Made in USA or Made overseas? That is a production question that every brand find itself engaged in at one point or another. To better Illustrate the debate I chose to share a story of a brand I have been working with.
What should we do?
A couple of weeks ago i received an email from Cathy, 1 of 4 owners at NoNetz – who designs anti-chafe swimwear for boys and men. In her email she asked for my thoughts on the following: “Staying in Brooklyn, we get to decent profit in 7 years. Going overseas, we are highly profitable in 2 years. Producing overseas will cost us 75% less in labor...What should we do?"
A little background, for many years the NoNetz owners (3 sisters and 1 family friend) have seen their husbands and sons get uncomfortable, chafing rashes from the mesh in their bathing suits. Then one of the sister experienced what millions of other Americans are currently experiencing: Loss. She lost her health, her job, her marriage & her house. That’s when they decided to develop a better, more comfortable bathing suit for guys with the hope that one day, they can help their sister build a better, more comfortable life for her and her family. That’s when I met NoNetz and helped them with the sourcing of their development and production. They launched successfully with boys suits and expanded this last summer into mens. They had a great response from the market but thousands suits later they are still fighting for a financial stability. NoNetz is competing in the mass market, their competitors are big brands like Old navy, Gap etc. therefore in order to stay competitive with pricing (retail $40-55) they were forced to make some sacrifices:
Buying bigger bulks of materials and producing larger quantities in order to have somewhat of a decent margins - That required them to have a bigger financial investment.Pass on wholesale opportunities since their margins do not allow for that (they gave up an opportunity to sell on QVC, $90k of retail) -which meant holding back brand expansion!
Over the last 2 years they approached politicians and other organizations asking for help in keeping production domestically, they all said "Very good , keep manufacturing here" however, as of today there's no incentives on the table and no action plan to help manufacturers or incent businesses.
Pros And Cons for Made In USA:
Before tapping into what NoNetz should do, let’s first look at the pros and cons of producing domestically:
- Quicker turnaround for production which helps with cash flow (most small brands go out of business due to cash flow issues), and allows to react quicker to trends in the market,
- Better control over the quality of products
- No language barrier and better communication with contractors
- Ability to produce smaller runs (for markets with higher price points)
- Higher protection over intellectual property
- Providing more jobs to our community (not only short term but even more so long-term, the young generation will not go into a dying industry…)
- More control over labor standards
- Higher production cost ( which forces mass market production to move overseas)
- Limited number of manufactures to choose from (as a result some products cannot be produced domestically).
To sum it up it all comes down to the cost of production, which in NoNetz’s case has forced them to choose between morals or money. Should they stick to their guns, keep their patriotic values, fight for the cause and hold the flag even higher while putting their own personal finance on the line? Or should they go where other companies went before them and choose financial success while putting their values on hold? What would you choose?
What should NoNetz do?
Before i share my opinion about the subject let me be clear: there isn’t only ONE answer/solution to this debate. The decision is individual and each owner and business has their own things to consider. I do however believe that as entrepreneurs we do have a responsibility to inspire and lead. Yes, we all want financial success but at what price? Sometimes the question becomes bigger than our needs and has a much bigger impact than what we signed up for.
Knowing that one of their goals at start-up was to support domestic production, my prospective was that with some adjustments (including a 10% increase to their prices, which considering the value of their suits is absolutely justified) they should try and give domestic production another shot. I thought they have a chance to do something bigger here, although it is absolutely understandable if they don’t.
After a long debate I was happy to hear that NoNetz decided to give domestic production another shot- A brave and inspiring decision by any means! They worked with their manufacture to help out with pricing in return for even bigger production units and they decided to put their trust in their customers.
The opportunity nowadays for bringing production back to US is bigger than ever with:
- China production prices are not as cheap as they used to be years ago
- The price of fuel goes up every day which increased shipping and freight dramatically
- There is a need for a job boost to the domestic manufacturing that is slowly dying
If only someone would wake up and lead the initiation of a tax incentive, or any other manufacturing incentives for domestic production??? ….Let’s hope that the NoNetz story will be the wake-up call because if they will end with moving their production overseas it will put a final stamp on the fact that mass production CAN NEVER be done in the US… and not because a lack of capabilities but a lack of will!
What is your take on the subject? Do you have a production preference? What would you do if faced with that same question?? Let us know, we'd love to hear.