Big Voice of Small Business

Does Made In America Matter to Customers?

With the bitter recession over the past few years, there has been fractious debate over how to create and retain American jobs and spur economic growth.    Typically, at the top of the list of ideas is making more stuff here in the US, and supporting the manufacturers, producers and service providers who do so.

But do consumers care enough about this issue to change their buying patterns and support American products?  According to a recent Boston Consulting Group survey, the answer is yes. According to the survey released November 15, 2012, two-thirds of American consumers would pay a premium for American-made consumer products in at least 10 product categories.  Further, the premium they are willing to pay for American-made products ranges from 10%-60%, while 60% had actually purchased an American-made product over a less-expensive Chinese product at least once over the past month.

A recent article in USA Today mentions that even Wal-Mart is getting in the act, pledging to source $50 billion worthy of American-made products over the next 10 years.

From my experience, while customers might want to buy Made-In-America products, most people in practice do not with the vast majority of their dollars when offered a cheaper alternative.   Let me explain.

In the craft market, Hero Arts is the leading provider of American manufactured stamps and stamping materials.  We are a 40-year old family business that makes the vast majority of our products by hand in California.  Further, we are a green-certified business and have won many awards for our sustainability efforts, including the top environmental award in the state of California.  We have marketed Made-in-America on our products for years, and green as well, with modest interest. 

The key is price, and to a certain degree performance.  If the price is similar to our overseas competitors, sure it makes a difference.  Who doesn't want Made-In-America, and/or a product that is good for the environment, if it performs the same and costs about the same as alternatives.  In fact, our green and Made-in-America marketing is often associated with better performance, and thus when the price is similar we win most of the time.

The issue comes when the price is different.  When our stamps, which are handmade with sustainable rubber and honey white hardwood maple blocks, are up against a Chinese-made product on synthetic rubber and a soft "hoe" wood block that is 20-30% cheaper, we lose almost everytime.

If anything, the situation has grown worse for American-made products, as the recession reversed any positive trends in this area.  Over the last four years, people for good reason became even more thrifty.  This hurt the trend towards buying American-made or environmentally friendly products, as even small price differences become even more important.  In fact, in some cases, our Made-In-America and Green marketing might have hurt us:  our products carry an American flag and a green leaf to indicate our production practices, and by one survey we found that people who didn't read the label closely assumed that meant the price would be higher.

Don't get me wrong.  The Made-In-America trend is something that I can see on the horizon as a positive thing, and if a company like mine can indeed offer good or better performance at a competitive price, I feel we should and will beat out inferior or cheaper-made products.  But is this trend likely to make a big difference in my business or the businesses of most companies across the US in the foreseeable future?  Not likely.

 

Politics Bad for Small Businesses

With the start of Obama's second term, the last thing we need is a U.S. political system that is divisive, partisan and unable to comprise either for the good of the country or the economy.  Political wrangling got in the way of good economic policy in Obama's first term, so let's not repeat the same mistakes.

After all, this gridlock is bad on all accounts for business.  Such political ineptitude introduces risk and uncertainty, the twin evils of long-term competitiveness and growth.  With risk and uncertainty of this nature, businesses, particularly small businesses, will be more cautious to invest, less likely to hire, and less able to get business loans.   This, combined with the potential for a further dampening of consumer spending and confidence, means the short-term prospects for American business has just been downgraded.

The reality of the U.S. problems, while significant, are not insurmountable or unsolvable.  If you consider our healthcare spending, which is high by any standard, and our overall tax burden as a nation, which is low by international standards, and simply agree we need to move towards lowering health care spending and finding ways to increase revenue, then there are relatively clear and painless paths to eliminating the yearly budget deficits and driving down the national debt. 

The problem is this requires a political process that is level-headed and looking towards the future of the nation, the economy, and businesses.  At the moment, there is little agreement in the House or the Senate on much of anything.  We need long-term solutions, not short-term quick-fixes, and it seems the mood is simply not conducisve for this type of nation building.

Let's be serious about what is good for the people, for businesses and for the economy.  If that means adjustments to healthcare spending, let's make that happen.  If it means a restructuring of the tax codes beyond the revenue agreements already passed, we need to look at that too.  What we can not stand for are politics or politicians that get in the way of serious solutions.  Political paralysis is our nation's biggest source of risk and uncertainty.

Despite Popular Belief, Regulation Can Be Good For Business

Could a regulation actually help business?

It would hardly be news worthy if the owner of a small manufacturing business like me reacted negatively toward a new regulation, especially one that requires business to assess products for toxic ingredients and seek safer alternatives.  Just such a regulation is here, titled the “ Safer Consumer Products” regulation that just passed today, aimed at ending the constant stream of news that a trusted product contains hazardous ingredients, and which dove-tails with the  national Safe Chemicals Act that also passed this week.  This can’t be good for business, can it? 

The reality is this regulation is exactly the role government should play, and one of the best ways government can help business.

I realize I just put regulation, government role and helping business in the same argument.  Let me explain why I believe this is a good thing.  A few years ago, my company Hero Arts embarked on a journey to innovate what we do, in order to compete globally on quality, craftsmanship and price.  We had to find ways to increase our quality and lower our costs while increasing productivity.  No small task.  In this process, we soon found ourselves asking: why not systematically remove all toxins, chemicals and solvents from our products and our manufacturing processes?

Despite the near economic Armageddon in our industry, especially in small-scale retailing where we sell most of our products, today we find we are not only still here but thriving.  We sell to 5,000 retail locations around the world, employ 65 people right here in California, and are the leader in our market in product quality and brand recognition. 

In many ways, clear, reliable and timely regulations help businesses like mine.  Such regulations can reduce business risk by eliminating the chance of unforeseen costs, and by doing so lay the foundation for investment and innovation.  For me and my company, innovation is the story behind my success despite tough economic times.  The investment in innovation, efficiency and change has allowed my company to thrive.  These investment decisions -- and the awards we received because of them including a California Governor’s Environmental Award -- are indicative of an ability to think long-term.  Without reliable regulations and a clear “line in the sand” by government, none of this would be possible.  Some rules, such as those within the proposed Safer Consumer Products regulations, can be good:  they clarify an otherwise turbulent landscape, create regulations businesses can rely on, and reduce long-term risk.  In this environment, businesses will invest, create jobs, and plan for the long-term as I did. 

I might not agree that every aspect of any regulation is correct or viable.  But I respect the rules that do pass, and being able to rely on them to clarify and reduce long-term risk has unlocked the ability of businesses like mine to find new and better ways to compete.    Don’t just take my word for it:  companies including Clorox, WalMart, Method, California Baby and Green Toys have already embraced the concepts of safer ingredients. 

Regulations can help business, and Safer Consumer Products is one such example.   It points to the future, a future that helps the business environment of California manage risk and thus invest for the future.   That is a future that I will invest in.

Reinvent Management By Hero Arts

Hero Arts has submitted its own family business story on ways to reinvent management at the Management Innovation eXchange or MIX. 

You can read the story here:

Cultural Innovation in a Family-Run Business: How Hero Arts Inspired Its Supply Chain to Unleash the Power of an Integrated Bottomline.

Take a look and join in by leaving your own comments and sharing the story with others.

The MIX, with Harvard Business Review and McKinsey & Company, has launch its most comprehensive contest ever, dedicated to reinventing management for the 21st century: The Harvard Business Review/McKinsey M-Prize for Management Innovation.  Hero Arts has entered its submission to this program. 

Does JOBS Change the 2012 Outlook?

The U.S. House of Representatives passed a bill today designed to help small businesses go public, streamline Security and Exchange Commission rules, and thereby improve access to financing. The "Jumpstart Our Business Startups" (JOBS) Act, advocated by House Republicans and passed with strong bi-partisan support, is far more focused and targeted then its name implies.  Basically, it smooths the path for going public for a segment of large "small" businesses. 

The real issue here is does this help U.S. Small Business?  Sure, it helps a narrow few, but no, it is not sweeping legislation that is going to make a large and lasting difference in the U.S. economy or job creation. 

House Republicans felt they had to get something done and respond to President Obama's State of the Union speech that spoke about job creation and continuing to give small businesses incentives to hire and grow.  Obama's plan is to extend a payroll tax cut for workers as well as a new payroll tax reduction for employers.  There are other provisions as well that talk about exports, loan programs, training, and more. 

Obama's record on attacking job creation is good, and you can find that evidence if you ignore the noise created by "spending is killing our economy and killing jobs," which is often heard but simply not true.  In fact, the reverse is true in times of high unemployment, as we find ourselves now.

For example, the stalled $260 billion transportation bill would create many more jobs that JOBS or Obama's current proposals. Additionally, Obama continuously hammered, especially by Republican primary candidates for his decisions to bailout the auto industry, pass the $787 billion stimulus program, and extend the payroll tax cut and unemployment benefits through the end of this year.  But the reality is, these policies did produce jobs and did help our economy grow, but some accounts in a significant way. 

Sadly, the stop spending voice continues to ring supreme, and thus no large spending package is likely to pass before November.

This is bad news for the economy.  It is still recovering nicely according to recent jobs reports, but it remains slow, especially among small businesses, and our economy remains susceptible to shocks, like increasing oil prices or European debt issues. 

There is no current policies design to help small businesses grow, access finance, and create jobs that is going to make a big impact anytime soon.  Thus, we are likely in for more of the same:  sluggish growth and slow jobs recovery for 2012.