There’s no question about it: manufacturing is a complicated matter. As a business owner, you must consider many factors when deciding on your production and manufacturing process:
- What’s going to be expensive or affordable?
- Where will you have the most oversight?
- Where will you be able to find the best talent?
- How will manufacturing impact your brand’s sustainability?
In this post, we’ll weigh the pros and cons of domestic manufacturing vs international manufacturing and consider what approach will set you up for a great deal of success as a startup or growth stage business.
Manufacturing has seen a recent boom in the United States over the last five years. While traditionally the US has an industrial history, certainly, back in the 1950s and as we look at the industrial revolution, moving into the 1970s, ’80s, and ’90s, we saw a huge shift to the global marketplace. As we opened up our borders and started to produce more internationally, it gave rise to a competitive market. It allowed US businesses and creators of products to work with manufacturers overseas, diversify our talent pool, and also to be able to access labor at lower rates. Fast forward to 2019 and 2020, and there’s an important question at the forefront: How do we want to approach a globalized market both in terms of our ethics and our pocketbooks?
As startups, many companies choose to start with domestic manufacturing, and the rationality behind that surrounds oversight. Certainly, if you’re working with a company in Los Angeles and you’re living in Miami, it’s easier to get in the same time zone or hop on a flight to check out what your manufacturer is doing. This becomes a lot more challenging when manufacturing abroad and possibly being on the phone at midnight or 1 a.m., and negotiating or having oversight on your production when it is happening in India, China or other countries abroad.
When it comes to a branding versus price point conversation, many new fashion startups will make a faulty assumption: “Well, I’m making my products here in the US, so obviously I can charge a premium price.” That’s not necessarily the case. The “Made in the USA” brand mark is a strong element to add to your business, but it is not strong enough to build your business around. Your business identity should encompass so much more—your branding, how you’re positioning yourself, and all of your marketing efforts. All of that outward-facing customer information and branded touchpoints ultimately become the reason why someone buys from you, not just the USA label.
Unfortunately, places like China and India have gotten a bad reputation when it comes to scaled-up manufacturing, and while we can’t say that all factories are compliant, that reputation is ill-deserved. More and more factories have been making a big effort to become more sustainable, transparent, and to be able to adhere to much better labor practices so that domestic U.S. companies and global brands want to be able to do business—and feel good about doing business—in China, India, and in other international markets. So, while we’re far from having full transparency, this shift is a really strong indication that the globalized market is becoming more transparent.
While sustainability and transparency are important to your business, being sustainable or transparent is not exclusive to domestic manufacturing. In fact, having a strong business model and knowing where your products are being made is certainly something that can happen on a more globalized level.
On the flip side, when we start to look at things like talent sourcing and finding globalized talent, elements like embroidery or having access to better silk come into play. For manufacturers who have established access to those kinds of raw materials, you might be looking at production in places like China.
When it comes to skill sets and expertise, the artisan marketplace has so much to offer. For example, there are regions in India that focus exclusively on block printing or hand embroidery. With international manufacturing, you’ll find many regions that are home to indigenous and exclusive talents that you won’t find anywhere else. So, not only can you have the opportunity to drive down your cost of goods on production and design, but you also have an opportunity to leverage international talent and add a certain essence and authentic quality to your products that you might not have when producing domestically.
When it comes down to it, the major decision-maker should be your cost of goods, labor, and production. Companies that are based in the U.S. tend to be able to give much smaller minimum quantity needs, meaning you might be able to find a manufacturer in Los Angeles that’ll be able to produce maybe 10 to 25 units per piece. For new fashion startups, this would be a safer starting point.
On the other hand, when it comes to international export and international manufacturing, the needs for those minimum quantities are going to be much higher. All of a sudden, you’re looking at 100 to 500 units. And the more that you’re able to produce at scale, the cheaper price you’ll get. So, if manufacturing internationally appeals to you right away, and if you can make those minimums, the pricing will be worth it. As you scale up, your cost of goods will just get lower and lower. When it comes to scalability, international happens to be predominantly a strong place for you to drive that profit and bottom line.
What’s the Verdict?
Now that you have a sense of the pros and cons, one thing is clear. There’s simply no easy answer to the manufacturing question. It will take some deep thinking about your brand’s needs to make the right choice.
While there are many different ways of approaching domestic manufacturing, the bottom line here is to not rely on the “Made in USA” label as a huge differentiator in the market. Choose to produce domestically if it makes sense for other business reasons like having oversight, wanting to be able to visit the facility, and especially if you want to have a future investment of ownership in a production space. At Scaling Retail, we have seen some amazing brands that have partnered up with local manufacturing from a business and investment standpoint in order to take advantage of having production that’s both domestic and local— and because of their ownership over the entire supply chain, they also have a much lower cost of goods.
On the other hand, if you have plans to scale and are looking to grow quickly, consider going international. International markets are the right approach for diversifying talent, for getting better cost of goods on higher minimums, and for planning your production further in advance. Many international manufacturers are working with the most famous brands in the industry— that’s because they’re able to plan with some foresight and they can really make those relationships super advantageous to them in the long run.
If you want to learn more about how to negotiate and understand manufacturing, make sure you take a look at our article on the Lingo You Need to Know. Before having these important conversations, make sure you’re familiar with the vocabulary and terms involved. As you take a step further and want to understand how to assortment plan and provide the best possible production schedule, timeline, and product assortment, make sure to take advantage of our free download How to Plan Your Assortment for Maximum Impact, which will drive not only what you create in the market, but also how you choose to work with your manufacturers.
At Scaling Retail, we’ve launched brick-and-mortar and e-commerce businesses all over the world. Questions about building, launching, or growing your fashion business? Send an email to firstname.lastname@example.org for a complimentary consultation.