Take a moment, walk around your store, and check the labels on your apparel. You’ll probably discover that your display racks are more international than the departure terminal at LAX. But have you ever wondered why most of the T-shirts are made in the U.S. while the walkshorts are produced in China? It all comes down to economics.
The increasingly competitive nature of the surf industry, in combination with a softening domestic economy, is causing many companies to produce a greater percentage of their apparel overseas. This ongoing exodus is helping maintain low prices for consumers, expand profit margins for brands, and enable the industry as a whole to produce the complex styles demanded by consumers. But has it also changed our industry?
“It’s no secret that when it comes to detailed cut-and-sew work, it’s very difficult to manufacture domestically in a cost-effective manner,” says Billabong U.S.A. President Paul Naude. “Sure, there’re isolated pockets of opportunity here — like with our T-shirt-blank program — but it just makes more sense to produce detailed pieces elsewhere.”
Domestic and foreign production methods are drastically different. Each has its pros and cons, and more and more companies are leveraging the advantages of one against the other.
Made In The U.S.A.
Domestic production requires a great deal of complex purchasing, which places an increased load on a company’s infrastructure. It demands companies oversee the selection of fabric, its delivery to the cutting contractors, the product’s transportation to the sewing house, and then finally onto the embroidery specialists. “You get separately invoiced from each of the steps,” says John Vance, president of The Realm. Not surprisingly, this often leads to an endless paper trail and plenty of headaches.
On the flip side, even though domestic production demands close attention to detail, it also often allows flexibility. Domestic production runs tend to involve smaller volumes and produce faster turnaround times, making it easier for brands to quickly react to trends and consumer demand.
“Some programs are useless to go overseas with,” says Abran Abeyta, head of outerwear production for Volcom.
As Naude points out, this usually depends on the detail level of the product involved. For items like a simple polo shirt, where the fabric is readily available in the United States, it’s not worthwhile to take production offshore.
A Full Package
Foreign production is much more streamlined than its domestic counterpart. Companies place orders with an overseas contact who puts together a full package for them. These packages include all the details: fabric, cutting, sewing, embroidery, and more. While this takes a lot more work and planning up front, it eases the burden of day-to-day management.
“Overseas manufacturing is better for the designers,” says Chad Godfrey, director of design and merchandising for The Realm. “It doesn’t require the same day-to-day involvement as domestic production does.”
Offshore production also usually comes with large minimums and long turnaround times. Doing business with reputable factories overseas usually requires 1,000-unit minimums and at least three- to five-month turnaround times (which includes shipping and customs clearance). These projections can be risky — companies are restricted from making major changes to their orders, and most companies are wary of alienating these sought-after contractors by breaching agreements.
However, some people believe that the downside of foreign production is a necessary evil. “To be competitive in the market today, you have to take product overseas or you’ll price yourself out of the market,” says Tom Ruiz, Volcom’s national sales manager.
“Volcom has always treated overseas production as a necessity — where heavily intensive single-needle items like cargo pants are involved,” says Abeyta.
Tavarua Owner Mark Price agrees: “With alll the bells and whistles of the more detail-oriented fashion styles, offshore production is necessary to stay competitive.”
The consensus seems to be that the overseas manufacturing quality-to-price ratio is consistently better than its domestic counterpart — quite a change from the stigma attached to foreign manufacturing a decade ago. “Back then China was equated with cheap, lower-quality goods,” says Mikke Pierson, co-owner of ZJ Boarding House.
Customer perception has also changed. “Five years ago the ‘Made In America’ label was an important factor for consumer purchases, but now not as many customers care,” says Pierson.
Essentially, customer purchases are almost always price-driven. “The hottest name at the cheapest price is the bottom line,” says Tom Schulz, co-owner and “head stock boy” of K-Five Boarding Company. “The majority of the population takes price over where the goods were manufactured.”
Most surf companies are now producing overseas, or will be moving production offshore shortly. Countries such as the Philippines, Taiwan, and Vietnam are new manufacturing hot spots. China, however, is the clear leader with the most sophisticated manufacturing technologies, says Vance. “China for clothing is like Italy for shoes,” he says. In other words, it’s where you go for quality. Because of this, Vance says, he recently decided to move all of The Realm’s manufacturing to China in 2002: “It simply allows more features for the same price.”
A Huge Sucking Sound?
As last summer’s World Trade Organization protests in Seattle made clear, trade policy has become a hot-button topic like never before. So has our nation’s increased reliance on offshore production resulted in just the type of “giant sucking sound” Ross Perot warned us of back in 1993?
According to the Cato Institute Center for Trade Policy Studies, the answer is no. “The simple truth is that the predicted massive flight of capital to countries with lower costs and standards never materialized,” writes Daniel T. Griswold, associate director of the institute, in a recent Cato publication. “More than half a decade after congressional approval of NAFTA and the WTO, domestic investment in the United States is booming.”
That’s all well and good for many larger industries, but down in the surf-industry trenches, it hasn’t been easy for small domestic factories. To remain competitive with foreign manufacturers, some have barely raised their sewing costs. Other factors, like the minimum-wage increase to $6.25 and skyrocketing energy costs in California, have put significant margin pressure on domestic production.
Despite these challenges, domestic production will continue to provide the surf industry with flexibility and proximity to the heart and soul of the market — Southern California. The “Made In The United States” label won’t disappear from shelves anytime soon, but don’t be surprised if the exodus to offshore production continues.