American Made & the Price Wage Squeeze

[Matt W.]

I saw the below post by Joe Piedemont on LinkedIn and thought it fit well with some of the conversations we have about American Made Gear. I look forward to the conversation to follow..

The key question he lays out is:
Are you willing to pay more for a domestically made product to keep jobs in your community, state, nation? How much more?
But read his full post before answering, its not a simple question.

I love the idea of American made products and keeping jobs local, but to be honest I am not sure how much more I would actually pay for two near identical products; one made local, one made "over there". It is a though provoking question I am not sure I have an answer for.. 10% more seems reasonable, I could understand a few % points over that, but much more over that..... Just not sure...

I certainly think a business needs to turn a profit, and I think the right mix of price, customer service, quality, and design will win the day.. The right "mix" is a challenge to be worked through for just about any company....

All the below is Joe's
--- --- ---
The PRICE / WAGE "SQUEEZE"
Lost in the arguments about the pandemic and the squabbles regarding the upcoming election is a quiet killer preying upon many manufacturers - it is the squeeze created by a demand for low prices and a desire for high wages.
As consumers demand lower prices for the things they want at the same time demanding an increase in the minimum wage, manufacturers may find themselves becoming "non-profit" organizations.
What can a domestic manufacturer do when faced with this situation?
Raise prices to restore margin.
Substitute materials for less expensive versions to reduce costs.
Reduce the number of SKU's produced to reduce overhead.
Convert to Automation and replace workers with machines.
Import products from overseas.
☠ Close up shop.
The open market can be a cruel task master, often culling companies for reasons just like the "Squeeze". But consumers can help the companies they depend upon by understanding that prices and wages are connected. After all, the Customer is the Boss.

What is your recommendation to remedy the "Squeeze"?
Is a company entitled to make a profit?
Are you willing to pay more for a domestically made product to keep jobs in your community, state, nation? How much more?

 

[Tryin]

Yes, 20%-ish. Reduce SKUs and focus on quality.

 

[Clarence]

On durable goods and clothing, 25%. Show me value in quality and durability. Build the best, then market direct to consumer. Enough of the big box stores price setting inferior products. I want to purchase goods that will still be serviceable for 5, 10 even 15 years. It used to be a reasonable expectation. We have been trained to expect less in more recent years. End of rant. Interesting thoughts o.p. Caused me to not think about elk for 10 minutes!

Sent from my SM-G965U using Tapatalk

 

[Axlrod]

Yes, 20%-ish. Reduce SKUs and focus on quality.

The reason for additional SKU's is to gain more space on retailers shelves. If your competitor has 20 SKU's and you have 10, you will have a smaller footprint. Also new SKU's account for most of the growth a company has each year.

 

[Tryin]

The reason for additional SKU's is to gain more space on retailers shelves. If your competitor has 20 SKU's and you have 10, you will have a smaller footprint. Also new SKU's account for most of the growth a company has each year.

I get it, I just don't care about having 10 slightly different versions of the same product just to increase visibility. Do one thing well. Once you accomplish that, do an additional thing well. Repeat.

Probably why I don't own a successful manufacturing company.

 

[TBHasler]

I get it, I just don't care about having 10 slightly different versions of the same product just to increase visibility. Do one thing well. Once you accomplish that, do an additional thing well. Repeat.

Probably why I don't own a successful manufacturing company.

Completely logical thinking and I agree. But, the consumer market for most stuff/junk purchased in the US is dominated by illogical decision making and experts that understand how to best capitalize on that.

 

[peterk123]

100% yes. As far as I am concerned we have been at war with China for 40 years, we are just too stupid to realize it. One of the ways they have been waging war is through shutting down all of our manufacturing by selling low priced crap. Ya, we will be forced to buy less things, but that is okay with me. Make it here, charge what you have to to turn a profit. It will help our wages, our economy and our long term viability.

 

[oake]

Yes I will absolutely pay a premium for domestic products. Honestly I see it as a function of upholding social economic standards. I make it a point to search for domestic goods and I do my level best to explain the significance to my children.

 

[TomJoad]

The OPs query is a good and tough one. I make product for a living and have worked overseas and domestically on soft goods for 20 years so I have some industry perspective on this.

Several in this thread want USA made and are willing to pay more, several have mentioned 25%. The product I make in Indonesia today for $11 FOB costs me $25 to make here. The Indo factory is not a garbage factory. This is a high-end factory: highest levels of social and environmental compliance, significantly Better quality build product than our USA factory can turn out and the best technology on line. Secondly on the USA factory is I still have to get the majority of my materials and trims from Asia so it becomes USA assembly from overseas materials.

On the above posters comments on “low priced crap” from overseas he and others need to get clarity that those are Americans deciding to make and sell you that crap. Chinese factories can almost without exception turn out whatever quality you are willing to pay for, the problem is the American company who negotiates pricing, sets product specifications and quality level. This is all based on market demand. So we’re back to the consumer. You guys asked for cheap trash, they made it and you bought it: demand.

Finally it’s important to realize that infrastructure depending on the industry involved just isn’t around. For my industry it’s slowly starting to come back but raw materials are a long, long way out. Nice and especially higher-tech materials come from off shore.

 

[Salmon River Solutions]

I've worked in manufacturing (specifically machine and plastic injection mold shops) my entire adult life. I guess I can make some simple comments.

I do a lot of work in titanium for my own business. Its very expensive. You can get import titanium, but it is only about 5% less than domestic sourced titanium. That's a no brainer for me. I obviously buy domestic. But think about a very large company that makes titanium parts, 5% on materials cost is HUGE!

Lets talk camo pricing for a second here... Its expensive, like really expensive for the top brands like Sitka. People say "Imagine if that was made in the US" "how much more would it cost?" An interesting site to look at is https://gulchgear.com/. The production costs are listed right on the website. Main material is imported, because it is not made in the US. But the production costs for it to be sewn/assembled in the US are right there. Now tell me why these other high end brands made overseas cost so much.


Converting to automation is extremely expensive. And right now a lot of manufacturing companies have taken hits because of COVID. They don't have capital on hand to invest in automation, and the rising minimum wage is just pushing there profit lower and lower. Its not just the minimum wage that is raising. As that rises, wages have to raise accordingly. A 30 year industry veteran worker making $30 or more an hour isn't going to take it when they hire people that have no idea what they are doing but have to get paid $20/hr.

I'll gladly pay an extra 20-30% more for made in the USA.

We will see how much of a dump manufacturing takes if we end up with a Democrat in office. Something to remember is for every ONE job in manufacturing, there are TWO other jobs created because of the downstream effect from selling said manufactured products.

 

[TomJoad]

Now tell me why these other high end brands made overseas cost so much.

gulch is direct to consumer, same model as Kuiu. That’s why Kuiu and Sitka are similar on build quality but Kuiu costs less. The wholesale model is broken, too much cost wrapped up in selling to resell when none of that value is passed on to the consumer.

there’s not a lot of disparity in margin across the same industry in my experience maybe +/- 10 - 15 points depending on the brand but nobody is raping and pillaging. The market will bear what the market will bear. If you launch high end product, folks will pony up for it but it better perform.

 

[Randle]

Well , are costs driven by Advertising dollars spent? Sponsors pay for advertising one way or another. Free gear to the show giving the airtime or actual dollars for the airtime either way it is an expense. I remember years ago a friend (sales rep in the medical field said you think meds are high now wait til they are allowed to buy TV Advertising time And now look at the meds cost to us. Top brands of hunting clothes are all over the hunting shows. Someone pays for it. Doesn't that drive some of the higher price?

 

[Poser]

Well , are costs driven by Advertising dollars spent? Sponsors pay for advertising one way or another. Free gear to the show giving the airtime or actual dollars for the airtime either way it is an expense. I remember years ago a friend (sales rep in the medical field said you think meds are high now wait til they are allowed to buy TV Advertising time And now look at the meds cost to us. Top brands of hunting clothes are all over the hunting shows. Someone pays for it. Doesn't that drive some of the higher price?

You’re suggesting that brands should manufacturer without marketing their products?

 

[Randle]

Not suggesting anything just stating a fact that it costs money to advertise. and some companies do it alot more than others.

 

[btindall]

https://gulchgear.com/pages/radical-transparency

To sell our products we thought it would be fair to treat our small company similar to a publicly traded company and be 100% transparent on the cost of our products from start to finish. We put customer first, company second, and make an effort to spend zero dollars on advertising because I hate 1/2 truth marketing. Most companies only tell you the good and leave out the bad. For example, our products will fail because nothing lasts forever, and I am not afraid of telling a potential customer that. Our base layers are made from knit fabrics, not woven ones, just like all other good companies. They are soft, quiet, and have excellent moisture wicking properties, but as an outer layer, you are sacrificing strength for those qualities. Each product has a strength and a weakness for its intended use, but not too many companies are willing to tell you the whole story behind their textile choice. We try to tell you everything that we know about our products, the good, the bad, and the ugly to help you decide if we have the right product for you needs. We want you to know what we know.

 

[Artanis95]

I think people wouldn't be as worried about paying more if in turn they made more, with the company I work for now our skilled tradesmen haven't had a cost of living raise in almost 15 years so these young men coming in off the streets are making the same money as a 15 year employee started out at the difference is 15 years ago it was really really good money minimum wage if I recall wasn't even 5 dollars an hour yet the cost of living was much lower and you could buy a really nice home for $450 to $600 a month or less fast forward to now wages are roughly the same, a mortgage in the area now with 20% down is going to be $1,100 to $1,400 a month a new pick um up truck can run $700 to $900 a month not including insurance which depending on age and driving record can run between $150 to $300 a month which doesn't leave much room for even a decent pair of work boots at the end of the month so they're forced to go cheap or not eat.
Now fast forward I've been here a long time and I'm on the top end of our pay scale which is still where it was 15 years ago but it's a significant difference from just starting here so I'll buy once and cry once and I'll buy stuff from guys on here that's made overseas because it saves me money and my money is going to You guys which may be hypocritical but at least on my end it's staying domestic but there's no way I'm going to spend the same amount of money on a shirt or pack or whatever on something made overseas over supporting the company's that keep their manufacturing domestic and if I can't get it I'll find someone local that can make it I just spent $160 dollars for two shirts for my adventures this year from a local seamstress made the exact pattern I wanted triple stiched the seems made with ballistic kevlar thread and a 60/40 hemp polly and 60/40 linen polly 30% stronger than cotton quick drying and comfortable like you wouldn't believe the only way I'm ever going to have to replace these things is if I grow sideways to the point I can't get them on anymore.

 

[Unclemoe]

You’re suggesting that brands should manufacturer without marketing their products?

I would 100% suggest that, Look at Arizona Ice Tea, they have yet to push one single and and i bet you 99% of adults in our country know them, and their Can of 99 cent ice tea hasnt risen in price, well ever.

Does anyone in our country not know about Coke? or Chevy or Ford? I dont know a single person who has bought a high dollar item because of an Ad, when its time to buy a new "blank" most people jump online look up what they want and buy it.

OK you could make the arguement for low dollar items needing ads. *sees ad for Beer* man I do want a beer.....

Same with hunting gear, we all watch hunting shows and yes the fan boys who watch (insert man crush here) and see how he is wearing Sitka no wonder he shoots all these animals i better buy it too, but a majority of us go online talk to other people using the gear and find out what works best over all. I know for a fact that Sitka has lost WAAAY more money mailing me dozens of flyers then they ever made off of me buying my wife that $20 Headband 3 years ago....

Edit* Maybe Im just Jaded and just hate ads I get that

 

[2ski]

I would 100% suggest that, Look at Arizona Ice Tea, they have yet to push one single and and i bet you 99% of adults in our country know them, and their Can of 99 cent ice tea hasnt risen in price, well ever.

So a couple things. Having experience with AZ tea. They do market. You just haven't seen it. I have AZ tea swag for one. Thats putting money in marketing.

2. You won't see those 99 cent cans much longer. The margin on them is super slim right now for the retailer but they can't move the price when they come prepriced, and AZ is practically begging for people to carry their new non prepriced plastic bottles. They're less ounces than those tall boys. It will happen. Soon.

A weakness of not advertising enough, how many people know that the brand Arnold Palmer alcohol uses AZ tea in the product? If the advertised that fact, I would bet they sell over triple what they do now. Does cost go up? Yes. But its an investment in generating more sales. And top of mind makes a difference too.

 

[5MilesBack]

This isn't rocket science.......it's economics.......with a little psychology thrown in.......which I guess might as well be rocket science for most folks.

Our nation is way past a totally "free market" system. Too much government control over both business and consumer for the free market to work efficiently as it would. Our nation has put itself in a tough situation and the entitlement mentality certainly won't help that.

"A quality product at a fair price" just won't cut it anymore when you throw in the psychology component that we're dealing with these days as well.

 

[30338]

Its not a level playing field. To run a business in the US is to deal with an amount of paperwork BS that is hard to fathom. Since most have never run a business, its blind to them. That is why the reduction in regulatory BS and reduced taxes was so well received before the COVID attack on us. Its no mystery. Level the playing field and US companies will compete with anyone.

And yes, I'll pay more for quailty US made products as well.