Stop shopping at BigCo.

I see a very basic link between the shopping habits of American consumers and the dearth of manufacturing jobs in this country. Here is the story I’ve heard over and over; the amounts are not from any specific example, but reflect the shared traits.

An individual or a company comes up with a great new (or improved) widget. It will be made here in the USA. The company can sell it to BigCo for $4.00 which then sells it for $9.99 – no more than what similar items sell for. The company is sure that BigCo could sell thousands each year.

BigCo agrees that the item could be hot. But they would need to promote it; offer discounts & samples and advertise it. Then maybe it could sell for $6.99 as a regular price- if they can pay only $3.00 for each one. Well, $4.50 for each one less rebates and allowances etc. But at that price they could sell MILLIONS!

Of course the product can’t be made in the USA at that price; but BigCo has ‘connections’ with all sorts of manufacturers over in Asia. Since BigCo buys so much (they get container-loads every day) there would be almost no shipping costs to add this little item. What’s a struggling company to do? They could turn down BigCo’s offer, produce it locally and sell through ‘specialty retailers’ and perhaps sell a few thousand. Oh, and pay for their own marketing and advertising.

And what’s the likelihood that BigCo will just happen to launch their own brand of new Improved Widget produced off-shore? Even if the designer had the forethought (and funds) to patent their Widget, do they have the money for a long, drawn-out lawsuit against BigCo? Probably not.

So the great new widget will be produced overseas. When you buy it at BigCo for only $6.99:
$3.99 goes to BigCo for overhead, marketing, minimum-wage staff;
$1.50 goes to the over-seas manufacturer
$1.50 goes to the designer/creator
So about $5.49 (less BigCo profits sent to overseas shareholders) stays in the USA.

If, instead, it’s made in the USA and sold through an independent shop for $9.99:
$3.00 goes to the local shop (they don’t get the volume discount)
$2.99 goes to the local manufacturer
$4.00 goes to the designer/creator- including marketing
So most of that $9.99 (less any parts purchased from overseas) stays in the USA. The local shop doesn’t get as much from each sale but most of what they earn is immediately put back into the economy rather than ‘fat cat’ accounts overseas. The sale supports local manufacturing so local government gets more in payroll taxes- and a few more cents in sales tax as well.

The designer gets more than three times as much per item with the local seller. They would make more if Bigco did actually sell many more. But they also probably have to pay to have agents stock/restock Bigco’s shelves and contribute to national advertising and other programmes that would reduce their income- so the “extra revenue” is far from a sure thing.

Please don’t bother posting that you think my examples are not ‘dead on’ – some of BigCo’s practises are hidden behind Non-Disclosure Agreements but these examples are based on analysis of published information, interviews with industry players and some first-hand experience. Even if I’m off on some percentages the end result is correct; shopping at BigCo prevents the resurgence (resurrection?) of US manufacturing. So enjoy those short-term savings, but stop b!tching about the lack of manufacturing jobs, “I mean it. Really.

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