A Captive Call Option: Walmart Makes a One-Sided Sourcing Deal with Li & Fung

By Jason Busch on February 11, 2010

You’ve got to admire Walmart for its procurement chutzpah. Or, (staying with the Yiddish theme for a minute), perhaps Walmart’s been more of a chazar in its approach. A colleague introduced me to this phrase, which is loosely translated as “a pig … a guy who wins the lottery and asks the government to pay for the taxi ride to pick up the check is a chazar.” Walmart’s latest sourcing partnership with Li & Fung to “consolidate some of its existing sourcing business with a new unit of L&F, which [will act] as a middle man between factories in China and around the world and European and US retailers and brands,” represents such a request. But where, specifically, does this type of chazar behavior come in?

Walmart has essentially a call option in its contract with Li & Fung “to take control of the unit in 2016, as it shifts towards more direct relationships with manufacturers — in effect subcontracting to L&F the creation of what will become part of its own global sourcing operation.” Just as Walmart often does in sourcing stateside…