Can America Make Stuff Anymore?
Words and Actions
Most Americans answer yes to the first question -- initially, at least. A New York Times poll last year found 46 percent of shoppers saying they would happily pay the same price -- or even a bit of a premium -- to own clothing made in America, as opposed to clothing made in China, Vietnam or another foreign country.
Yet according to American-made apparel manufacturer Buck Mason, less than 3 percent of clothing is made in America.
Why is this? Many products made in America sell for prices far higher than what similar products made elsewhere cost. What's more, even if you are willing to pay the premium for quality (the Times poll noted that 56 percent of Americans say American-made clothing is of higher quality than imports), Buck Mason laments: "it is virtually impossible to go to a mall anywhere, and find a high-quality, American-made garment" today.
So there are really two problems for shoppers looking to "buy American" today. First, you can't find such goods to buy. Second, if you do find them, they cost too much.
One company trying to fix the first problem is Los Angeles-based American Apparel (APP). A vertically integrated clothing company (meaning it owns and operates its own retail stores, selling its own clothing), American Apparel makes its clothing in the U.S. and sells it here and abroad. Despite charging prices that can be twice the cost of imports, however, American Apparel has struggled to earn a profit.
The company ran into difficulties with its financial auditor in 2010 and suffered through a Securities and Exchange Commission investigation as a result. Sales growth has been anemic; American Apparel is losing money; and at last report, the company was $235 million in debt. Adding existential crisis to injury, American Apparel just ousted CEO Dov Charney, setting the stage for a nasty lawsuit with him.
Giant retailer Walmart (WMT) is having different difficulties with the made-in-America business model. You've probably heard that Walmart plans to spend an additional "$50 billion" over the next 10 years, buying American-made goods to sell in its stores. However, after contributing to the dearth of supply in the first place -- by pushing suppliers to cut prices, forcing many of them to close up shop in the U.S. and move manufacturing abroad -- Walmart is scrambling to find businesses that still make stuff in America, to stock its shelves and help it fulfill its promise.
And what about the second part of the problem: price? With the falling cost of energy in the U.S. resulting from the shale oil boom, advances in manufacturing technology such as 3-D printing and rising cost of labor elsewhere, you'd think U.S.-made goods would be getting more cost-competitive. So why do they still cost so much?
Buck Mason co-founder Sasha Koehn points the finger at the multiple links in the supply chain that clothing passes through today en route from manufacturer to retailer. If a T-shirt from Thailand sells for $10 wholesale, for example, then delivery to industry showrooms, sales to wholesalers, resales to retailers and final sales to consumers can push the price tag on that tee up past $50. Koehn notes that the garment industry standard is for prices to get marked up as much as 800 percent between manufacture and retail.
A Modest Solution
Buck Mason is challenging industry norms with a two-pronged approach. First, the company limits price mark-ups with a "direct-to-consumer" model, manufacturing clothing in-house, then selling over the Internet to customers. By cutting out the middleman, Koehn says he's able to hold its retail prices to just twice the cost of manufacturing -- rather than 800 percent.
%VIRTUAL-article-sponsoredlinks%Still, as long as American workers are paid better wages than their counterparts overseas, made-in-USA prices will remain higher than American shoppers are used to paying. (Buck Mason sells jeans for $135, belts for $72, and T-shirts for $24.) With its cost structure as low as it can go, therefore, Buck Mason focuses its efforts on ensuring customers "get what they pay for."
Paying up for high-quality raw materials, Buck Mason sources leather for its belts from a century-old tannery in Chicago, for example. Koehn says that Buck Mason gets its denim from a North Carolina plant that charges $16 a yard just for the fabric. On one hand, this helps preserve American jobs and the same manufacturing base Walmart says it wants to promote. On the other hand, the higher-quality materials, Koehn says, enable it to stand behind the promise that its "30 Year Belts" and "20 Year Boots" names imply.
Will this business model work? If shoppers really do mean what they say about wanting to "buy American," it just might.
Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned, either.
Looking for stories about the kinds of goods Americans still make? Check out the new AOL series, This Built America.