Is nearshoring a thing? What about onshoring? These topics remain attractive for some companies – and an illusion for others. So, what's real and what's not? Let's begin with imports.
The May 2023 U.S. import statistics are out. When measured by square meter equivalents, imports of textiles and apparel from the world are down more than 20 percent for the first five months of 2023 compared to the same period in 2022. Interestingly, imports from China, India, Vietnam, and Bangladesh have declined by about 30 percent. Imports from Turkey are down more than 40 percent. Imports from the Western Hemisphere are up 5 percent – huh? How can that be?
For sure, the U.S. market is in the dumps. Imports are down virtually everywhere, mostly because there's weak demand. This isn't new; the industry has dealt with this reality for quite a while. But what is new is that nearshoring is showing signs of life. In particular, imports from Mexico are up 85 percent; USMCA (NAFTA v 2.0) is up 67 percent. Whoa. Yes, imports from CAFTA-DR are down 19 percent, but that compares to far steeper declines from other major suppliers and is in line with the aggregate global trend. Curiously, imports from Canada are even with last year.
Closer to home
All of this leaves me wondering about the state of nearshoring and the "Made in USA" movement. Has there been a realignment of sourcing closer to home? Does where a fabric or a garment is made matter? Answering that question depends upon whom you ask. Talk to an environmentalist, and the answer will be an enthusiastic "Yes!" And they'll also ask how it is made and with what materials. In turn, ask a sourcing person, and the question may be answered with: "It depends ... what's the cost?"
However, U.S. consumer attitudes are more nuanced. Socioeconomic factors influence consumer purchasing decisions, while anxiety about the future, global conflicts (like Ukraine), and pervasive uncertainty weigh on consumer willingness to buy stuff. Yeah, it's complicated. And when guessing what our industry's prospects will be in a month, six months, a year, or five years, assessing consumer attitudes becomes critical. After all, consumers are the ultimate customer.
So how is "Made in America" doing?
Nevertheless, according to one research firm, consumers have clarified their intentions. "U.S. consumers' demand for 'Made in America' products is robust," says Morning Consult, a nonpartisan polling and research firm out of Washington, DC, in their newly published "Made in America" survey.
In fact, a recent article in the New York Times cited the survey in the context of a fast-selling $60 Made-in-USA t-shirt from American Giant, the San Francisco-based clothing company. American Giant's success may not be a one-off thing but rather part of a broader pattern of consumer behavior. "Sixty-five percent of U.S. adults said they intentionally bought 'Made in America' products over the past year. That's about the same rate of U.S. adults who said they had those intentions last year," said the Times, referring to the Morning Consult survey.
Morning Consult's survey offers insight into macro-forces affecting consumer preferences and sheds light on demographic trends and political characteristics. Many such consumer studies focus on economic factors -- such as inflation, job security, etc. But with this survey, preferences by political party (Republican, Democrat, Independent) are also considered. Indeed, such assessments are not without pitfalls; for instance, it will be interesting to see if a survey such as this makes its way into the mudslinging of the 2024 election. Political concerns notwithstanding, the survey identifies gender and generational attitudes toward "Made in America" and price sensitivity.
How U.S. consumers react to "Made in America"
Some of Morning Consult's findings are consistent with other research surveys, but some are new – and are quite pointed. Let's look at some of the highlights from the Executive Summary of the "Made in America" survey:
1. U.S. consumers look for "Made in America."
About three-quarters of U.S. consumers say they intentionally looked for "Made in America" products, with Republicans and Baby Boomers more inclined to search for domestically-made products than Democrats and younger generations.
2. Recent economic troubles have not affected consumer attitudes toward "Made in America."
Although domestically-made products may cost more, surveyed consumers said they continue to search for them over foreign-made merchandise. Consumer
interest in "Made in America" products has remained steady from 2022 to now despite higher inflation and rising interest rates squeezing consumer wallets.
3. Willing to pay more – but only up to a point.
Consumers said they are willing to pay more for domestically-made products, but only to a certain degree. Explained Morning Consult, "Nearly half of U.S. adults say they would pay more for 'Made in America' goods. But price hesitancy will constrain companies' ability to upcharge: Among U.S. consumers who said they would pay more, a majority are unwilling to pay above 10% extra for 'Made in America' goods relative to foreign-made equivalents."
4. Nationalism plays a role for some consumers.
For some consumers, purchasing decisions favoring "Made in America" reflect patriotic sentiments. Says Morning Consult: "Marketing campaigns that prime nationalist sentiment — specifically by emphasizing how "Made in America" supply chains can create and protect U.S. jobs — will most help win over consumers." The survey indicated that nationalism plays a greater role with Republicans and Baby Boomers than Democrats and Gen Z adults.
5. Reshoring out of China will yield large reputational gains for U.S. multinationals.
Surveyed consumers favorably view American multinational companies that reshore production that replaces Chinese labor and/or parts in their supply chains with domestic inputs. "Seven in 10 U.S. adults said they hold favorable views of American companies that incorporate domestic labor and parts into their supply chains, compared with just 29% who said they hold favorable views of those using only Chinese inputs," reports Morning Consult.
6. American companies that reshore have a competitive edge relative to foreign ones that onshore.
According to the survey, "larger shares of U.S. consumers are willing to pay more for reshored goods produced by American companies compared with onshored goods produced by foreign ones."
7. Foreign multinationals hailing from U.S. allies and friendly countries have a leg up compared with others.
Explains Morning Consult, "Among foreign multinationals, those hailing from U.S. allies and friendly nations have a better chance of seizing market share. Russian and Chinese companies are highly disadvantaged by these geopolitical dynamics and will struggle to gain traction."
Sentiments versus reality?
"Men, baby boomers, Republicans and consumers who are proud to live in the United States offer ready-made markets," concludes Morning Consult. This is not to say that other market segments are not interested in "Made in America." After all, patriotic sentiments transcend political affiliation, gender, and demography only that certain market segments will be innately more receptive to that message than others. Moreover, job creation remains front of mind for most consumers, young or old, Republican or Democrat. "Made in America" taps into consumer sentiment supporting greater domestic employment.
Even so, this needs to be qualified. Let's get real here: price sensitivity has to be considered. There is a limit to what consumers are willing to pay regardless of where a product is made. Many surveys have accurately reported consumer interest in buying domestically-made products, only to discover that such intentions dissipate once consumers enter a store and focus solely on price. It's a conundrum for advocates of "Made in America."
This leaves us where we began: U.S. apparel imports slumped again in May, a clear sign that the market remains soft. But for one company with an appealing message, selling t-shirts with an "American Made" logo, knitted with American-made textiles, and sewn in the U.S., seems to be bucking the trend. Of course, the big question is if the "Made in America" phenomenon is temporary or the beginning of something more permanent.
Originally published on July 13, 2023 in just-style.com