‘Made in America’ a Competitive Advantage

Discussion
Jun 01, 2011
George Anderson

Three stories lead to one question.


  1. Crain’s New York Business reports on apparel retailers, including
    Bloomingdale’s, Kohl’s, Macy’s and Saks, using private labels
    to contain retail prices and bottom line results.
  2. A Bloomberg News article looks at how designers Joseph Abboud and
    the Olsen twins, along with chains such as Brooks Brothers, are using "Made
    in America" labels to drive sales.
  3. Research by Boston Consulting Group projects a growing number of American
    manufacturers moving operations back to the U.S. from China as wages and
    other factors such as fuel make it more expensive to produce goods there.

The question: Is there a strategic advantage to be gained by retailers that market
private label goods manufactured here?

Brooks Brothers, according to Bloomberg,
manufactures a "large percentage" of the items it sells in U.S. factories.

"There is a customer that appreciates that the product is made in the United
States and
is willing to pay for the difference," Claudio Del Vecchio, CEO of Brooks
Brothers, told the news service.

Pam Danziger, president of Unity Marketing,
said Americans are more interested in where goods are produced today.

"Made
in America feeds into the values proposition," she told Bloomberg.
"They are voting with their money, not just for U.S. jobs, but for a way of
life. In 2007, they were on a spending jag — they weren’t thinking about things
like this."

Manufacturers
and retailers, according to Boston Consulting Group, are increasingly thinking
about producing goods in the U.S.

"All over China, wages are climbing at 15
to 20 percent a year because of the supply-and-demand imbalance for skilled
labor," said Harold Sirkin, a senior partner at Boston Consulting Group, in
a press release. "We expect net labor costs for manufacturing in China and
the U.S. to converge by around 2015. As a result of the changing economics,
you’re going to see a lot more products ‘Made in the USA’ in the next five
years."

Discussion Questions: Is there a competitive advantage to be gained by retailers that market branded and private label goods manufactured here? Do Americans want to buy American?

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22 Comments on "‘Made in America’ a Competitive Advantage"


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Fabien Tiburce
Guest
Fabien Tiburce
9 years 11 months ago

Absolutely there is. However, the tone should be carefully managed. Made in the USA should not be about flag-waving and chest-pounding. Made in the USA should stand for quality (American quality assurance is sure largely superior to Chinese made products today) and environmental concerns (shipping anything across the world does not promote a sustainable future).

Peter Fader
Guest
9 years 11 months ago

Many Americans may say they care about this, but I doubt they would put much weight on it when it comes down to the point of purchase.

I see made-in-America claims in the same spirit as this quote by Jeff Bezos: “Advertising is the price you pay for having an unremarkable product or service.” Generally, I see made-in-America claims as a way to deflect attention away from more meaningful product deficiencies.

Of course I don’t want to imply that American products are generally deficient–not at all! But to the consumer, a focus on quality and other genuine attributes is far more valuable than emphasizing irrelevant details such as country of origin.

Max Goldberg
Guest
9 years 11 months ago

As long as the expected quality is in the product, there is a definite advantage to goods manufactured in America. In many product areas American consumers have a bias towards goods produced here. This is potentially good news for the US manufacturing sector and could contribute to lower unemployment.

Paula Rosenblum
Guest
9 years 11 months ago

I just have one thing to say.

Sign me up.

Actually I have a second thing to say.

It’s about time.

The quality can’t possibly be worse than what we’re getting from China–a decade of “strategic sourcing” has taken care of that.

One can only hope that newly re-born factory workers in the US will take some pride in their work and produce good products.

We could have so much more flexibility as retailers if we just sourced product closer to home. I really look forward to it.

Mel Kleiman
Guest
9 years 11 months ago

Made in American seems to be back in vogue. With the unemployment number still holding at about nine percent, Americans are beginning to realize that the government does not have the ability to bring the number down. It is up to the American public to help make jobs available, so buying something that is made in America is becoming something to do.

Gene Detroyer
Guest
9 years 11 months ago

Let’s drop the quality illusion. In product category after product category, American products rate no better and often worse in quality than foreign products. In terms of value, foreign products often rate well above American made products. (Remember, all foreign products don’t come from China.)

As far as the consumer goes, they may say “Buy American” but they won’t, and should not. They should not pay $1 more for an American product of the same value or pay the same for an American product of lesser value.

“Buy American” is a bogus, flag waving tactic to get more dollars for less effort. Professor Fader and Jeff Bezos (in the comment above) say it very well.

Dan Frechtling
Guest
9 years 11 months ago

Competitive advantage is rarely built on slight changes in attitudes.

Real opportunity comes from the battle between states and provinces. It’s less US vs China. It’s more Mississippi, Alabama and South Carolina versus Guangdong, Jiangsu, Zhejiang, and Shandong.

The former present incentives, skilled labor, and low unionization as an alternative to rising costs and labor scarcity in China’s manufacturing belt. Manufacturers don’t just need workers, they need people who run plants well.

BCG suggests lower labor/higher shipping cost appliances and capital equipment are most likely to move. High volume/high labor apparel and textiles may stay put.

There is directional “buy American” interest at the high end, but gains are small (65% of luxury buyers in 2011, only +3 points over ’08, says the Harrison Group).

For competitive advantage, it will come down to cost. Don’t count out Mexico, Vietnam, Indonesia, and Bangladesh. The infrastructure lacking today can be remedied by foreign investment, just as in China.

John Boccuzzi, Jr.
Guest
John Boccuzzi, Jr.
9 years 11 months ago
I am so happy to see RetailWire is covering this very important topic. Americans are still looking for a fair price, but they are now more concerned about quality, safety, health, environmental impact…and American jobs. Americans are finally realizing that we can’t survive on just a service economy alone, we need to also have manufacturing jobs in the US to keep our economy strong and growing. How many more toys need to be recalled because of lead or other poisonous substances for American companies to realize that it would be better for not only their customers, but the bottom line if they started pulling manufacturing back to the US? The same goes for food companies. My hope is McCormick and other food manufacturers will start manufacturing items in the US again. It still astonishes me that McCormick dried garlic is manufactured in China. I moved to Island Spice dried Garlic for the simple reason that it was made in the USA. Finally, we need to consider the environmental impact of manufacturing in China. The fuel… Read more »
W. Frank Dell II
Guest
9 years 11 months ago

Manufacturers are relearning what happened when they moved production to Puerto Rico; low wages is not the total solution. Wages in China appear to be increasing, yet quality is not. When factoring in the defectives, the sellable unit cost increases thereby reducing the profit margin. A long supply chain increases inventory investment which increases cost. The greater factor is the inability to increase and decrease inventory for current demand. When demand declined in 2008, many manufacturers had too much product in the pipeline. This forced them to stop production rather than slow it down.

Kent Shelor
Guest
Kent Shelor
9 years 11 months ago

I think consumers want to believe they would buy “made in America” at higher rates than non American goods but much like Green products, at the point of purchase, if price is not right and benefits provide no value for the cost increase, then I think consumers will revert to their traditional purchase behavior. I hope I am wrong, but it’s very tough to trade people up unless the benefits are very clear–especially when income is not rising with the cost of living.

Ben Ball
Guest
9 years 11 months ago

I signed onto this discussion all prepared with a “it depends on the product and audience…” comment, but quickly found myself surprised by discussions of Brooks Brothers.

One of my hobbies is BBQ (“smoking meat” to the initiated) and the forums there are rife with threads disparaging any equipment not made in the USA. I think Bruce Springsteen might be a good spokesperson (“Born in the USA”) for the group — despite the fact that you would expect Willie Nelson.

Evidently the emotional side of “Made in America” is not limited to a target audience wearing boots and John Deere hats, however.

On the more practical side, as the cost/benefit ratio of US manufacturing balances out it will become easier for more consumers to satisfy their aspirations of allegiance.

Joan Treistman
Guest
9 years 11 months ago

We just talked about this in RetailWire the other day…regarding minimum Chinese wages going up 80%. So here is some of the fall out, and it’s good for America. There’s an opportunity for companies who manufacture in the States to sponsor a campaign “Buy American,” or just renew the previous campaigns. We sing the Star Spangled Banner before each sports event. I see tremendous potential in connecting the patriotic dots.

It’s not that difficult to push the patriot button among our citizens. Remember the great line (one of my favorites) in the Muppet Movie: “Patriotism swells in the heart of the American bear.” I think it’s true for Cubs, Packers, Phillies, Yankees and the rest of us as well.

Ted Hurlbut
Guest
Ted Hurlbut
9 years 11 months ago
I think Americans will buy American if it’s the lowest price. I think the percentage of retail business to be done by American-made goods when there is a significant price difference on comparable goods from overseas is small, and confined primarily to the high end. If and when that price differential narrows, I think that percentage goes up, and impacts a greater range of goods, but I still think it remains pretty small. On most every item coming from China, price is the key competitive driver for retailers, and consumers. For retailers, if you don’t have the lowest price, you’d better find a way to get there. That’s why so much is being manufactured in China in the first place. If we want to truly take back production from China in a meaningful way, we’re going to have to meet and beat them on price (on a landed cost basis), and as much as I’d like to see that, and as good as it would be for our economy, I just don’t see that happening… Read more »
Mark Burr
Guest
9 years 11 months ago
While there may be no connection to Walmart’s continuing inability to turn around same store sales, it just might be a very small factor. Nevertheless, what is really an ‘American’ product? Is it a product with a ‘Made in America’ label? Does it matter that there is foreign content? Does it matter that it may be entirely foreign content and simply the final production is done in the good old USA? What’s the real definition of ‘Made in America’? From my view, the entire concept of ‘goods’ is redefined today as opposed to previous “Made in America” terms when it may have menat something completely different. Isn’t a BMW that has its final production in the Carolinas ‘Made in America’? Or is it not? Is a Honda that is built entirely from components engineered and manufactured in America (with exception of a transmission) and rolls off an assembly line in Ohio ‘Made in America’? Is a shirt made from fabric shipped here and sewn in the USA “Made in America”? What’s the definition? Is there… Read more »
Doug Garnett
Guest
Doug Garnett
9 years 11 months ago
It’s such an odd challenge. In research, without question everyone will tell you that they’d rather buy “Made in America.” But that’s the moral response–the moral equivalent of buying green goods. Once the goods are in the store, I think “Made in America” plays a much lower role (for better or worse). For example, I’m beginning to find consumers in research are quite well aware of some of the excellent quality coming out of China and other foreign markets. And, consumers have all experienced products made in the US that aren’t as good. First and foremost, they want products that are a good value, do what they say they’ll do, fit their fashion needs, and last well. Once satisfied by all of these, made in American can swing the sale if you can get that communication through all the other communication it took to sell the product. So it seems to me that the competitive advantage for shifting back has to be based on far more than “Made in America.” For example, the US is… Read more »
Lee Peterson
Guest
9 years 11 months ago

Here’s the deal: on a mass scale, Americans say they’re interested in “Made in America” until they see the price tag. Then it doesn’t matter. They buy Asian. I agree, things are changing in China and elsewhere, but not that much (yet).

Another factor that is rarely discussed because it is a hot button is quality. Especially in apparel. Matter of fact, Asian factories are a triple-whammy-super-challenge to American manufacturers: better price, better quality, better speed. Show me an apparel retailer that would sacrifice those three elements just to have “Made in America” on their labels (other than the one-off ‘craft’ stores in Brooklyn and Portland) and I’ll show you someone who’s going to get crushed sooner or later (i.e.; American Apparel).

Doug Stephens
Guest
Doug Stephens
9 years 11 months ago

All things being equal, Americans will choose to buy American. Problem is, all things are rarely equal. And I simply don’t believe the average American is making the decision to buy American for the long-term health of the economy and American way of life over realizing the short-term savings of buying off-shore goods.

Until such time as we reach price parity with off-shore goods, the lower price will reign supreme on most commodity products.

Bob Phibbs
Guest
9 years 11 months ago

One thing I think has been overlooked about buying American vs China–fit. When manufacturers abandoned the US and other craftsmen, tolerances for fit were gradually expanded due to the mass volume. Perhaps Brooks Brothers clothes are made in the US precisely for this reason. Indeed if buying “Made in the USA” (like Bob Hope and others made popular in the ’80s) we may be able to take aim at the slobification of fit in fashion.

Tim Henderson
Guest
Tim Henderson
9 years 11 months ago

Where we sometimes err in discussing made in America is we position “Made in America” as the only selling point. It isn’t. Rather, it should be part of the overall brand/product story, i.e., another message on the path to purchase that helps create a consumer more willing to make the buy. For example, among the many product categories on its website, The Container Store also offers a “Made In USA” category. Cutco Cutlery not only includes on its site a list of all Made in America products, but they also identify those partially made in America and those not made in America.

For a small number of consumers, “Made in America” may be the only selling point. But for most consumers, while it isn’t the sole selling point, Made in America can be used effectively as a differentiator that helps instill a sense of trust and confidence in the brand and ultimately helps seal the deal.

jack crawford
Guest
jack crawford
9 years 11 months ago

As a retailer, “Made in America” has tremendous potential, as long as the product has “quality.” Price will obviously be important, but except for Walmart shoppers, it won’t be the main issue. Point of interest: we had 2 selections of outdoor dinnerware, one made in China, the other in Germany. The German product sold out first at approx. 3X the retail of the Chinese. The quality difference was obvious and the small sign saying “Made in Germany” surely helped. We’re not a high-end store, by the way.

Ed Dennis
Guest
Ed Dennis
9 years 11 months ago

I think most Americans would rather buy American made products and support American Workers but they won’t put up with high prices and shoddy quality. All of us gave GM, Ford and Chrysler chance after chance to earn our business during the 80s and 90s. I wouldn’t buy from a foreign car maker until my wife insisted on a Volvo when our second child was born. I haven’t looked at USA cars since.

My experience with US product was OK but USA service was beyond horrible. I would rather buy American, but not an American car.

Tony Orlando
Guest
9 years 11 months ago

I owned two GM cars when I graduated from college, as my dad insisted I buy American. Well today, my father owns a Honda Accord, and loves it. The two GM cars I bought fell apart in 3 years, and I haven’t bought one since. Nobody deserves your business, until the product you buy gives you your money’s worth. Stop the bailouts, and subsidies, and get government out of the way, with horrible regulations, which will kill off any uprising in our country. The unions, and management must work together, and clean out the riff raff.
All companies must concentrate on quality, and value, plus great marketing, and the consumers will be there wanting to buy your product.

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