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Retail Trends

Patriotic Purchasing

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For more than 65 years, the family that founded Sub-Zero has believed that consumers purchase the company’s premium products because of their quality. But recently, with a groundswell of support for American-made items, the Madison, Wis.-based manufacturer of built-in home refrigeration has found it important to tell that story, too.

“We’re not waving flags and saying that should be the sole decision-maker,” Sub-Zero corporate marketing manager Paul Leuthe says. “But there is a heritage there, and we’re proud of it.”

U.S. consumers don’t have to look far these days to hear encouragement for buying American. Moved by the sluggish economy, bloggers and pundits have touted the link between U.S. manufacturing and U.S. jobs. But complex issues rarely have simple solutions: Are consumers willing to pay more for a made-in-the-U.S.A. label? If so, how much? Are margins already too tight for retailers to eat additional costs? Has too much infrastructure moved offshore for the opening of another mill to make a difference? Would it help if American manufacturing concentrated on the industries they do best and let the rest go?

“We’ve been sticking to our knitting, and that’s what has led to us being a brand leader in the marketplace,” Leuthe says. The company is more than just surviving: Sub-Zero — which acquired Wolf cooking appliances in 2000 — recently outgrew its Phoenix production facilities and purchased a 440,000-sq.-ft. building for developing new products. And though it had to let some employees go when the recession was at its worst, many already have been hired back.

“There is an optimism in the company,” Leuthe says. “With the new facility, it would have been easy to go south of the border, but our owner said, ‘No, I’m going to keep it here.’ We have a number of competitors out there, but we feel like we do it better than anyone else due to our components, systems and work ethic. We’re only going after our niche, and that’s one of the reasons we haven’t migrated offshore with our production.”

A ’til-death kind of loyalty
Alex Kaplan, a cosmetic surgeon and owner of Celebrity Laser Spa in Los Angeles, searches out products that are American-made and encourages others to do the same through his “Made in U.S.A.” blog. He wants retailers to provide better labeling for what they sell.

“Just highlight the products made in the U.S.A,” he urges. “Promote them. ... Am I going to spend an hour just to find one thing that’s not imported? No. I’m going to go find it online instead.”

Conversely, he says, when he finds a retailer that promotes the country of origin on products — and trains employees to know the difference, “I evangelize them. They will have that ’til-death kind of loyalty from people like me.”

Consumers like Kaplan often see the issue as more patriotic than political, and organizations are stepping up to connect those “patriots” to companies. TAP America — TAP being an acronym for tolerance, Americanism and patriotism — introduced its TAP Certified Merchant program in July to support small businesses and educate consumers. Members agree to stock at least 20 percent American-made goods in their stores, as well as to increase those levels by 1 percentage point a month. In return, those members receive a listing in the TAP business directory, as well as decals to promote the idea to customers.

TAP America founder Mark Bloome — an investor, philanthropist, community activist and former retailer — hopes the program will catch on like consumer review-driven organization Yelp.

“We may look simple,” Bloome says, “but this is not simplistic. We’ve just got to start somewhere ... we’re not going to be able to get anywhere until we get our economy together.”

Bloome began studying global systems after selling his business 30 years ago. “It became clear to me, looking at the present situation, that the key to any retail business is local employment.” He cites subsidies of business through low-cost land, currency manipulation and other methods of gaining competitive advantage over U.S. manufacturers, and others back him up.

Manufacturing a Better Future for America, a 2009 book by Richard McCormack et al., blames China’s “unfair trade practices” and “U.S. multinational corporations’ support of them” for inflicting heavy damage on the U.S. economy. The book also quotes a report from President George W. Bush’s Council of Advisors on Science and Technology (PCAST) that the continuing shift of manufacturing to lower-cost regions is pulling high-end design and R&D capabilities right along with it.

“Important scientific groups in the United States have warned repeatedly over the past five years that if the country loses its production capability, then research, development, engineering and design will quickly follow,” the book states.

Sandeep Chugani, senior partner and retail practice leader of The Boston Consulting Group, says his firm’s report predicting a “manufacturing renaissance” in the United States within the next five years met with a “muted response” from the retail sector.

The report, released in May, pointed out that Chinese wages are rising at about 17 percent per year; the yuan is continuing to increase in value; and “a host of government incentives” are making many U.S. states increasingly competitive as low-cost bases for supplying the U.S. market.

But as many retailers already have deep commitments in terms of global purchasing and infrastructure, Chugani says, the costs to move operations to the U.S. would be “huge.”

“Yes, consumers would prefer a product made in the U.S., but not at a premium,” Chugani says. “The pressure will be put on retailers as to how you can leverage that sentiment without asking those consumers to pay for it. That’s the tricky part.”

On a smaller level, manufacturers are facing the conundrum of how many components of a product can be made elsewhere while still maintaining the “made in the U.S.A.” label. Then there’s the challenge of sending so many components of a product offshore, one by one, that the other country eventually gains the ability to make the whole thing — and at a much lower cost. Look no further than computers for evidence of that.

“It is an interesting conversation,” Chugani says. “At some level, I do believe some industries will migrate back here. But it may take longer than any of us would think.”

Part of the fabric
In the meantime, part of the answer may be for the U.S. manufacturing base to come together and say, “This is what we want to do, and this is what the future of our industries will be,” Chugani says.

This summer, the Beverly Hills, Calif.-based Made in the USA Foundation named its second group of “Hall of Fame” businesses, with companies judged on quality, competitiveness and impact. Winners included Nordic Ware, 3M, K’NEX, Harley-Davidson and The Boston Beer Company, maker of Samuel Adams beers.

Attorney and foundation founder Joel D. Joseph says consumers often mistakenly believe that “nothing is made in the United States,” but “we’re still the largest manufacturing nation in the world.” The challenge is that many items — such as aircraft — are not bought by the average consumer.

Joseph believes that “all stores, from top to bottom, should at least offer the alternative of American products.” He also believes that the government should set an example by offering more U.S.-made products on military bases and in national park retail settings.

“It’s going to take a lot of work to change things,” Joseph says. “But I think we’ve turned a corner on it.”

Jim Koch, founder and brewer at The Boston Beer Company, says he’s heard plenty of anecdotal stories about Samuel Adams fans who celebrate international sporting events like the Olympic Games with the American beer.

“I especially love to hear the stories about U.S. soldiers who are going overseas or coming home, and their chosen celebratory beverage is Samuel Adams,” he says. “That makes me understand how much a part of the fabric of America Samuel Adams has become.”

Any thoughts of taking production elsewhere? “Even if we could, it doesn’t make any sense for us,” Jim Koch. “Our breweries and our brewers are here. Our drinkers are here. Freshness is important to our drinkers, and being America’s best craft beer is important to us.”

Three years ago the company started the Samuel Adams Brewing the American Dream program, which offers small loans and other assistance to early-stage business owners in food and beverage. At last count, “we had helped save or create 621 American jobs and our coaching events have touched 1,400 small business owners,” Koch says.

His own company has some 800 employees, most of them working in three breweries in Massachusetts, Pennsylvania and Ohio.

Leuthe would likely approve. It’s not uncommon for fathers and sons to have worked side-by-side on Sub-Zero’s production lines, and even though he’s been with the company for more than 20 years, Leuthe says he often feels like a rookie.

“We had a guy retire recently after 50 years,” he says. “There are a lot of tenured people here. They feel an affinity for the company. And I feel like this is my company, too.... We do want to engage American workers. But we always want to stand on quality, too.”