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Is The “Made In USA” Movement Working?

When the U.S. Olympic Team entered the stadium for the opening ceremonies of the Sochi games, TV announcers made a point of telling viewers the Ralph Lauren apparel the athletes were wearing was made in the USA.

We have foreign-born athletes on the U.S. Olympic Team, like figure skater Simon Shapnir and freestyle skier Gus Kenworthy, and coaches from all over the globe. Foreign athletes from countries like Canada, Israel and Jamaica relocate to the U.S. to train for their teams in our world-class facilities. Why does it matter where our Olympic uniforms come from, as long as they look good and help our chosen few excel at what they do?

As it turns out, it matters quite a bit to quite a lot of people. Ralph Lauren came under intense criticism during the 2012 London games for providing the team with imported garments, and the company vowed not to repeat its error.

Back at home, consumer groups with names like Made in the USA Foundation and Buy American have launched campaigns to encourage Americans to buy domestically-made goods, reacting to a groundswell of sentiment that blames the sluggish job market on imported consumer products. The American Apparel and Footwear Association (AAFA), the national industry trade group, is trumpeting claims that domestic production in apparel has started to grow and, thanks to a change in consumer mindset, will begin to regain ground lost to imports.

Many companies are now looking at their product lines to see whether domestic sourcing is feasible. New Balance is making footwear in the U.S. Many designer brands in New York and L.A., like Jason Wu, Nanette Lepore, and Paige Denim, are using local sewing factories to produce their products.

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The most widely acclaimed announcement came from Walmart, however. The world’s largest retailer has committed to adding $50 billion worth of domestically-sourced merchandise over the next decade, which has caused apparel makers to clamor for a piece of the action.

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

However, the impact of these initiatives remains tiny at best relative to the total industry. The value of U.S.-made apparel shipments has been stuck at around twelve to thirteen billion dollars for the past four years, according to the U.S. Department of Commerce, reflecting a steady decline from its peak of $68 billion in 1997.

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

USApp pct of totalApparel made in the U.S. today tends to be either highly automated, like hosiery, socks and underwear, or highly specialized, like custom, technical or high end designer clothing, where quantities are limited and manufacturing cost is a smaller fraction of garment price.

The industrial production index, which compares manufacturing activity over time, is 20 percent of what it was in the early Nineties for apparel, and industry capacity has shrunk to less than a quarter of the 1993 level.

IndProdAppIn the past two decades, apparel imports have surged 160%, from $35 billion to $91 billion, and now comprise an estimated 95 to 97 percent of all apparel sold at retail. Last year, apparel imports grew 4 percent on a dollar basis compared to 2012, faster than the growth in the overall apparel market. Recently, companies have been shifting production from China, where labor costs are rising, to countries like Vietnam and Bangladesh. In 2013, apparel imports from Vietnam surged 14 percent, while those from China grew by a mere 2.5%.

appimpannFootwear maker New Balance actively leverages its Made In USA positioning and the fact that it has two factories in Massachusetts and three in Maine. However, a closer look at the fine print on the company website reveals that only 1 in 4 pairs of shoes it sells in the U.S. is made or assembled here. The company’s U.S. sales are less than half of total revenue, which means likely closer to 10 percent of its total volume is made in this country.

Walmart’s initiatives, which it claims are designed to create jobs, are even less likely to have an impact. The $50 billion additional onshore buying it vows to do over the next ten years will probably not require a major shift in sourcing strategy for the retailer, whose total sales last year were an estimated $491 billion. Most of its U.S. sales growth will come from food and other consumables — categories that it’s already sourcing domestically. It’s doubtful whether its sourcing policies will move the needle on apparel production employment, which has plunged from almost 900,000 in 1993 to less than one-sixth of that number today, or 139,000.

prodempappIn the showrooms and conference rooms where most of apparel business is really done, the talk is all about cost, as in: “We can increase our business with you this year, but we need to bring prices down” and “Can we move this item to a cheaper factory?” Very few meetings at big companies are being held to see how production can be brought onshore at higher costs.

All the wishful thinking in the world isn’t going to overcome the simple truth that even when improved lead times and the elimination of freight and duty costs are considered, domestically-produced apparel is too costly for our market to bear. 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 health insurance costs kick in.

American consumers want more for less. It’s the way we’re wired. As J.C. 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., they usually won’t. Even if they were, the premium they are willing to pay would not, in most cases, be enough. So it’s unlikely that any meaningful amount of apparel production will occur domestically. There might be a little blip in some categories, but at the end of the day it will result in few additional jobs created, which kind of defeats the purpose, doesn’t it?