CATONSVILLE, Md. — “Made in USA” is a label Americans see on all sorts of products around the country. What many people may not know is these claims are purely for marketing purposes. So does seeing a “Made in the USA” sticker really make that big of a difference to consumers? A new study finds it does and it’s even motivating some companies to make deceptive claims about their products.
Researchers from the University of Chicago explain that the U.S. Federal Trade Commission (FTC) requires items imported into the United States to display a label showing its country of origin. For products produced in America however, there is no such requirement. So, when you see “Made in USA” on something, that was put there specifically for the consumer’s eyes.
With that in mind, the study finds this kind of marketing can actually motivate customers to spend more on a “local” product. Conversely, when businesses take those “Made in USA” labels off, demand for those items drops.
Researchers Xinyao Kong and Anita Rao note, while these drops in sales aren’t enough to make companies want to move all their manufacturing back to the U.S., they do push some businesses to make false claims about their merchandise.
What does it take to be ‘Made in USA’?
For something to meet the standard of a “Made in USA” claim, the FTC says that product must be “all or virtually all” made with the United States. It must also have no or next-to-no foreign content in it.
Over the last decade, the FTC has investigated more than 150 cases of false or misleading claims about products allegedly manufactured in America. In the new study, researchers zeroed in on four specific cases that ended up not meeting the FTC’s standard for a “Made in USA” label.
“We focused our attention on four brands that included Gorilla Glue, Loctite Glue, Gorilla Tape and Tramontina cookware,” says Kong in a media release. “For three of the four brands, the removal of the information had a negative impact on sales. Tramontina cookware saw a 19.5% decline in weekly store sales; Loctite Glue experienced a 6.1% decline; and Gorilla Glue suffered a 1.9% decline. The fourth brand we studied, Gorilla Tape, experienced a ‘trend decline’ following the FTC decision.”
People really pay more for ‘American-made’ products
The team also took their study to eBay, to find out if telling consumers that something is American-made really pushes them to spend more money. Researchers held over 900 auctions on the site, with the only differences in their advertising being whether they made a “Made in USA” claim or not.
Results show auctions for products with a “Made in USA” claim ended in sales that were 28 percent higher than those not claiming to be American-made.
“In the field experiments, we chose a product category in which demand was already high on eBay,” Kong reports. “We then offered two variants of the product, one with the country-of-origin information, and one without. The products we chose were screen protectors for handheld devices. We eventually sold 912 screen protectors using three-day auctions on eBay.”
“While the increase in sales is not sufficient to justify the economics of relocating manufacturing operations to the United States, it is enough to incentivize some firms to engage in making improper and deceptive country-of-origin claims,” Rao concludes.
The study appears in the journal Marketing Science.