Living in Vietnam, I don't believe this article for a second. Clothing manufacturing is unbelievably massive here. It isn't going anywhere anytime soon.
Clothing is a commodity item, even if it takes a week or a month to ship to the US, it does not matter. If you need it faster, raise the prices (or take a hit on the massive retail markup) and ship it faster (air vs. boat).
Having also built a successful print on demand business, we did all our printing in the US because the customers were in the US and the shipping times would have been too great because of the on-demand nature.
The garments themselves come from other countries. Notably, the people creating the designs and buying the FB ads, which target US consumers, are in SE Asia (mostly in Vietnam). Only people in the US will pay $25+ for a t-shirt that costs $1 to $4 to produce.
"Living in Manchester, I don't believe this for a second. Cloth and clothing manufacture has become unbelievably massive throughout Lancashire since the spinning jenny in 1760. Manchester wasn't called Cottonopolis for the last 100 years for nothing. It isn't going anywhere soon."
They produced for all levels of the market from the cheapest to the most premium. Mostly cloth, but a big apparel industry on the back of it.
By the time of WW2, almost half a million had left the industry. Through the 50s and 60s mills and garment makers were closing weekly. By the 1970s or 1980s there was essentially nothing left. Nothing in stores is UK made any more, except the highest end and bespoke.
Cheap T's and the like will probably always come from wherever's cheapest. For the rest, never say never. :)
Investors everywhere drool at the idea that automation can make employees redundant - they're expensive and one of the biggest sources of risk in a business. Employees make investors super jittery.
I think the Trump trade war has only elevated those jitters. Investors are terrified at the prospect of paying an American $15 / hour what they used to pay $4 for in Vietnam.
The demand for automation is very, very, very high because of this. This drives a lot of investment which pushes up developer wages. It also means that a lot of people seeking investment aren't 100% truthful about what is possible and what isn't in their press releases.
I think that this charade of "we will eventually automate 100% of the world out of a job" is kind of the silicon valley religion. Challenging it means violating a taboo - it threatens the torrent of cash being funneled into our ecosystem and, frankly, undermines the very core of the power we hold.
I noticed some jeans I bought a while ago had a label that said they were made in Lesotho (which is not in Asia).
A motorcycle I owned in 2009 was made in Thailand.
A car I owned in 2011 was made in South Africa.
These are all things being imported into the US.
China and India make a lot of things because they are big, but that doesn't mean the rest of the world does nothing or that tomorrow large parts of the world will close up shop.
Depends what you call fast. Fast enough to cause deprivation more than likely, and the usual bell curve. For a career, an industry almost completely exiting in half a working lifetime might be thought fast by many outside IT. :)
Some will leave early, most when some tipping point is reached, and some will hang on for decades. Something different will fill the gap.
I could see it being much faster than that. As someone working in automation, a lot of our recent work is involved with automating tech and car manufacturing in Vietnam. I could easily see a shift away from textiles and into more advanced manufacturing very soon.
10 years .. shorter supply chains is going to be trend in post-brettonwoods world. The free-traders and multilateral trade agreement people lost the fight both on left and right in USA. Prima facie evidence TPP.
25% of those surveyed said 50% of their clothes will be "nearshored" by 2025.
So within 7 years (ballpark number) 12.5% of clothes will be nearshored.
That sounds pretty plausible. It's not exactly a titanic shift, more of a gradual one And looking at the chart backs up those kind of numbers. Fewer companies have 0-10% nearshored and more companies having 10-30% nearshored.
Of course, the survey is a bit misleading because it isn't volume-weighted. If 100 boutiques use nearshoring but Walmart doesn't...
Also keep in mind that "nearshoring" doesn't mean "moving back to the US and Western Europe". If you read the linked McKinsey study it means "moving to Mexico and Turkey because the US and Germany are still way too expensive even with full automation".
Your calculations weren't quite correct because you didn't account for all the different survey answers. If you account for all of them, right now about 21% [0] of clothes are nearshored, and in 7 years about 30% of clothes will be nearshored. That's about a 45% increase in the amount of clothing nearshored or 13% decrease in the amount of clothes manufactured overseas. Vietnam's share might still increase though because it may take more of the declining Asian share.
[0]: Using the midpoint between the two survey options and 60% for 50%+: 6.21 + .45.03 + .35.04 + .25.05 + .15.15 + .075.18 + .025.33 = .21025
[1]: With the same method: .6.24 + .45.04 + .35.14 + .25.18 + .15.22 + .075.15 + .025.03 = .301
>Only people in the US will pay $25+ for a t-shirt that costs $1 to $4 to produce.
As a Westerner this drives me nuts about about buying clothes. Every time I buy any article of clothing I feel it right in the sphincter, getting ripped off 10x - 100x. Is there any way for folks in NA/Europe/etc to get clothes at or near cost?
Why don't you buy clothes from a thrift store? Maybe you (or maybe not...) don't want to look like a hobo.
Why does wearing clothes from a thrift store make you look like a hobo? Because they are so cheap, people with very little money can buy them.
That is why clothes are so expensive. They, to a certain degree, flaunt your wealth, or at least show that you probably aren't a hobo. This is pretty important to people, or no one would pay so much for clothes.
Not really, donation clothing is skyrocketing (because people consume more and more clothing from cheap brands like H&M) and stores like Value Village or Good Will can't actually accept every piece of clothing donated to them. Lots of it end up on cargos back to Africa or Asia. Buy from thrift stores, this is a good thing and good for environment.
Yes, you buy them directly from the Asian companies, just don't expect being able to change if they don't fit, becaus1 even when they accept to do it the round trip takes too long.
3 tshirts for £13.50 delivered next day to your door. That's $5.80 each. I have no idea where you'd pay 4 times that.
On the other hand I couldn't find a pair of socks in Nairobi last month for under about $15. Clearly I didn't know where to look, but it goes to show that there's always stores charging shocking amounts.
It is not that you are getting Rip-Off, There is at least $15 going into Retail Rental, Staff, Operation, All these cost are 10x higher in US than Vietnam.
I haven't bought clothes in the states for a while, but I did go to a "TJ Max" (apparently unrealated to TK Maxx) and from memory didn't seem terrible prices.
Bought some underwear from a Duane Reade in NY just before Hurricane Sandy hit which was a reasonable price -- I was on the last flight into Newark, but my suitcase wasn't. That was the last time I've checked luggage.
You should be annoyed. I routinely buy 'name brand' clothes here in Vietnam and I pay $4-5 for a shirt or shorts that have $50 price tags attached to them.
Just curious. Are they made with the same specs or are they lower-quality counterfeits? I used to check out some cheap knock-offs in another SE Asian country and they were all lower quality than genuine items.
The answer is 'it depends'. There is different grades of knockoffs and it is pretty easy to spot low quality ones. The fabric is thinner, the sewing isn't quite right. So far, I've only had issues with poorly made cheap shoes falling apart. Regular clothes have generally been excellent and I can't tell the difference.
(However, Vietnam has terribly high import tariffs, especially on cars, and it is annoying US car manufacturers. And electronics is also surprisingly expensive here, maybe also because of the import tariffs?)
Vietnam is now making their own cars too! Imported cars are 200%+ tax, which is great because it is keeping the numbers of cars lower (better for a motorbike based culture). Sure makes you pause at how wealthy people are here when you see a Lambo driving around Saigon.
Vietnamese also generally can't drive well at all, the education and penalties are mediocre at best. Huge numbers of road deaths here. There is videos all the time of someone mistaking gas for brake or drunkly running over a few motorbikes [1] (Lucky she is rich, she will likely not face any jail time and the articles about it have magically stopped).
I think any downtime for that machine is going to be really expensive. The more those machines do, the more they cost when they aren't doing what they need to do. Human labor, is plentiful and cheap. A worker who is out sick can be immediately replaced by 100 others waiting in the wings.
Factories can support redundancy too, can’t they? It means higher cost. But technology costs go down over time while labor costs typically go up in a given country.
Tesla tried to automate too much too soon but it appears Sewbots are quite ready to be deployed and their capabilities and reliability will likely improve in the future.
A worker needs to be trained, and willing to work. And has huge medical liabilities, along with tons of other clerical duties. With machines you don’t need to worry about them getting to work, sexual harassment, unemployment insurance, etc.
Of course there is a point where humans make more sense than machines, but the formers cost keeps rising while the latter’s cost keeps dropping, so the trend is clear unless that dynamic changes.
Clothing is fashion which is culture. The design, marketing, promotion, and customer relations and support or repair work best with local players. If a shirt can be sold for $25 then a fast moving and tuned in group with good client lists and promotional channels can and will dominate sales. The margins will be greatly reduced but the products will be superior. Customers are driven to best product fit not highest corporate margins.
> Only people in the US will pay $25+ for a t-shirt that costs $1 to $4 to produce
Does anyone have any solid numbers for this? When I've been in Asia buying cheap clothes usually the quality is terrible. Branded stores in Asia seemed similarly expensive still. In US outlet malls I regularly see Asian tourists from many countries buying clothes to take home.
I get the vibe that Bloomberg (the news) is very supportive of the trade war in the sense that all the related headlines I've seen seem to emphasize the positives to America and the negatives to China. Too lazy to dig up references right now. By comparison, the NYTimes seems more balanced. Am I wrong?
Also my reading is that Bloomberg etc are actually against the trade war and their coverage has been anti trade war. A broken clock is right twice a day and sometimes the Donald can be right as well.
Right, which is why Bloomberg published a story about China inserting backdoor hardware on its chips. A story that was refuted by the CEOs of the companies supposedly hit by the attack and by the very sources cited in Bloomberg themselves. A story that hasn't produced a single physical compromised chip as evidence despite Bloomberg claiming that there were tens of thousands of units affected.
I once knew Sharon Qi, she was a businesswoman who started Chinese edition of Forbes (all "foreign" media in China, are foreign in name only.)
The point she was making that Chinese state very much welcomes moves that amount to "giving your own child as a hostage" when it comes to big name foreign entrepreneurs having big stakes in highly regulated businesses that the state can "hold at gunpoint"
The very fact that Bloomberg group companies are still kicking in China, means that Michael Bloomberg is still playing ball with Beijing.
In the contrary, being a business journal, BBL must remain accurate in reporting and analysis of business. Biased business reporting will directly impact reader trust, this revenues.
Yes, business news is my favourite because to make money you have to be right about things. The guests on Bloomberg TV are just incredible compared to any other media sources, top financiers, economists and etc.. who are comfortable with math, science, history and economics.
I've heard this argument before, though with respect to the WSJ.
I don't really believe it. There is still a bias because "reader trust" depends on what the readers want to read, yes?
That is, most of the readers of Bloomberg, and of the WSJ, are - to use Marxian terms - aligned with the interests of capital owners, and not workers.
Labor is an important part of business, yes?
Yet a look at the Bloomberg home page shows no mention of union or worker rights issues. The word "worker" exists in the headline link "Jaguar's New Evoque Rides to Rescue of UK Workers" but the actual article is titled "Jaguar Land Rover's New Evoque SUV Rides to Rescue of U.K. Plant Amid Brexit Pinch", with no mention of workers.
Why would Bloomberg cover more about the labor aspect of business if its readers don't want to know more about it, or are actively against it?
I don't consume print business news but watch video format. And they do seems to be politically biased.
Give an examples I see CNBC tilting towards current administration. If not blatant, in more subtle ways like omission and directing the discussions away from critique.
Some Fox Business programs are more or less seems extensions of Fox News.
Bloomberg spends more times critiquing the current administration. So who knows whats their agenda.
Also, when coming to trust, it is pretty difficult to pin it. And user memory seems to not last more than a day. It is not like users going to remember what business advice somebody provided a year ago.
All reporting is always biased. Every word you select is a direct product of bias, and the choice between multiple sentence phrasing changes emotional direction of the reader.
I don't think logistics or even storage were ever a large percentage in cost / unit. The highest two is rent, staff in retail, and marketing.
Although the idea of Online Retailing were suppose to save on this, in reality it is merely moving the Rental cost to last mile delivery.... which is also expensive.
So in summary, manufacturing is coming back but the jobs aren't?
This trend was entirely predictable. Cheap human labor becomes expensive and unreliable at scale so it's only a stopgap until automation becomes affordable enough. Cutting delivery times and transportation costs helps shift the balance. Scandals and improving quality of life (i.e. workers become more expensive as labor laws improve, production becoming more expensive as environmental laws improve) also helped.
It's the end goal for Uber, so why should labor-intensive factory jobs be any different? As soon as automation becomes more profitable than human labor the jobs will be gone.
For many industries automation is possible and affordable, but it's held back by the fact that you still can find places where manual labor is cheaper than dirt. As the quality of life rises worldwide and decent workers have better options than working for a handful of rice, we'll get mass automation.
Not because of automation getting cheaper (though that's happening as well) but because of labor costs rising closer to living wages.
One of the most positive things to come out of advanced automation in manufacturing will be the decentralization of manufacturing and countries being able to make most of the products themselves again, instead of buying them all from China.
Hopefully this will be just as true for chip and device making in the future, as then it should become much more difficult even for China to force companies to implement backdoors in the products they sell abroad. Because once those companies are discovered it would be game over for them.
I think that is only possible for Clothes, Plants / Vegetables. Chip Fab are highly specialised, and only leading edge are from Intel, Samsung and TSMC.
As the benefit to each next generation of chips becomes lower and lower though, that might not matter as much to some countries as independence. For example, I've read that Russia manufactures some of its own computer chips for military purposes where it doesn't trust imported chips.
If any country wanted to, I'm guessing they could manufacture CPUs that would've been top of the line 10 years ago, and honestly, for most applications that would be good enough.
It also might be that individual countries would manufacture chips for certain applications, and then they could buy the "world's top of the line" from Intel, Samsung, and TSMC just for high end business or gaming machines, which is a smaller market than the total market for all tablets, phones, IOT devices, etc.
This mainly affects luxury clothing items for which “Made in ...” label matters more. The fashion is becoming ultra fast as trends are set by items on Instagram and 30 day bulk shipping from China doesn’t cut it. The term is “nearshoreing” because it is cheaper to produce in Mexico for US market and in Turkey for German market. Still, US and Germany themselves not an option because they are 17% and 144% more expensive respectively. China is responding by opening factories in places like Ethiopia.
Would China opening businesses outside of China due much to help the Chinese economy? I would assume most of the gain will flow to the local economy and the 1% Chinese elite
I can see nations such as India and Bangladesh getting into trade agreements with Western Governments to ensure them of continued quota in order to keep their masses employed and their economy intact. China is going to get screwed over severely for sure.
India, being darling of free World will get this 'special status' definitely so reality would be, clothes made in West + India and Bangladesh.
I'm curious about logistics in general. If the US rebuild its train system, by expanding it, would it make more economic sense to have production centered here? Could the US transport clothing from say, Indianapolis, to EU member states more efficiently, cleanly than China's proposed rail/road system?
The US freight rail system is already excellent. This fact is often missed in the periodic “American trains suck so hard” pieces because it’s not visible to the average person the way passenger service is.
Thank you for replying. Do we have the infrastructure to compete with large shipping vessels? Part of my curiosity is the switch over that supposed to happen soon in diesel fuel. If the price of fuel increases, will it make manufacturing in a central continent preferable?
Apparently it’s considerably cheaper to ship coast to coast by sea even though it’s a lot farther. Rail’s big advantage there is speed.
Fuel costs would hit both, but I don’t know which one would suffer more. In theory, rail could become independent of fuel costs by using electricity, but I don’t think electric trains are cost effective over such distances.
There where an article a few month back, from Norway I believe, where someone claimed that by raising shipping cost just slightly the saving by having certain products manufactured in China would be completely negated. The cost increase could be emission taxes on container ships.
The take away seemed to be that right now China is very depended on keeping shipping costs low for a large number of goods. Otherwise they are no longer able to compete on price.
Back in Medieval period, the Ottoman empires taxed the hell out of silk road, so Europe countries had to find alternative sea routes to India and China.
It's possible that automation is better for the average human, but worse for the median human. It's probably better for the environment, in terms of shipping.
Eliminating redundant work while maintaining the same productivity is good for all humans. It let's you do something else instead. Its up to the society to provide that something or in its failure to a standard of living in its stead.
But nobody is growing up desperate to be a line worker. Its a job of necessity, not desirability.
If your economic system ignores a significant portion of your population to live in poverty maybe you need a new economic system.
Within capitalism this only means people will be worse off (though in this case the impact most likely will be outside the US rather than within because the jobs in the US were mostly gone to begin with).
Automation is a good thing for humanity. Capitalism is making sure that good isn't distributed evenly or fairly.
Under capitalism automation is not really a good thing for humanity. Loads of middle class jobs disappeared due to it, leaving millions with lower wages and a more insecure life.
But automation is good for the average HN reader I guess, for now. One day it will come for them too.
A thought experiment: What would happen if we remove all "automated" things like factories, robots, cars.
We'd have lots of things to do, labor shortages everywhere.
But would you think the median worker would be better off?
And wouldn't you think that in the 18th century the automation of manual work through factories should have resulted in huge unemployment today?
You need to reconcile these thoughts with your claims before you dismiss automation.
My own take is: "Automation" leads to lower prices for everyone. In a sense, automation is the thing that increases your purchasing power by letting you buy more (of the automated good) for the same money. It's not a wage increase but its effect is the same for the good/service automated.
And yes, a manual worker might lose his job, but all others + all coming generations and there included his personal offspring will benefit from that. Now what's better in the long run?
The great thing about automation is that it allows us to make so much more with each unit of labour, so we can afford so much stuff.
The downside of automation is that we have to keep on buying more stuff so that everyone has a job, and to keep the wheels turning.
Automation of all those jobs in the 18th century did lead to everyone getting better off and that was good because most people didn't have enough. Today (in the west at least) most people have enough. There's a limit to how much stuff you can buy, money is increasingly directed into property etc. And the jobs are becoming increasing less useful (service jobs growth, marketing job growth v traditional blue collar, white collar job stagnation / shrinkage).
To continue your thought experiment. What is everything were automated? No one would have a job to buy anything. I guess that's where the basic income crowd is coming from. Its unclear how you get from here to there though.
The middle class has seen wages increase 20 fold since the early 1800s due to automation. It's the single biggest source of quality of life improvements.
Both viewpoints are half correct. Automation eliminates low skilled, low paying jobs and replaces them with a smaller number of higher skilled, higher paying jobs.
Whether this is good for society or not depends on the difference between the rate of automation and the rate of skills gain within the population. So the better your education system, the more fluid your labor pool etc. the faster your society can absorb changes caused by automation and move everyone up the wages and skills ladder. But too much automation in the absence of these things will lead to unemployment and social unrest.
Automation also tends to concentrate wealth within the owner/capital class and this can become a problem if left unchecked.
The irony of calling them communist, is that Marx argued that socialism/communism first becomes possible when capitalism has driven efficiency to a level where there is enough wealth for everyone coupled with mass unemployment. He warned strongly against the consequences of trying without it, arguing that it would just restart the class struggle by spreading poverty around.
Clothing is a commodity item, even if it takes a week or a month to ship to the US, it does not matter. If you need it faster, raise the prices (or take a hit on the massive retail markup) and ship it faster (air vs. boat).
Having also built a successful print on demand business, we did all our printing in the US because the customers were in the US and the shipping times would have been too great because of the on-demand nature.
The garments themselves come from other countries. Notably, the people creating the designs and buying the FB ads, which target US consumers, are in SE Asia (mostly in Vietnam). Only people in the US will pay $25+ for a t-shirt that costs $1 to $4 to produce.