It would be funny if it was not so tragic. The headline reads “China Factories Eye Cheaper Labor Overseas”. It’s well documented that labor costs have been rising – dramatically – in China over the last few years, something like 15 to 20 percent per year, and of course material costs for anything and everything have gone up worldwide. Shipping is also skyrocketing, to the point where our clients tell us some factories will no longer quote hard prices – just an estimate that may change (upward of course) by the time they place the order. Countries like Bangladesh, Ethiopia, Vietnam and a host more are looking to pick up the slack, but the logistics of manufacturing in the middle of truly undeveloped countries will give anyone pause. Regardless, it’s a weird twist that the products we outsourced to China might actually be made in Africa by China.
Shouldn’t this open up more opportunity for us at home? Well…maybe… Art and design in America is inexorably tied to price – sad but true. We marvel at the beautiful pieces in a Scandinavian Design store and then wonder why we cannot buy them at WalMart. Everyone loves a Lamborghini or Ferrari, but every American company that has tried to build a high design car eventually fails. We crave Missoni, Mizrahi and Michael Graves but the only time we buy it is when Target rolls out a discounted collection. This is the state of consumption in America, cachet without the price, so is it any wonder so many of our jobs were displaced to countries providing cheap goods? You can try to blame corporate greed, but corporations react to what their customers want, and as a nation we want cheaper, cheaper, cheaper. Perhaps now the field will level a little bit and we can make an effort to support our own manufacturers and give them a reason to bring it back home again.
Ah well, a boy can dream.
Another article that hit my inbox today was about the new problem vexing big box retail, and it now has a catchy name: showrooming. This is the rapidly growing practice of using the brick and mortar stores to see, touch and feel the products and then ordering them online for a cheaper price. BIG problem for stores like Best Buy, Target, Wal-Mart and many others, especially for music and high end items like tools and electronics. The first line in this article (from the WSJ) was “Target Corp is tired of being used” and my first thought was “well, that oughta bring snorts from anyone who has had the pleasure of dealing with them”. But all that aside, the basis of the article was that TGT has sent a letter to their vendors asking them to create products unique to their stores to help shield them from price comparisons (presumably by altering features or model numbers), and if that is not possible they want the suppliers to ensure they can match the online prices. Without hurting their margins of course.
Did you hear the groan from the experienced licensors out there? We already know that, working this backwards, that means retailers will extract more price concessions from the manufacturers, which means the mfrs will need to find ways to cut costs further which means – yup – we will all be invited to participate. Again.
Man, I am getting to dislike Amazon….