Can America Make Stuff Anymore?

Mid Adult worker with yellow helmet against factory interior
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Do you want to buy clothes that are made in America? And are you willing to pay what it costs to help bring manufacturing jobs back to America -- and be once again able to buy quality goods that will last, in return for your money?

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.

American Apparel

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.

American Prices

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.

9 Numbers That'll Tell You How the Economy's Really Doing
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Can America Make Stuff Anymore?
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.
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