheads – as well as generating knock-on gains like speed to market – is to offload some or all of their sourcing interests to focus on their core retail concerns.

This is exactly what has happened with US retail giant Wal-Mart Stores Inc, which last week agreed a strategic alliance with Li & Fung as part of a shake-up of its global sourcing structure in a bid to reduce costs, improve quality and accelerate its speed to market.

Under the deal, Li & Fung is forming a new company to manage the Wal-Mart account and will act as a buying agent for goods valued at around $2bn within the first year. “We are redefining how we source products that are imported into Walmart retail markets around the globe,” Wal-Mart said of the deal.

Elsewhere, retailers and certification groups have gone on the offensive after a German newspaper report last week claimed that clothing labelled as “organic cotton” by some major retailers contained genetically modified cotton from India. The allegations prompted H&M to say it had no reason to believe the organic cotton used in its garments was grown using genetically modified seeds. While fashion chain C&A said it was investigating the claims.

Cotton certification group Control Union, meanwhile, argued that the data was skewed. Whatever the outcome, the charges highlight the problems of trying to improve the integrity of the organic cotton trade, the challenge in verifying organic claims – and just how easy it is to undermine credibility in this growing and lucrative market.

Trade and environment specialists at last week’s UN Conference on Trade and Development (UNCTAD) believe the eco-fashion segment will post big gains over the next decade as consumers buy more environmentally sustainable and ethically produced goods. But they also acknowledge that uptake will be determined by how fast manufacturers adjust their production towards the new ethical model, and how quickly prices are lowered to compete with conventionally manufactured apparel.

And in a bid to help develop more sustainable solutions across a range of products, sportswear maker Nike has teamed with nine other companies to launch web-based marketplace GreenXchange (GX) to share intellectual property (IP) such as patents with other firms. The idea is to create a forum for technology, with Nike promising to share more than 400 of its patents via the portal.


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