Textile revives the "made in USA"

A textile workshop in the heart of Manhattan! When you push the door of Hanky ​​Panky, on the 11th floor of an apartment building on Park Avenue, a stone's throw from Grand Central Station, the surprise is total. Dozens of seamstresses are busy working on patterns. Further on, designers, behind computer screens, are getting their hands on the next collection. In one of the cities where real estate is reaching peaks and in a sector that has relocated at all costs, the SME specializing in lingerie provides proof that it is possible to ignore Chinese subcontracting or Indian.

“Made in America” is the credo of the two leaders of Hanky ​​Panky, Gale Epstein and Lida Orzeck. "At the beginning, we were called crazy," says Ms. Orzeck. But, in recent years, mentalities have completely changed: it has become a competitive advantage for us. In the space of ten years, Hanky ​​Panky has gone from around fifty employees to 150. Its specialty is thongs (about 50% of its production). The company sells 2 million per year, distributed, among others, at Bloomingdale's, Macy's, Nordstrom or Saks.

A SLOW MOVEMENT OF RELOCATION

Despite the growth of the company, the two founders have always been keen to maintain production in the New York area. Hanky ​​Panky has a workshop in the Queens district and sources its fabric exclusively in the United States. This choice has a cost: a thong is sold for around twenty dollars, three times more expensive than at Victoria's Secret, the market leader which has chosen to relocate. “Of course, we are in a niche market, recognizes Ms. Epstein, but by emphasizing design and quality, we manage to make a difference with the competition. »

Hanky ​​Panky could pass for the exception in an American textile sector which massively relocated in the 1980s and which, since then, was left for dead. But a slow movement of relocation is beginning. US exports of textiles and clothing have increased by more than a third in the space of three years.

A survey, conducted in 2012 jointly by the Massachusetts Institute of Technology (MIT) and the journal Supply Chain Digest among 340 manufacturers in the sector, revealed that a third planned to repatriate part of their production to the United States, 15% claiming that they had decided to do so. “A certain number of companies had not really measured all the hidden costs represented by relocation to the other end of the earth, explains Suzanne Berger, professor at MIT and specialist in globalization and relocation. We have witnessed a herd movement on the part of industrialists, who today realize that this does not only have advantages. »

RISING COSTS IN EMERGING COUNTRIES

The American textile sector is bloodless. In 1993, more than 477,000 people worked in spinning. Today, there are no more than 115,000. But, undeniably, "a movement of reversal of flows is occurring with the increase in costs in emerging countries", recently explained to the Wall Street Journal Robert Hitt , the Secretary of Commerce for South Carolina, one of the traditional textile regions.

According to the University of Textiles in the neighboring state of North Carolina, the cost of producing a kilogram of yarn was 2.86 dollars (2.09 euros) in the United States in 2003, against 2.76 dollars for China. Today, the gap has reversed: 3.45 dollars for the United States but 4.13 dollars for China. The rise in Chinese labor costs and supply times, which are becoming less and less compatible with the acceleration of collection renewal, are pushing certain brands, such as American Apparel, to play on “made in the USA”.

Read also: In the United States, the industry risks a lack of qualified employees

A movement that is also driven by consumer choices. According to a January 2013 survey for the New York Times, 68% of Americans say they prefer to buy clothes made in the United States, even if they are more expensive, and 63% are convinced that they are of superior quality. .

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This change in behavior encourages brands and retailers to change their strategy. Abercrombie & Fitch has created “Made in the USA” areas in its stores. Walmart, considered the champion of offshoring to drive prices down, is also changing its tune. The world leader in distribution has set itself the objective of increasing its purchases in the United States by 50 billion dollars over the next ten years. The group announced, on January 24, the creation of a fund endowed with 10 million dollars to promote those who accept to repatriate their production.

Some subcontractors have taken the lead, such as the manufacturer of women's socks Nononsense: this subsidiary of the Kayser-Roth group (Burlington, Calvin Klein, Jockey) has just invested $18 million in its factories in Tennessee and North Carolina. Nord, to provide Walmart with “made in the USA” socks.

If the examples of relocation are for the moment impressionistic, the general dynamic goes beyond the simple anecdote. Thus, in December 2013, a Chinese spinning mill, Keer Group, signed an agreement to invest 218 million dollars in a factory in Lancaster, near Charlotte (North Carolina). In addition to local subsidies, the company will find electricity twice as cheap there as in Hangzhou, its cradle, in the province of Zhejiang. It aims to create 500 jobs in the United States.

“A REAL SHOOTING WINDOW”

Another advantage for a Chinese manufacturer to settle in the United States: optimize customs duties. Making its yarn in the United States then allows it to be exported to Central America, where the clothes are woven before returning to American soil to take advantage of the attractive rates of the regional free trade zone (NAFTA).

The Indian Alok Industries made the same calculation by planning to establish itself 80 kilometers from the port of Savannah (Georgia). Fellow ShriVallabh Pittie Group is also set to invest $70 million in Georgia, considering that between local subsidies, low interest rates in the United States and the cost of affordable energy, it was not insane to get closer to its end customers.

"We must not imagine that all the jobs lost by American industry will come back as if by magic," warns ^Ms. Berger, who points out that countries like China have integrated industrial sectors that go well beyond the mere subcontracting. The lost ground will be all the more difficult to regain as outsourcing has been pushed to the extreme: in 1991, more than one in two garments (56.2%) was made in the United States, according to American Apparel & Footwear Association. Today, that rate has fallen to 2.5%. The impact on employment is equally impressive, the sector having lost three quarters of its workforce.

"There is a real window of opportunity for industry and production jobs," says Ms. Berger, who participated in the "Production in the Innovation Economy" survey, conducted for three years under the aegis of MIT and published in the fall of 2013. "We have come to the conclusion that industrial production cannot be considered as a simple commodity that can be let go in low-cost countries", she insists, while emphasizing that the reconquest requires “the establishment of integrated ecosystems where innovation and production play on proximity”.

The American government got down to it by co-financing innovative industrial centers with private consortia. A first, devoted to 3D printing, was launched in 2013 in Ohio. A second, specializing in low-power devices, was inaugurated on January 15 in Raleigh (North Carolina) by Barack Obama, who promised to open a total of fifteen. The textile is still waiting for its own.

Tomorrow, fourth part of our series on the American economy: “The boom of start-ups in New York”

Stephane Lauer

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