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Wal-Mart, Gap look to India

(bloomberg)
Updated: 2005-07-12 09:26

U.S. retailers, including Wal-Mart Stores Inc., Gap Inc. and Chico's FAS Inc., are increasing purchases of inexpensive clothing and jewelry from India as they brace for rising costs when China, their biggest overseas supplier, revalues its currency.

Wal-Mart, the world's largest retailer, is boosting purchases from India by 30 percent to US$1.5 billion this year. The Bentonville, Arkansas-based chain has an 86-employee purchasing office in Bangalore, India, from which "we could export a lot more," Wal-Mart International Chief Executive John Menzer said during a conference in New York on June 13.

Shoppers exit a Wal-Mart store in Casselberry, Florida June 22, 2004 in this file photo. Wal-Mart is one of the US retailers shifting from China to India for  clothing and other inexpensive goods supply. [Reuters]

Retailers that bought about US$65 billion in Chinese goods last year are turning to India because the anticipated yuan revaluation may increase their costs by 10 percent over two years, said Ken Mark, managing director of Martello Group in London, Ontario, a consultant who's co-written Harvard Business School case studies on Wal-Mart. Mark's figure is based on estimates of the yuan's rise versus the dollar.

"Retailers could shift the fall season to India," said Norbert Ore, committee chairman of the Tempe, Arizona-based Institute for Supply Management, the world's largest association of purchasing managers. "We've gotten into a virtual world where buyers can quickly move to the lower-cost country," he said. "If you see a shift in the yuan, you are going to have some impact."

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