The tipping point to ‘Made in USA’ fashion
New York City, London, Paris and Milan. What do these four cities have in common? Yes, you are right. It’s fashion. The four cities are known universally as the fashion capitals of the world. Every half year, these cities stage fashion weeks, during which designers showcase their upcoming collections for the next seasons and buyers commit to orders or incorporate the designers themselves into their retail marketing. It is also an opportunity for the media to provide sneak previews of upcoming fashion trends.
Of the countries where these fashion capitals are located, the USA is the one whose government has launched a nationwide initiative to revive and support domestic apparel manufacturing. When we talk about US fashion, which brands immediately come to mind? Marc Jacobs, Kate Spade, Calvin Klein and DKNY should be some of the names on the list. For those who are familiar with these brands, it’s no surprise that none of them manufactures 100% of their products in the USA. Instead, all of them have opted for offshore manufacturing. Even luxury brands like Marc Jacobs do not necessarily have their clothing or handbags produced domestically. Some may be made in Italy, but not in the USA.
After the decade-long decline of US apparel manufacturing, does the ‘Made in USA’ label still not carry enough weight to enable US brands to shift their production back to the USA? This may no longer be true when the demand for locally made products has recently been gaining unprecedented momentum. The tipping point will be when American spirit and pride add to the label a value that cannot be determined by an economic equation alone.
Added value for the tag
One of the reasons why US fashion brands do not wear ‘Made in USA’ tags is because of the extremely strict requirements regarding labeling. The ‘Made in USA’ label is regulated by the Federal Trade Commission (FTC), and must comply with the labeling standard that ‘all or virtually all’ of a product should be of US origin; that is, all significant parts, processing and labor that go into the product must be of US origin.
Given that apparel manufacturing is labor intensive, earning a ‘Made in USA’ label can mean a significant increase in labor costs when compared with offshore manufacturing in apparel-manufacturing hubs such as China and Bangladesh. In the business world, the obvious question is whether the value of the label is high enough to offset the increased costs and make financial sense.
According to a survey released in November last year by Boston Consulting Group, 80% of Americans are willing to pay more for ‘Made in USA’ products. Helping manufacturing jobs to return to the US was what 93% of these respondents were hoping for when purchasing US-made products.
Though the silver lining reveals that 55 cents in every dollar spent on products made in China actually goes to US companies and workers, the patriotic battle and trade-deficit numbers are what make it matter to the government and its people for more ‘Made in USA’ tags.
A ‘Made in USA’ label on clothing may give Americans a good feeling, but can this feeling be shared by non-Americans as well so that they will pay a premium for ‘Made in USA’ fashion wear?
The truly American brand
In recent years, younger US brands have paved the way to success by living the American values. One such brand is American Apparel. While the world is going for horizontal integrated sourcing and manufacturing, American Apparel is advocating vertical integration of the supply chain. They claim that by going vertical, that is to keep the entire manufacturing operation within the shortest distance and with the fewest tiers possible, the company can not only save unnecessary fuel expenditure but create jobs for more than 5,000 Los Angeles employees. A close-to-market manufacturing approach can also help the brand closely align with market demand.
Another value proposition offered by American Appeal is the assurance it gives to consumers about the working conditions of their workers. ‘Sweatshop Free’ is their slogan. Their garments workers are also known to be the highest-paid garment workers in the world. On top of all these, American Apparel advocates for immigration and gay rights.
American Apparel has all the values it needs to touch the American soul. It now owns the largest individual garment factory in the United States, sells its products in over 260 stores worldwide across 19 countries, and is listed in the American Stock Exchange. From its sales volume overseas, it can be inferred that one does not have to be an American to appreciate the American spirit behind the brand.
Believers in the ‘American Religion’
At a True Religion store in Hong Kong, located in the shopping mall of International Financial Center (IFC), the commercial building in the city with the sky-high rents, the store manager proudly told customers that all denim jeans were USA made. Priced in a range of around US$250 to US$400 per pair, the True Religion jeans really are luxury items for the casual dresser.
True Religion was started by an American in 2002 based on the principles of quality, authentic American-made denim, with timeless appeal and a vintage aesthetic. For years, Hollywood stars and celebrities have been seen wearing the luxury jeans and their fans are following suit. As a 400-million-dollar company listed on the NASDAQ today with 125 standalone stores worldwide and a distribution network in 50 countries on six continents, True Religion has proved the value of quality American-made denims.
American Apparel and True Religion are examples of how US fashion brands successfully bring to new heights their unique positioning through differentiation and by building brand security through a loyal group of local and overseas customers. Their stories have proved that there are non-American believers in US fashion brands because they represent real quality as well as liberal beliefs, which are always backed by a good American story.
The emergence of an ‘Onshoring’ trend
At the opening session of the 2013 AAFA Annual Executive Summit, Kevin M. Burke, President and CEO of the American Apparel and Footwear Association (AAFA), said: “In 2011, domestic apparel and footwear manufacturing increased 7.9% and 11.1% respectively, and we expect the 2012 numbers to be even greater, as the ‘Made in America’ momentum for apparel and footwear builds.”
The numbers are showing a ‘comeback’ for US apparel manufacturing. Yet, it is noteworthy that still less than 3% of all apparel purchased in the USA today is manufactured domestically.
During an interview with Tradegood, John M. Martynec, Vice President, Manufacturing, of Brooks Brothers, explained the difficulties the company has encountered in domestic manufacturing. Not only is there a lack of skilled workers, but getting the right fabrics and setting up factories are not easy tasks. His vision is to make one product in 1,000 ways and to be flexible.
As the oldest menswear chain in the USA, and which now has manufacturing facilities from New York to North Carolina, Brooks Brothers has dressed a number of US presidents, including Abraham Lincoln and the current US president, Barack Obama. The latter wore a Brooks Brothers coat, scarf, and gloves during his inauguration in 2009. Today, the majority of its products are imported from other countries, though it keeps some of the premium lines to be manufactured locally.
Despite the fact that apparel manufacturing in the USA has its obstacles, and can be impossible for brands and retailers which require large-scale production, there is definitely a re-emergence of smaller-scale manufacturers and vendors that answer to the demand for US-made fashion. All American Clothing Co. and USA Love List are some of the sites that have emerged in response to consumers’ demands. The stress on ‘Everything we sell is USA-Made’ is prominent. Department store websites such as Macys.com and Nordstrom.com have also answered to this trend by linking products to ‘Made in USA’ searches.
The best is yet to come
The Obama administration’s National Export Initiative aimed at doubling US exports by 2014 has also put the textile and apparel industry at the forefront. The LA Mayor’s Office is one of the most active among cities in support of driving domestic economic development. In 2012, the Office’s Economic and Business Policy launched the ‘Designed/ Made in LA’ initiative with the aim of raising the profile of Los Angeles brands domestically and around the world.
The initiative’s five-pronged approach includes an online resource guide to easily identify local manufacturers. The Office has a first-of-its-kind public-private partnership with Tradegood to build an LA manufacturers database for US apparel manufacturing.
As today’s fashion world calls for shorter product cycles and greater flexibility and variety in product differentiation, the fast-fashion model that is used by many US domestic manufacturers can provide an added advantage to the industry. These manufacturing bases have a quick response time and enhanced design capability, which gives brands and retailers the flexibility to make big changes to the orders even after the season has begun. Fast-fashion products have proved to have higher sell-through rates than those manufactured by the traditional approach, and consumers are more willing to pay the full retail price.
Undoubtedly, there will be a lot more to come from both government and brands themselves regarding the ‘Made in USA’ label. With the American spirit, talented designers and entrepreneurs in the USA should be prepared to welcome more independent brands to the American fashion scene, whether it’s a new Tom’s Shoes or a J Brand.