Walmart, a major U.S. retail giant, is reportedly taking significant measures to reduce costs on its apparel items, including canceling orders, as consumers prioritize essential items like food amid surging inflation. This strategic move to sell off remaining summer collections ahead of the back-to-school season and upcoming holidays has implications for Bangladesh, one of Walmart’s primary suppliers of ready-made garments (RMG).
According to industry reports, Walmart has been scaling back both the number and volume of its apparel orders from Bangladeshi garment factories in recent weeks. Textile millers providing fabrics for Walmart are also experiencing a reduction in orders. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has indicated that Walmart has already canceled some orders, suspended shipments ready for delivery, and paused those in process.
Simultaneously, the global increase in fuel oil prices has led to a substantial rise in garment production costs, reportedly escalating by at least 20 percent. Garment factory owners are grappling with the challenge of coping with these heightened costs, especially considering that garment prices are typically agreed upon two months in advance of production. Consequently, factory owners find themselves producing clothing at a loss due to an inability to adjust prices during the production stage.
Walmart CEO Doug McMillon acknowledged that shifting consumer priorities, driven by rising inflation and high gas prices, are influencing spending habits. As a result, Walmart is facing the need for increased markdowns in the apparel category within its U.S. stores. This development follows Walmart’s earlier announcement of reduced profit projections for fiscal year 2023. The retail giant’s response to changing consumer dynamics has ramifications not only for its own bottom line but also for the economies and businesses of garment-producing countries like Bangladesh.
