Made in USA: Myth or Reality?

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\"RROn a recent afternoon I was stopped in the mall by a foreign tourist looking for American gifts to take back home. All the clothing and accessories in the stores were made elsewhere, she said, so they weren’t really American.

U.S. consumers are starting to feel the same way. Groups with names like Made in the USA Foundation and Buy American are launching advertising and social media initiatives to encourage Americans to buy domestically made goods. They’re reacting to a groundswell of sentiment that blames the sluggish job market on imported consumer products. Large companies are reportedly looking at their product lines to see whether even a little domestic sourcing is feasible. Several fashion startups are touting the fact that their stuff is made in the USA, and in some cases even successfully using crowdfunding to get their businesses off the ground.

Walmart recently announced it would add another $50 billion in U.S.-sourced goods to its product line over the next several years.  Trade groups like the AAFA are abuzz over the claims that domestic production in apparel has begun to grow and, thanks to a change in consumer mindset, will begin to regain ground lost to imports.

The prospect of resurrecting this once-major part of the American manufacturing heritage is an exciting one, to be sure, with benefits of job growth, energized consumers, and shorter lead times, giving retailers the ability to provide consumers exactly what they want when they want it. Truly a win-win.

Except…it’s not really happening.

The value of U.S.-made apparel shipments has been stuck at around twelve or thirteen billion dollars for the past three years, according to the U.S. Department of Commerce, down considerably from its peak of $68 billion in 1997, a level from which it has declined steadily. Apparel made in the U.S. today tends to be either highly automated, like hosiery and underwear, or specialized, like custom or technical clothing.

In the last 15 years, U.S.-made apparel has plummeted from 90% of total wholesale apparel shipments to 10%.

The industrial production Index for apparel is 20% of what it was in the early Nineties, and capacity has shrunk to less than a quarter of the 1993 level.

During those years, apparel imports have surged 250%, from $35 billion to $88 billion, and so far this year are ahead 4% over last year.

Apparel production employment has plunged from almost 900,000 in 1993 to one-fifth of that number today, or 140,000.

All the wishful thinking in the world isn’t going to overcome the simple truth that even when improved lead time and the elimination of freight and duty costs are taken into consideration, domestically- produced apparel is too costly for our market to bear.  The reasons for this are too numerous to outline here, and have already gotten air time ad nauseum, but the main culprit is U.S. labor costs, which are at least ten times more than that of our major apparel trading partners, and set to grow even higher when higher minimum wages and Obamacare kick in.

American consumers have an insatiable desire for better, faster, cheaper, and more. It’s in our DNA. As JC Penney so painfully discovered, value drives a lot of shopping behavior these days, and cannot be ignored if you want to stay in business. Despite the consumer surveys showing that people want and will pay a premium for products that are made in the U.S., the premium they are willing to pay is not enough. So it’s unlikely that any meaningful amount of apparel production will occur domestically, unless it’s at the very high end, where quantities are limited, and manufacturing cost is a smaller factor relative to garment price. Additional jobs created would be few, which kind of defeats the purpose.

While a nice patriotic gesture, and a clever marketing ploy to create brand awareness, all the talk about Made in American is pretty much just talk.



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