May 9, 2017

American Apparel: Made in the USA. Or not? It's the price, baby, the price.

Say you want to purchase a shirt, and you have the opportunity to choose between (1) a shirt made in the United States, or (2) a shirt made overseas, mostly likely in a country such as Bangladesh, China, Indonesia, or India.  The same shirt with different manufacturing locations.

What shirt would you choose?  American made, or foreign made?

But wait a minute before you jump on the Made in America bandwagon.  There's a catch:

The made in the USA shirt costs 25% more
than the foreign made shirt.

Would you still purchase the American made shirt?

Well, we're about to find out.  

Canadian company Gildan Activewear Inc. acquired Los Angeles-based American Apparel in bankruptcy proceedings earlier this year.  This represented the 2nd bankruptcy for American Apparel, a company that previously prided itself on manufacturing all of its clothing in a 7-story factory in Los Angeles, where the company was also headquartered.  Yep, truly American made.

Clearly the all-American-made business strategy didn't work too well for American Apparel.

And Gildan Activewear is setting out to change that.

What's in store for American Apparel?  Well, first off, no stores, only an online presence.  Secondly, no more all-American-made, with a twist:  Consumers are going to have the option of choosing between a made in the USA item and a foreign made item, for the same item.   But then your wallet comes into consideration, as the American made items are expected to cost about 25% more than their foreign made counterparts.  According to Gildan Activewear's Chief Executive Officer Glenn Chamandy:
“There are consumers that really want ‘made in USA,’ so we’re going to cater to those consumers.  But there are consumers that didn’t want to pay the actual price but they love the brand, so now they can also buy the brand.”
Read more about American Apparel's new sales strategy here.

Gotta admit this is an eyebrow raising business strategy.  My hunch as to consumers' choices?   I think the majority of shoppers ... the vast majority ... will choose price over manufacturing location, and pick the cheaper foreign made product.  People may chant made in the USA, but let's face it:  for many people, the wallet speaks.

Tax, Insurance, or Financial Concerns?

Mary Rae Fouts, EA, CFP assists nationwide clients that have complex or technical tax, insurance, and financial concerns.  For more information about Mary's fee-only Tax, Consulting, and Expert Witness Services visit Fouts Financial Group.

Mary Rae Fouts

6 comments:

  1. No one is going to pay more for a shirt to have it made in the united states. How do you think walmart became the largest retailer in the country? not from selling expensive US made stuff.

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  2. Thats a dumb marketing strategy. They will end up with a bunch of made in usa clothes no one wants to by. End up on sale or shipped off to an outlet mall somewhere.

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    Replies
    1. My husband and I had the same conversation at breakfast on May 9. We joked that the made in USA clothes may become cheaper than the foreign made clothes, after the USA items are put on sale in order to sell.

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  3. Is made in Mexico overseas? It is not over a sea.

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    Replies
    1. "Overseas" is another word for "foreign" in this discussion. Yes, Mexico - even with the NAFTA trade agreement - is considered a foreign country when it comes to clothing manufacturing.

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Thanks for sharing your comments here! Mary Rae Fouts