The truth’s on the garment tag. Calvin Klein outsources part of their manufacturing to Asian countries, of which China takes the lion’s share. This outsourcing strategy is commonly employed by many international fashion brands with the main purpose of driving scale at low cost, with little to no impact to the end-user. However, a simple business decision undertaken by such a fashion icon can have more implications to consumers than what meets the eye.
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Cost Efficiency
The easiest conclusion – the manufacturing move to China is a cost-efficiency tactic and with good reason. China grew into a manufacturing hub due to its high supply of laborers and low labor costs. Coupled with government subsidies, outsourcing labor-intensive work to China became a smart option for large companies looking to save.
The country has also become a prime location to engage the other end of the Chinese spectrum – the growing affluence of the ‘new rich’ – and serves as the gateway to consumers all across Asia. Calvin Klein has hubs in Shanghai and Hong Kong, among others, and in the age of digital, the company needs to bring its products to the market faster.
Imagine if Calvin Klein’s digital ads have already reached the shores of Singapore, but the jeans have yet to hit the shelves – that would make for a lackluster campaign, and a waste of ad spend.
Producing in China not only lowers the cost of goods, but it also saves companies shipping costs and lead times to bring finished goods to that side of the world.
The trade-off: Quantity vs. Quality
The move to China can also be a statement of the company’s strength and scale. It would be no surprise for a worldwide brand such as Calvin Klein – it is present in 110 countries around the world, and even more through strategic partnerships with major department stores.
A greater manufacturing capacity allows the brand to produce more designs and collections to meet and dictate ever-evolving trends – an important factor to stay relevant in the fashion industry.
However, taking the route of growth at low cost also comes with its trade-offs – to the consumer, this may translate to lower quality products. The dark side of fast fashion has revealed how fast trendy items are made and replenished, only to fall apart just as quickly.
A departure from small-batch or hand-sewn clothing, low-cost production in Asian sweatshops prioritizes a high output of finished goods over everything else – which may imply that the production process is rushed, or that some items fall through the cracks in quality checks.
Brand Equity
Brand equity isn’t directly impacted by a company’s outsourcing its production in China, but its implications do. And especially for a luxury brand such as Calvin Klein, the premium one pays for lies in the power of the brand. The fact that Calvin Klein is made in China can impact the brand negatively or positively.
Due to consumer knowledge of lower cost and perceived lower quality of Chinese goods, Calvin Klein might struggle to justify the premium placed on its products. Customers may judge products with “Made in China” on the tag and attribute a lower value to them.
This is especially problematic as brands are legally required to indicate where their products are made for customs purposes.
Producing in scale as China does also diminishes the sense of exclusivity that would drive customers to pay a premium for high-end products. The law of supply and demand dictates that with high supply, demand would decrease which would dictate a lower price in the market.
Why pay so much for Calvin Klein if you’re likely to bump into someone with the same outfit? Simply put – is it truly high-end if everyone can get it?
However, Calvin Klein’s “Made In China” badge can work to its advantage. Consumers nowadays look for not only aspirational but authentic brands. As such, brands are becoming more and more transparent to drive meaningful connections with consumers.
Provided the basics of these Chinese production houses are sound, the company could use this fact to push forth its identity as a truly global brand – one that is made for and by the world. Honesty works well with consumers – it builds customer affinity, which would drive purchase and loyalty.
Conclusion
The fact that Calvin Klein is “Made in China” is benign in itself. It’s the implications that can make or break the business in the eyes of the consumer. If the company uses its cards right, uses its cost efficiencies to truly add more value, and sticks close to its identity as a larger than life, luxury brand, Calvin Klein can continue with ease.
The truth may be on the garment tag, but how to leverage this truth meaningfully for the brand and its consumers – the ball is on Calvin’s court.