Consumer Sentiment
The Bottom Has Fallen Out of US-Made Consumer Goods…
HermitCrab’s product focus from yesterday’s Day 22 Class focused on sixty non-food consumer goods that are almost entirely made offshore(1). It’s safe to say 95% of the products listed yesterday are no longer made in the USA. While that’s hard to believe, all you need to do is take a trip to Walmart, Target, Hobby Lobby, or Home Depot to see it for yourself. The figure below is from a recent trip to Walmart, which has a stated goal of increasing American made products on its shelves. All the products shown are made offshore, and I walked out of the store depressed. This is NOT an attack on Walmart – HermitCrab intends to make products for them within a few years – we could have done this same exercise in a dozen large retail chains.
Figure 1: Walmart is Filled with Chinese-Made Goods
Another surprising fact is that we are not improving the offshoring problem despite the marketing and advertising from industry groups and the retailers themselves. American-made consumer goods started declining 40 years ago (the beginning of offshoring) and have accelerated in the last 10 years. The emphasis on lowest landed costs overrules common sense and total cost of ownership analysis. The figure below shows the decline of American-made consumer goods, with the last ten years having the largest decrease. In short, the bottom fell out of Made in the USA, especially with durable consumer goods (i.e., not food).(2)
Figure 2: Decline in US-Made Consumer Goods Over Last 60 Years
…But Consumers Still Prefer “Made in the USA”
So, in light of the reality that less companies make consumer goods in the America these days, how do we meet the desire to actually look for and buy American-made products? There’s a term in psychology where, in the absence of a real alternative, people will say they want the alternative! In other words, when asked, everyone will say, “Yes, I want to buy American,” but since there are no American-made options on the shelf, they buy the offshore brand and then move on with their lives. There’s not a groundswell of sentiment demanding companies produce in America again.
That said, there are gobs of surveys that indicate pro-American sentiment for American-made goods. Rather than reinvent that wheel, we suggest people look at the Morning Consult’s great whitepaper on Made in America Report, 2023 Edition(3). These are smart people, and I cannot explain it better than them! The key takeaways in the Executive Summary are:
U.S. consumers’ demand for “Made in America” products is robust: Nearly two-thirds of U.S. consumers said they sought out “Made in America” products over the past year.
Recent economic headwinds have not dented consumer appetites.
Price hesitancy limits upside potential: A majority of U.S. consumers who said they would pay more are unwilling to pay above 10% extra for “Made in America” goods relative to foreign-made equivalents.
Nationalism offers a partial remedy: Patriotic consumers are willing to pay more for “Made in America” goods at higher rates, partially explaining Republicans’ and baby boomers’ enthusiasm for them relative to Democrats and Gen Z adults.
Reshoring out of China will yield large reputational gains for U.S. multinationals.
American companies that reshore have a competitive edge relative to foreign ones that onshore.
Foreign multinationals hailing from U.S. allies and friendly countries have a leg up compared with those from China and Russia: Among foreign multinationals, those hailing from U.S. allies and friendly nations have a better chance of seizing market share.
The net of this whitepaper is that consumers want American-made, and a 10% premium is not too much to pay, and most of the products listed in the Day 22 whitepaper have a real chance to hit that target, based on the shifts in labor costs, ESG considerations, advanced technologies, and government incentives.
Past Efforts to Sway Opinion Had Limited Results
Over the decades, isolated attempts to convince the public to buy American have been tried. All failed to stem the tide of offshoring, including the Federal Government. Here’s five examples:
"Made in the USA" by Walmart: In 2013, Walmart launched an initiative with a commitment to invest $250 billion over ten years in products made, sourced, or grown(4) in America. Walmart claims 85% of Americans want to buy domestically made products. The campaign was marketed through advertisements and in-store promotions. See the results on https://corporate.walmart.com/suppliers/investing-in-american-jobs.
"Keep America Rolling" by General Motors: After the September 11 attacks, General Motors launched the "Keep America Rolling" campaign to boost consumer confidence and promote economic recovery. While the focus was on financing incentives to encourage car sales, the campaign subtly reinforced patriotic themes and the importance of supporting American car manufacturers.
"Buy American" by American Giant: American Giant launched a campaign highlighting its commitment to producing high-quality clothing in the USA, appealing to consumers' desire for domestically made goods. Although private, revenue estimates range from $15 to $30 million annually, so while they make great products, they aren’t turning the tide.
Federal Government “Made in USA” Office: Any effort is appreciated, and the Federal Government launched the https://www.madeinamerica.gov/ site in 2021, and intends to drive business to American companies through sourcing exceptions. Every bit helps, and HermitCrab may one day seek this help, but the focus now is corporate customers.
International Ladies Garment Workers' Union (1977 to 1990): One of the largest textile worker unions went “all in” to try to convince consumers to buy American. Click here to see the 1978 commercial for “Look for the Union Label” – cringy but also disheartening, since every soul in that commercial was likely unemployed 10 years later. In fact, the union collapsed in 1995 and merged with Amalgamated Clothing and Textile Workers Union to form UNITE. https://www.youtube.com/watch?v=7Lg4gGk53iY
Figure 3: Sample Ad to Encourage Consumers to Buy American
New Ways to Convert “Opinion” to “Decision”
From Tony Robbins to Geoffrey Moore(5) to Stephen Covey to any of the Shark Tank™ hosts, all success gurus point to the big difference between “wanting to do something” and actually going out and doing it. This is often the difference between success and failure of any enterprise, but especially entrepreneurial endeavors. To succeed, you must make a bold decision to execute a plan. So, if a significant majority of Americans want to buy American, what concrete steps need to happen to allow them to enable that desire? The old ways didn’t work – see previous section – so what new ways can be attempted to drive demand for Made in USA now?
Federal Government: Yes, the same Federal Government that crushed manufacturing with horrible trade policies has the chance to redeem itself through a half dozen actions that can increase reshoring success and increase consumer awareness of reshored products. Examples include:
Tariffs – Forget the complaining wonks, a Tariff Policy is needed for at least the next 5-10 years just to create a safer haven for reshoring to occur.
Tax Modifications & Simplifications – Changing the tax code and enhancing depreciation rates for companies adding new equipment of structures is a great start.
Regulatory Relaxation – The current maze of regulations and environmental restrictions are strangling the ability to open many types of manufacturing enterprises.
Ad Council – The Federal Government is the largest customer of the Ad Council, which create social awareness ads for everything imaginable. Let’s add reshoring as a campaign.
Federal (and State/Local) Procurement Policies – The madeinamerica.gov website is a start, but it’s a great incentive to build a factory if you know agencies will buy your product.
Environmental Penalties – Imported goods have twenty times the carbon footprint of domestically made goods. That has always been true, and will never change.
We do NOT need or want mandates or cronyism – no more CHIPS Act, for example.
Awareness Campaigns: HermitCrab’s reach is microscopic, but a social media, print, or television ad campaign by a HermitCrab customer could dramatically increase awareness among consumers. Individual industry groups could tout the reshoring of Made in the USA products (it seems like only apparel companies try that these days) amongst their members and customers.
What if the National Hardwood Lumber Association ran ads praising the increased use of wood to make consumer products like picture frames, furniture, and trays? What if Tableware International praised the reshoring of a significant portion of ceramic dinnerware manufacturing. These changes would cause a needed shift in demand.
Retailer Emphasis on Reshored Goods: As reshored goods begin to increase, large retailers could set aside floor space for American-made consumer goods, highlighting the fact that the purchase of these products support American jobs and communities. The emphasis on “Made in America” can also translate to Internet sales, where a separate tab can take shoppers to an area where every product is made in the USA. In the near term, retailers should also consider taking a lower margin on the sale of American made goods to eliminate price comparison and a race to the bottom with cheaper offshore goods. This is an essential paradigm shift in the near term to help new factories find their feet.
Conclusion: Every survey says that Americans want to “Buy American,” but there are not that many choices remaining. Deliberate efforts by public and private entities are required to create the environment to bring manufacturing back while simultaneously increasing consumer awareness of the availability of reshored products. This is a ten-year program, with small steps along the way, which can not only stop the slide of offshoring, but restore American made market share to retail shelves.
Thank you for Reading! Tomorrow’s topic is Day 24: Risk Mitigation - Reducing risks associated with global trade disruptions. This takes us back into the Supply Chain discussions around the benefits of reshoring, and shows compelling reasons to why making products in the USA reduces the risk of supply chain breaks.
Thanks for reading,
The HermitCrab Team
Footnotes:
I want to say completely or 100% but there’s a tiny number of exceptions.
https://netchoice.org/made-in-the-usa-three-factors-retailers-should-consider/
https://pro.morningconsult.com/analyst-reports/made-in-america-reshoring-consumer-goods
“grown” doesn’t count, in the opinion of HermitCrab – manufacturing jobs are key.
Read Geoffrey’s Book, “Crossing the Chasm” and watch this video to see how Geoffrey explains the concept in consumer markets! https://www.youtube.com/watch?v=izP5n1SBEaI
https://www.rigzone.com/news/how_much_oil_and_gas_does_the_usa_have-16-may-2024-176766-article/
