With the spring season looming, Dartmouth College men's head rugby coach Alex Magleby didn't want to risk waiting the roughly eight weeks his two suppliers typically took to get jerseys, shorts, and jackets from their workshops in Asia. So in February he turned to Boathouse Sports, a Philadelphia manufacturer that promised to provide similar gear in four weeks at about the same price. "We found that Boathouse delivered the quickest, hands down," says Magleby.
Boathouse and other small U.S. clothing manufacturers that bucked the offshoring trend are catching a tailwind as rising costs for labor and transportation make Asia more expensive. In the U.S. apparel market, domestic production fell from 41 percent in the late 1990s to just 3 percent in 2008, according to the most recent government data. Still, hundreds of small companies, most with just a few dozen employees, manufacture in the U.S. Many are benefiting from their decision to keep production stateside, says Nate Herman, vice-president for international trade at the American Apparel & Footwear Assn. "There haven't been any new manufacturers popping up, but the ones that are around are pretty much at maximum production," Herman says.
The recession winnowed out many factories in Asia, so those that survived—primarily large operations—have started turning down or postponing smaller jobs, says Jeremy Lott, a vice-president at SanMar in Preston, Wash., one of the biggest wholesale apparel suppliers in the U.S. Overseas factories "can really pick and choose the orders they want to take and what they're producing because there's a shortage," Lott says. "If you don't have the buying clout at the factory level, your orders are taking significantly longer than they used to."
That has led to growing interest in the services of Contract Sew & Repair. Cheryl Evans, who runs the 15-employee company from a vast warehouse near Seattle, says established companies are coming to her with sizable orders—as many as 20,000 shirts or pairs of pants—that were spurned by factories in Asia. "This is a reverse," Evans says. "Usually companies come to us when they're first starting out in business because they can't make [big enough orders] for offshore."
For some buyers, the price gap between U.S. and Asian factories is no longer the primary concern. Boathouse President and Chief Executive Officer Doug Tibbetts acknowledges that his prices often are about 10 percent to 15 percent higher than those of rivals that manufacture overseas. That's down from 25 percent two years ago, and the change is enough to win buyers such as Dartmouth coach Magleby, who don't want to wait months for their orders. "When I talk to peers, they're always shocked and surprised that we've made this commitment" to keep production in Philadelphia, Tibbetts says. That decision, though, is paying off for the 200-employee company. "Our business is up significantly across the board," Tibbetts says, over 15 percent this year to the "$20 million range."
Labor trouble in China is making it harder for some retailers that buy from overseas manufacturers to keep their store shelves stocked. Scott Jones, founder of Beyond Clothing, which makes custom outdoor wear in Seattle, says rivals experienced shortages after the weeklong Chinese New Year holiday last February, when many migrant workers decided not to return to factories in Guangdong Province. That supply advantage, combined with growing concern among customers over the loss of American jobs, means sales of Jones's jackets, fleeces, and waterproof pants are on track to jump as much as 40 percent this year. Consumers "are disgruntled about overseas production, they're disgruntled with not being able to get their product," says Jones. Will Manzer, CEO of 65-store outdoor outfitter Eastern Mountain Sports in Peterborough, N.H., says the change in the labor market is hardest on smaller brands. "Many [Asian] factories don't want to take their orders," he says. "The capacity availability is just not there."
Some small companies also say U.S. manufacturers help them maintain a better grip on the quality of the goods they order. While Wal-Mart Stores (WMT), Target (TGT), and other big brands can afford to station buyers in China and send executives across the Pacific to vet suppliers, that would be prohibitive for brands with just a few hundred thousand dollars in sales. Janice Kajanoff, founder of Zentek Clothing, also in Seattle, contemplated using overseas factories, but last year she hired Evans's company, CSR, to make her brand's vests, dog coats, and pet crate mats. "Unless you're gonna hop over and check it all by hand," Kajanoff says, "you don't have control over quality."
The bottom line: Small apparel manufacturers that produce in the U.S. are getting a boost as shipping and labor costs in Asia increase.