Monday, January 23, 2012

Bring It On Home

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….


  1. I am not alone in thinking that a good part of the reason this country is in the state it is job-wise is because we don't make anything here anymore and even our tech jobs are being out-sourced. No brainer. But interestingly, during a meeting I had in Atlanta, a manufacturer told me they were in the process of bringing their manufacturing back to the US. He said it pained him to tell people his product was made in China and that he felt what they were making there was becoming more and more inferior. Also, and I wish I could remember which of the trades I read it in (during the show) that there was a new push to manufacture at "home" and that a variety of small companies were going that way. Because of all that you've sited above, the "big" manufacturers and those that that sell to the Big Boxes are not likely to jump on this little red wagon (not big enough to really be a bandwagon as of yet :-) but, it's a start. It's a start.

    The problem with this "new" paradigm is that eventually (maybe not even that far into the future), licensing just won't be worth it. We're already working three times as hard for the same money as we did a couple years ago.

    How much thinner can an licensor spread themselves before the amount of work involved in creating the art, marketing the art, doing the production work that many manufacturers now demand of an artist all while taking lower percentages and hit-or-miss advances, overrides what one actually makes?

    1. Hey Beej,
      Trust me, I feel your pain...If only more licensors would draw that line in the sand and walk away from royalty rates that are too low. Of course the reality now is there will be someone in line behind you who would take it, so that's a tough stand to make.
      I also wish that every time a politician claims they are going to "bring those manufacturing jobs home again" they would be required to add "and the American people will happily pay the extra dollars to buy those homegrown products!"
      Guess I won't be holding my breath...

  2. I remember the good old days when companies asked you what percentage you charged to license your art, now they tell you what they are willing to pay.......and while some companies out there still understand that it is the art that drives the sales of the product and respect the designers, there are some who still think that we need to take less when there are cost increases, when everyone else makes significantly more than we do (I refer to the individual artist).....I am lucky to have great licensing partners :)