Walmart's planned South Carolina warehouse will increase Port of Charleston volume 5%

Dive Brief:

Walmart will build a direct import distribution center in Dorchester County, South Carolina that will increase the retailer's throughput at the neighboring Port of Charleston, the South Carolina Ports Authority announced Monday.
The $220 million, 3 million-square-foot facility is expected to increase the port's volume by 5%. It will serve "several" regional distribution centers that support about 850 Walmart stores and Sam’s Clubs. The groundbreaking on the facility is expected to happen in March 2021.
"In order to ensure we are prepared to keep up with the trend of customer demand, we are adding this distribution center to our supply chain network," a spokesperson for Walmart said when asked why the retailer chose the location. "Dorchester County was an ideal site for the DC based on local infrastructure, a strong nearby port, the talent pool and other factors."

Dive Insight:

Walmart is not wholly unfamiliar with the Port of Charleston. The retailer had 8,208 TEUs (3.7% of its imports) move through the gateway in the year ending June 30, 2020. About three-quarters (76%) of the imports to Charleston come from China and 81% of them being handled by CMA CGM, according to data shared with Supply Chain Dive from Panjiva, the supply chain research unit of S&P Global Market Intelligence.

"The largest port for Walmart’s imports was Houston with 43,426 TEUs followed by Seattle with 31,776 TEUs," Panjiva wrote in a research note. "The biggest losers from the new center, assuming there are also redirections as well as new growth, would be Savannah, GA and potentially Norfolk, VA which handled 31,313 TEUs and 30,525 TEUs respectively."

Chart segments U.S. seaborne imports linked to Walmart by port of unlading and shipping firm in the 12 months to June 30 in TEUs.

Table and data from Panjiva

East Coast ports have gained a lot of attention over the last couple of years as they have steadily chipped away at the market share of the substantially larger West Coast ports. Analysts point to shifting sourcing away from China and the East Coast's proximity to a large part of the U.S. population. An estimated two-thirds of the U.S. population lives east of the Mississippi River, according to JLL.

"Certainly Walmart, but many other customers, are cognizant of the scale of the southeastern market," Micah Mallace, the director of national accounts at the Port of Charleston, told Supply Chain Dive in an interview.

Walmart saw a need for more capacity in its network dating back before the pandemic and approached the Port of Charleston to let them know it was one of the markets being considered. It is the port's impression that the majority of the business from Walmart will be new rather than shifted away from other port locations as Walmart expects to outgrow its existing facilities in the coming years, Mallace said.

He said the port's strategy for getting new volume focuses on courting beneficial cargo owners like Walmart rather than ocean carriers.

"You can be the best operating port with the least expensive offering to the ocean carrier," Mallace said. "But if you have no freight, then they have no reason to call your port."

Working with shippers to locate their facilities near the port then gives the carriers an incentive to call the port.

"That may lead the SCPA to target large retailers currently shipping to Savannah in particular," Panjiva wrote in its research note pointing to this strategy, adding that Target and Ikea are currently the largest retailers moving cargo through Savannah.

The location where Walmart is building the distribution center is located near Ridgeville, South Carolina, on a 1,000-acre plot of land the port bought in 2018, Liz Crumley, the manager of corporate communications for the Port of Charleston, told Supply Chain Dive. The rail-served location is 35 miles from the Port of Charleston and Walmart is the first tenant as the facility called the Ridgeville Commerce Park.

The port is also pivoting to a focus on retail and consumer goods after years of prioritizing advanced manufacturing, he said, citing the fact that manufacturing makes up about 11% of the GDP while "tangible consumption" makes up 30% to 35%.

As ports on the East Coast look to bring in more volume, there should be plenty to go around, Mallace said.

"Walmart is is a perfect example of that," he said, "in that they have an international distribution center in Savannah and that's not going away."