11.20.12 6:58 PM ET
Consumers Love the Made in the U.S.A. Brand
For a long time, U.S.-based manufacturers have felt like the deck was stacked against them. Labor costs are lower almost everywhere, especially in China. Taxes on profits are comparatively high. The most rapidly growing end markets are also overseas, and it frequently makes sense to manufacture heavy items like cars or appliances near the consumers who will buy them.
But trends have a way of reversing. Rising labor costs in Asia and the continuing hard work American firms have done on efficiency and productivity have helped reduce the cost advantage of offshore locations. In an influential report, Made in America, Again (PDF), the Boston Consulting Group (BCG) suggested that up to 3 million manufacturing jobs could return to the U.S. over the next several years.
Now, BCG says there is more reason for people who make stuff in the U.S. to take heart. According to a new survey, consumers at home and abroad say they are willing to pay more for certain products bearing a “Made in the U.S.A.” stamp. Driven by a combination of patriotism, fear of the potential danger lurking in some China-made goods, and a concern over quality, 80 percent of American consumers say they are willing to pay a premium for products made in the U.S. instead of Chinese products. Nearly 60 percent of U.S. consumers said they had consciously chosen more expensive American-made products over cheaper Chinese ones in the previous month. Perhaps more surprising, some 60 percent of Chinese consumers said they would do the same. “We were really surprised at how much the Chinese consumer values the Made in America brand,” said Hal Sirkin, senior partner at BCG. (You can read more about the survey here.)
The preference for U.S.-made goods was particularly pronounced in product categories, such as hand tools. “For things people expect to be durable and pass on to your children, they are willing to spend the extra money if they can afford it,” said Sirkin. “And Chinese products just aren’t designed for the durability that we expect.” He also noted that anything that deals with children—toys, baby clothes, children’s furniture—found a similar response. Media reports on problems with Chinese-made drywall, or on lead paint in Chinese-made toys, have made parents think beyond price. Sirkin noted that 37 percent of U.S. consumers said they would be willing to pay 10 percent more for baby food if it were made in the U.S.
Of course, it is easier to purchase patriotically when doing so is less costly. And Sirkin says that the shrinking cost difference between manufacturing in China and the U.S. is affecting consumer preferences. “Wages in China have been rising about 15 to 20 percent per year,” Sirkin noted. “And so the value equation has changed. Instead of having to pay double for a U.S.-made product is in many instances, the consumer is only going to have to pay 20 percent more.”
Sirkin and his colleagues were surprised by the changing attitudes of Chinese consumers, who are now much more keenly attuned to issues of quality in everything from dairy products to toys and furniture. “Chinese consumers are quietly recognizing the value of 'made in the U.S.A.,'” Sirkin said. In the survey, 50 percent of Chinese consumers said they had deliberately chosen American-made products over Chinese ones—even if it costs the same or more. This preference is largely due to rising concerns over quality and environmental issues among middle-class Chinese consumers.
Now, there’s some reason to be skeptical of these numbers. Surveys tend to measure sentiment and attitudes, rather than behavior. People do not always do what they say. And the playing field between U.S. and Chinese manufacturers isn’t quite level. But Sirkin says there is an important message embedded in this study. “People tend to discount U.S. manufacturing,” he said. “And they shouldn’t. The message for U.S. manufacturers and retailers is that they are undervaluing the Made in America brand by not making it prevalent.”