c.2013 New York Times News Service
c.2013 New York Times News Service
Designer Nanette Lepore is a cheerleader for New York City’s garment district. Most of her contemporary women’s clothing line, which sells at stores like Saks Fifth Avenue and Bloomingdale’s, is made locally.
Her company occupies six floors in a Manhattan building and uses, among other businesses, six nearby sewing factories, a cutting room and even a maker of fabric flowers in the neighborhood. She organizes “Save the Fashion District” rallies, writes about the danger of losing local production and lobbies lawmakers in Washington to support the American fashion industry.
“If my only option as a young designer was to make my clothing overseas, I could not have started my business,” she said.
Yet Lepore says that when she signed a deal with J.C. Penney for a low-cost clothing line for teenagers — clothing that sells for about one-tenth the price of her higher-end lines — Penney could not afford production in New York.
Of the 150 or so items she now has featured on Penney’s website, none are made in this country.
“That price point can’t be done here,” Lepore said of lower-end garments.
As textile and apparel companies begin shifting more production to the United States, taking advantage of automation and other cost savings, a hard economic truth is emerging: Production of cheaper goods, for consumers looking for low prices, is by and large staying overseas, where manufacturers can find less expensive manufacturing. Even when consumers are confronted with the human costs of cheap production, like the factory collapse in Bangladesh that killed more than 1,000 garment workers, garment makers say, they show little inclination to pay more for clothes.
Essentially, to buy American is to pay a premium — a reality that is acting as a drag on the nascent manufacturing resurgence in textiles and apparel, while also forcing U.S. companies to focus their American-made efforts on higher-quality goods that fetch higher prices.
Last year, Dillard’s, the midtier department store, wanted to promote American-made clothing, according to Fessler USA, an apparel maker in eastern Pennsylvania. It turned to Fessler to produce tops. Theirs was a brief relationship.
“Almost overnight, they called and said, ‘Made in America just doesn’t sell better than made in Asia, and you can’t beat the price,’” said Walter Meck, Fessler’s chief executive and principal owner.
The pattern repeats across retailers. Brooks Brothers’ American-made cashmere sport coats sell for $1,395; comparable imported ones go for $1,098. At Lands’ End, American-made sweatshirts cost $59, while the ones made in Vietnam cost $25. The label on an Abercrombie & Fitch American-made sweater, which sells for $150, screams about its American origins. But most of the sweaters for sale at Abercrombie are the cheaper ones priced at $68 and up, and made abroad.
Eric Schiffer, known as Ricky, and his business partner, Leonard Keff, last year opened Keff NYC, a knitting operation in New York’s garment district. Business has been good, with contracts from higher-price retailers like Abercrombie, Anthropologie and Ralph Lauren. One afternoon earlier this year, Schiffer watched as a table full of women knotted loose threads on Ralph Lauren gloves destined for the American team in the Winter Olympics next year in Sochi, Russia. (Ralph Lauren chose American manufacturing only under pressure from consumers and government officials up in arms after it supplied Olympics uniforms made in China for the 2012 Summer Games.)
Although the cost of labor is about 40 percent more than in China, and retail prices end up 20 percent higher, Schiffer says Keff’s clients — and, more important, their customers — can afford it.
“We can’t work with the Targets and the J.C. Penneys of the world,” he said. “It’s not for everyone. It’s really just for the higher-end companies.”
PAYING FOR QUALITY, OR NOT
Americans spend more than $340 billion a year on clothes and shoes, more than double what they spend on new cars, according to the American Apparel and Footwear Association. And they say they want to buy American, even if it hits them harder in the pocketbook.
Two-thirds of Americans say they check labels when shopping to see if they are buying American goods, according to a New York Times poll taken early this year. Given the example of a $50 garment made overseas, almost half of respondents — 46 percent — said they would be willing to pay from $5 to $20 more for a similar garment made in the United States.
It is a sentiment that advertisers have picked up on. In the first half of 2013, according to the most recent data available from the research firm Kantar Media, spending on advertising by companies like the Toyota Dealer Association, Chevron and New Balance that emphasized products’ American-made status nearly tripled when compared with the first half of 2012.
The flurry of new promotions also has the Federal Trade Commission policing made-in-America claims. According to its rules, “all or virtually all” of a product has to be both assembled and sourced in the United States in order to qualify.
But shoppers’ statements that they are interested in American-made goods don’t always square with how they spend their money, especially when they are on a budget.
“A while back, we thought we’d stick little American flags on the products made in America,” said Frank Blake, chairman and chief executive of The Home Depot.
He said he had figured, based on the prevailing marketing wisdom, that customers would flock to the items.
“But whatever segment really cares about it doesn’t make much difference from a retail perspective.”
So retailers are focusing on the quality when trying to justify the higher cost of American goods.
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A majority of consumers, rich and poor, say they believe that American-made products have higher quality than imports, according to the Times survey. Fifty-six percent of those making more than $100,000 said so, as did 67 percent of those making less than $50,000.
Lands’ End promotes its American manufacturers as “the highest-quality companies, working with vendors and artisans.” New Balance says its American products are made by “highly skilled craftsmen.” At L.L. Bean, bags are “still made by us here in Maine from practically indestructible cotton canvas.”
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“With higher-end fashion goods, where it’s made is an identifying source of quality,” said Anthony Dukes, an associate professor of marketing at the Marshall School of Business at the University of Southern California. “But at the lower end, I don’t get a sense that people pay too much attention to where it’s made.”
He said, however, that attention to where items were manufactured “could catch on and is certainly catching on in food, so things can go in the other direction.”
GIVING UP THE FACTORY
It ended last year with a four-inch stack of paperwork from the bank. Fessler USA, the apparel maker in the Blue Mountain foothills of Pennsylvania, was being liquidated after 112 years.
By March this year, all except four of the 300 sewing machines had been sold off. The few administrative employees still left on the job had written their names on chairs so they wouldn’t be sold just yet. And Fessler had made its final order, for Michael Stars T-shirts, five months earlier.
“It’s eerie,” said Meck, its chief executive, whose grandfather started the company, then known as Meck & Co., in 1900. “The lights started to go out throughout the factory: That department’s done; that department’s done.”
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After Meck and his four siblings bought back the company in 1994 — his father sold it while Meck was a child — Fessler met time after time with retailers interested in selling American-made goods and produced batches of American-made fashion T-shirts and knits. Business looked so good that just before the recession, it borrowed $4 million to buy a long, low brick factory with the idea of expanding.
Clients were already shifting work overseas in the 1990s, so Fessler’s strategy was to focus on smaller companies that couldn’t order the large volumes that most Chinese factories required. While Fessler’s cost was double China’s for finished goods, it had quicker turnaround. But as everyone scurried for customers of any size during the downturn, Chinese factories offered airfreight, making their turnaround almost as fast, at about half the cost.
“All of a sudden we had competition from China and everyone else,” Meck said.
Fessler watched one customer after another jump ship. Lucky Brand, which made up 20 percent of its business, discontinued the products it was making at Fessler. Urban Outfitters, its second-biggest customer, told the factory that it was moving work overseas. And as Michael Stars’ business declined with the recession, so did its orders.
There seemed to be lifelines at times. J.C. Penney, under new management with Ron Johnson as chief executive, placed a priority on American-made clothing and talked with Fessler about producing there. But as Penney’s revenue fell, its executives stopped returning Fessler’s calls. Cost ruled. Eventually, Johnson himself was out.
“We got a little bit of business — not enough to recover — and not many people were willing to pay what it costs to make it in the USA,” Meck said. “We have had people who have walked away from us for a nickel.”
As the recession hit in 2008, Fessler’s revenue dropped in half from the previous year. By 2011, the banks started circling. Fessler laid off about half of its staff, stopped its 401(k) match and kept only three days of thread on hand rather than three weeks. Meck went from bank to bank and investor to investor looking for additional capital, while Fessler tried a bunch of one-off projects that didn’t go anywhere, like fireproof clothing and a Pampers washable cloth diaper with a paper lining.
Much of the plant in Deer Lake, Pa., is being leased by a bottled-water distributor and a fitness training center. In the front of the building, there is a collection of dusty equipment and supplies that haven’t sold: lights, scales, office chairs, wooden hangers, bins of flawed T-shirts. In the former factory, between stacks of bottled water, there’s a dark line on the floor that signaled the end of the knitting room, gray lines where walls once were, yellow safety lines that encircled the sewing area, scratches and bolt holes in the floor where the cutting machines moved back and forth.
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The old entrance is lined with logos, a who-was-who of clients like Pendleton and Nordstrom. Up on the roof is another sign of Fessler’s once-grand ambitions: a spread of solar panels that Meck installed to try to modernize the factory.
Now the hallways are dark and silent. The lights are on because of a motion sensor, but there isn’t much motion these days.
“This is what’s left of our company,” said Meck, who still maintains a small office in the factory. “We have one room.”
AN UNCERTAIN BET
There are some hopeful signs for retailers, even at the lower end.
Wal-Mart, which centers its business on inexpensive items, started a program this year to increase its purchasing of American-made goods by $50 billion over the next 10 years. The company says that more than 150 projects are underway, with products ranging from socks to flat-screen TVs.
Wal-Mart has an advantage that few other retailers can match: Because of its scale, it can push suppliers on cost. For example, it got the price on an American-made towel down to $9.47, or 50 cents less than a foreign-made towel previously for sale. (That $9.47 towel is a premium product at Wal-Mart, where some towels sell for as little as $1.97.)
“We do have research that says, yes, it is an attractive proposition, customers will buy more because of the ‘Made in the U.S.,’” said Michelle Gloeckler, a Wal-Mart executive who oversees the program. “We even have some research that says customers will pay more for made in the U.S., but we don’t believe that they should have to.”
Wal-Mart’s efforts go only so far. Asked if it would push suppliers to provide more apparel made domestically, executives said probably not, because of the labor costs associated with cutting and sewing.
“The wages in other countries are still lower than the absolute wages here, so products that lend themselves to more U.S. production are generally more highly automated,” Gloeckler said.
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That has drawn criticism from some suppliers. Price targets “barely cover the cost of the fabric required to make the garments, never mind the salaries and expenses of American workers,” wrote Christopher Dal Piaz, president of the sportswear company SML Sport in New York, in a letter to the Wal-Mart merchandising chief after a frustrating buying meeting. The machine-made products on which Wal-Mart is focusing “do not build a new middle class,” he wrote. (Wal-Mart says the effort has drawn pledges from manufacturers to create more than 1,600 American jobs.)
The average price of a garment sold in the United States is $13.49, according to the NPD Group, an industry researcher. That low price is largely a result of sales at extremely low prices by huge retailers like Wal-Mart, Target and H&M — sales that are made possible by efficient supply chains and purchases of products from low-cost countries like Bangladesh and Cambodia, said Marshal Cohen, chief industry analyst at NPD.
But keeping costs low, which consumers now expect, can often mean lower quality.
“In many cases, the product that we buy today does not have the same, higher level of standards that we saw in earlier years,” Cohen said. “Are you buying a T-shirt that’s lighter than it used to be? In many cases, absolutely, yes. They had to take things out to keep the price the same.”
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As some consumers look for higher quality, the door to American-made goods seems to be opening wider. But even at the higher end, companies like Keff NYC say the market is too new and uncertain to bet on the future. Schiffer, the company’s chief executive, said a lot of companies were still just testing the appetite for American-made goods. After all, it is the shoppers who will make this movement succeed or fail.
“We’re not under any illusions,” he said. “We take orders as we get them. If people come back to us with reorders, great.”