Every July, Americans join together to celebrate our independence and values. Americans have a strong entrepreneurial spirit, and consumers understand and champion the quality of products that are “Made in the USA.”
Forty years ago, 80% of the items Americans bought were made by U.S. producers. By 2009, that number shrank to 65%, and to 51% by 2014. Today, U.S. manufacturers make only about 11% of American-bought goods.
As “Made in the USA” goods become less common – yet more valued – should retailers pursue this avenue for their products? Here are three factors to consider:
- Consumer Demand
Selling products manufactured in the U.S. can enable retailers to differentiate themselves. In a 2023 survey with Morning Consult, nearly two-thirds of U.S. consumers said they routinely sought out “Made in America” products over the past year – and many are willing to pay a premium, especially Boomers. A Retail Brew survey found that nearly half of Americans are willing to pay around 10–20% more for U.S.- made products.
Higher demand is partly due to supply chain issues during the coronavirus pandemic, which led to an increased American preference for U.S.-made goods, and caused manufacturers to rethink where they source and make products. In a 2022 survey of CEOs and investors, for example, 46% said they were adjusting their supply chains.
- The Cost of Made in America
American-made products will almost always cost more to produce, because labor in countries such as India and Mexico is less expensive than U.S. labor. In 2016, Business Insider looked at how much some top American products would cost if made in the U.S. A pair of Levi’s jeans that cost $128 could rise to $328, and that is before today’s increased inflation levels.
But this isn’t always the case, and there are other factors to consider. Industry Week warns that in some cases, the cost of shipping products to the U.S., the time delays as a result of supply chain issues, and the cost of excise taxes “could very well negate those savings” that come from lower labor rates abroad. Moreover, some raw materials are more easily sourced in the U.S.
Retailers should also look at the preferences of their target customer. If costs are passed on to the retail price, is your customer willing to pay more for American-made products? Or is price a bigger factor than where production occurred? Inflation continues to be a concern for many Americans, as more than a quarter of Americans say inflation has a lot of negative impact on their likelihood of buying American-made.
- FTC Standards: Helpful or Harmful?
What does “Made in the USA” really mean? Does it mean that a product is assembled here? That its components are made here? If components are made here and sent abroad for assembly, or vice versa, does that qualify?
According to the Federal Trade Commission, “Made in USA” means that “all or virtually all” the product has been made in America, and its final assembly must take place in the U.S. Violations of the Made in USA Labeling Rule can lead to civil penalties of up to $51,744 per violation.
Recently, the FTC ramped up enforcement against “Made in USA” claims that don’t comply with the standard. In January 2024, the Federal Trade Commission (FTC) announced that it imposed a $2 million penalty against Kubota North America Corporation, which manufactures tractors and construction equipment, for falsely labeling parts as being “Made in USA”. This April, the FTC issued a record $3.18 million penalty against Williams Sonoma for claiming its Pottery Barn Teen mattress pads were American-made.
But the FTC’s term “all or virtually all” can be ambiguous, and “the standards can be difficult to interpret,” Daniel Kaufman, former FTC Bureau of Consumer Protection acting director, told Bloomberg.
Here’s an example: Starting in October 2017, Bigelow included “Manufactured in the USA” claims on packaging for certain teas. The tea was actually grown abroad, but blended and packaged in the USA. When a class action lawsuit was brought against Bigelow in California, it surfaced issues with the ambiguity of Made in USA language.
In some cases, retailers may not even know their products aren’t made in the U.S. One law firm that represents retailers urges, “Manufacturers and marketers should be cautious when relying upon information from American suppliers about the amount of domestic content in the parts, components and other elements they buy and use for their final products.”
For smaller companies, penalties could be especially damaging. Small business owners should reach out to the FTC and gain greater clarity on standards.
Retailers, as well as consumers, should additionally contact their Senators regarding the Country of Origin Labeling Online Act (COOL Online Act). The goal of this legislation is to allow consumers to access information about a product’s origins for products sold online. However, the Act would hold online retailers and marketplaces liable if they receive and post incorrect information from their vendors. Verifying vast amounts of product information could raise costs for online sellers and ultimately consumers.
Conclusion
Making goods in the U.S. is becoming harder to achieve, and it may be especially cost-prohibitive for small businesses. In 2021, The New York Times published an op-ed titled, “America can’t even produce the things it invented,” noting that the last domestic penicillin plant closed in 2004. Bringing manufacturing back to the U.S. isn’t just the responsibility of retailers; it requires action on the policy level.
But producing goods in the U.S. has significant benefits for retailers, including better oversight and control, reduced lead times, consumer trust and a lower environmental impact. Perhaps most importantly, sourcing materials and manufacturing products in the U.S. has a tangible impact on a brand’s reputation, as Americans prefer American-made products.
Image generated by NetChoice using ChatGPT’s DALL-E.