The Effects of Reshoring on Purchase Behaviour and How Marketers Need to Keep Pace!

Reshoring is the opposite of offshoring, a term used to describe the act of bringing manufacturing back to the country of origin.

Reshoring is not a new concept but Trump’s recent election has sparked a buzz around potential fast tracking to onshore businesses in the US. As marketers we need to consider the effects reshoring will have on customer purchase behaviour, so we can align with change.

Reshoring takes a global shift

Reshoring has been happening since early 2000 and it’s not just an American phenomenon. It is a global economic shift with major powers such as England with the Brexit, Italy, Ireland, Germany & Spain leading change. In Germany, around three percent of industrial enterprises (approximately 570 companies per year), reshored their operations, including mid-sized companies like household brand Fackelmann and chainsaw maker Stihl. Japan have also been adopting the shift to reshoring, not just in manufacturing but call centres and support functions.

Offshoring is no longer providing the economic benefit it once did, causing businesses to rethink their production models. The rise of wages in the Asia region is causing a decline in cost savings, meaning the total cost of ownership is no longer viable. With the development of modern technology to enable production cost savings, the time is ripe to move businesses back onshore.

Trumps focus on reshoring American manufacturing and his requests to Apple to move manufacturing plants back to American soil will lead the way in fast tracking global shifts. Trump said, “I said, ‘Tim, you know one of the things that will be a real achievement for me is when I get Apple to build a big plant in the United States, or many big plants in the United States, where instead of going to China, and going to Vietnam, and going to the places that you go to, you’re making your product right here’.”

Montetize the reshoring business model

Reshoring is happening and marketers need to understand the best ways to support these changes to business models and montetize opportunities. We can learn from studies and examples in other economies to predict the likely reaction and behaviours from local markets. Being prepared can help us to plan and achieve financially successful outcomes.

The role of marketing in reshoring is to look at how automation and technology can cost effectively support local businesses and apply the right communication and messaging to influence consumers in the benefits of supporting and purchasing local products.

What are the effects of reshoring on purchase behaviour?

With major manufacturing and production changes happening, it is pivotal to consider what the perception of the consumer will be and how they are likely to react to a reshored model.

Studies show there are 4 major conditions at play that influence consumer product evaluations for purchase preference of reshored products;

• Environmental impact
• Local jobs
• Convenience and efficiency
• Quality

Samantha Kumara, Associate Professor in Marketing, Faculty of Management and Finance at University of Ruhuna, Sri Lanka stated that the understanding of consumer behaviour in relation to the perception of country of origin provides important considerations for strategic decisions in marketing and consumer behaviour.

There have been no focused studies on purchase behaviour, however research has demonstrated that “Made in” labels affect consumers’ product evaluation and purchase behaviour.

Recent polls indicate 78-80% of consumers would be willing to pay more and prefer to pay for U.S or European made products.

By understanding the dynamics of how consumers respond to country of origin related information, marketers can better communicate the benefits of reshoring.

What messages should marketers focus on to influence consumers?

When marketing reshored products, marketers need to consider these key behavioural influences and align messaging to address and support these benefits.

1. Environmental impact

   Over time, the growing social concern for sustainability has been recognised and incorporated in marketing decisions (Murphy & Laczniak, 1991). Reshoring’s sustainable approach of reduced shipping, stricter monitoring of standards improves the environmental footprint. This would affect purchase behaviour, because environmentally safe purchases address the consumer’s concern about environmental issues.

2. Local jobs

   This is a great behavioural driver because people are always concerned with the ‘what’s in it for me?’. This is an easy message to convey as the majority of the public know that a lower unemployment rate directly correlates with a more stable economy and improved overall living standards. Take the lead from politicians and reiterate the benefits your onshore company provides to the everyday job hunter and supporting hard working families.

   Despite global headwinds, directors are feeling more upbeat about domestic business conditions and the growth of their business than they have for a number of years. Indeed, while global uncertainty has directors concerned, there are positive signs that business may be ready to take greater risks, invest more and hire more staff. Source: Australian Institute of Company Directors “Director Sentiment Index: Research Summary Second Half 2016

3. Convenience and efficiency

   Reshoring provides greater value to consumers, with more efficient production and faster shipping lead times. The technology available in more developed countries also lends a hand to faster, better processes that the consumer benefits from.

4. Quality

   Studies show consumers expect a certain quality standard regardless of the country of manufacturing. The importance of brand strength now outperforms importance of country of manufacture. Marketers need to reinforce the message of quality standards and strengthen further by building brand presence. Creating an emotional brand connection will sustain a more loyal brand following.

What part does marketing technology, robots and automated processes play?

A very big part! In fact, it is technology that has enabled the shift to reshoring, with an increase in manual labour now more cost effectively carried out by machinery, AI, bots and CRM platforms.

Leveraging modern day technologies such as marketing automation can help reduce costs to keep prices competitive. Marketing automation provides a more efficient service with real time triggered responses and eliminates the need to over staff. Professionals are able to focus on more complex issues or sales queries, providing even greater customer value.

Bots and AI are becoming increasingly integrated into business and marketing practices, providing greater financial return and increased customer value.

Robotics play a big part for manufacturing, enabling companies like Adidas to return manufacturing to Germany.

Robots may be reducing human job vacancies, but the benefits of technology being able to bring work back onshore means profits will be returning to support local businesses and there are many supporting businesses that benefit. Technology will take care of the more mundane jobs, freeing up humans to focus on business development and innovation.

We would love to hear your thoughts on reshoring and how it might affect your business market. Please also feel free to put your Trump hate/love messages in comments …

References:
http://www.na-businesspress.com/JMDC/WilsonP_Web9_2_.pdf
http://cerasis.com/2015/06/23/reshoring-update/
Big names reshoring: https://tablo.io/ade-asefeso/reshoring-manufacturing-is-coming-home
http://www.reshorenow.org/companies-reshoring/
http://www.chinatopix.com/articles/106848/20161124/apple-donald-trump-iphone-china-tim-cook-outsourcing.htm