Dive Brief:
- Wal-Mart Stores will stop selling sheets manufactured by Welspun India Ltd., as Welspun could not guarantee the sheets were 100% Egyptian cotton, the Wall Street journal reported.
- Wal-Mart is offering refunds to customers who purchased the 400 thread count sheets that are identified with the Damask Stripe and the Better Homes and Gardens brand and Canopy brand, whose tags read "100% Egyptian Cotton," according to a notice on its website.
- Wal-Mart joins Target, Bed Bath & Beyond, Macy's and J.C. Penney as the latest retailer to pull Welspun made products. However, the retailer said it will continue to work with Welspun for better labeling practices.
Dive Insight:
The controversy about the validity over Egyptian cotton revealed the importance of transparency in supply chains and the ramifications that can take place at each stage of the manufacturing process.
When Target cut ties with Welspun, the cotton manufacturer lost access to approximately $90 million in addition to lost sales with the other retailers, according to the transcript from a conference call with investors. The company stated the mistake was a sourcing problem, and its failure to guarantee 100% quality of Egyptian cotton was due to growing volumes which led to decreased controls.
Welspun's debacle, while widely unacceptable for any salesperson, also revealed a stunning lack of labeling controls, however. The Cotton Egypt Association estimated 90% of "Egyptian cotton" products were, in fact, inauthentic, according to a Wall Street Journal report. It also raises doubts over the major retailers' procurement practices in vetting suppliers for authenticity, particularly while selling luxury products.
