Cost of Production

[Arturo21]

We all know that it costs more to make something by hand than have it machine made. We all know it costs much more to produce something in France rather than in the Philippines. So, I've always wondered, when are you paying the right price and when is it overpriced?

It's a given fact that most designer labels blow up their prices. For example, Dior Homme jeans cost around $500 - yes, they've got silver details and so, but are they worth that amount? What about raw denim A.P.C or 45RPM jeans? This doesn't only extend to denim. So, what is the real cost of production for different things? When are people paying too much?

 

[PrinceOfCats]

Assuming that Dior pay the least they possibly can then France's minimum wage is about seven euros an hour as a starting point...

 

[raijin]

In pretty much all cases, there is quite a large profit margin for the producers in the clothing industry.

45 RPM is all hand-made in the traditional way with non-synthetic dyes, organic materials etc, and ages naturally with time - I would say this somewhat justifys the price.

Dior Homme and many other high end jeans labels are either machine made or hand made. However, whats really the difference if the jeans are made assembly line by hand, than be machine? These labels have huge profit margins, im sure they cost very little to produce.

 

[Arturo21]

I'm simply wondering, how much does it cost? Does anyone know? thx. Thx for reply, POC

 

[Lena]

it goes like this..
in everything we buy, production & expenses cost (you need to count up fraction for advertisement, shows etc) are multiplied by three.. be it a Dior or a no name product. The 'cheaper' the 'real production cost' the higher the profit margin a label can take on an item, but this is how it roughly works.
In EU we pay around 10euros per hour. Dont let this fool you ..i'm sure some of the 'cheaper' lines of lux labels are produced either outside EU or in soon-to-be-in-EU countries where labour costs are much lower than EU standards

 

[AlexN]

I'm simply wondering, how much does it cost? Does anyone know? thx. Thx for reply, POC

Yeah, I've always wanted to hear a straight figure on something. But I've never found one. I don't think anyone knows.

 

[Lena]

Yeah, I've always wanted to hear a straight figure on something. But I've never found one. I don't think anyone knows.

i just gave you the breakdown AlexN, just divide by three and see how much everything actually costs

 

[AlexN]

I read your post wrong. Sorry.

 

[EdK]

i always figured for rough example retail price is 500 then manufacturer sells to retailer for 250 which is wholesale price. and production cost is like a 1/3 of the wholesale price.

 

[happycamper]

This is such an interesting thread. What about things like those Prada robot tricks that retailed for something like 100 or 200 dollars or something at one point? I can't imagine those things cost more than 5 or 6 dollars to produce. Is there a formula for the "designer markup" or is it some arbitrary amount? The multiply by 3 thing sounds reasonable for a lot of goods but it just doesnt seem right that these little robots (and other designer accesories) have a production cost of 30-40 dollars.

 

[Lena]

i always figured for rough example retail price is 500 then manufacturer sells to retailer for 250 which is wholesale price. and production cost is like a 1/3 of the wholesale price.

a 500 retail price
deduct vat according to country
then divide by three
then you have the wholesale price
this includes, materials, design, accessories, tax, travel expences, pr, logistics, company expences and advertising (shows, invites, events, print ads etc) costs. Those general costs are a fraction of the total expenses, but they are always there in the final wholesale price...

*since i sell wholesale, i have 'experienced' the retail prices of my products its always x3 +vat which makes it quite expensive
keep in mind that by choosing to have a small production i pay even more than the EU standard for manufacturing/materials costs.

 

[Lena]

This is such an interesting thread. What about things like those Prada robot tricks that retailed for something like 100 or 200 dollars or something at one point? I can't imagine those things cost more than 5 or 6 dollars to produce. Is there a formula for the "designer markup" or is it some arbitrary amount? The multiply by 3 thing sounds reasonable for a lot of goods but it just doesnt seem right that these little robots (and other designer accesories) have a production cost of 30-40 dollars.

those robots are obviously handmade.. this justifies very well the 30-40 dollars wholesale cost.. actually they are cheap, for sure they take more than 45 minutes to handmade..

 

[travis_nw8]

just remember at sale time stores can slash prices by at 75% and still make a profit.sadly it's the price one pays to be fashionable..

 

[enak]

How about the prada lamp broach, it was basically a piece of plastic and a metal pin, (AU$275). The description was funny, I think I remember a line "made from precious metals" I guess the pin must have been the expensive part

This makes the robot tricks quite reasonable

 

[faust]

just remember at sale time stores can slash prices by at 75% and still make a profit.sadly it's the price one pays to be fashionable..

where do you get your information from?

Lena, in the US we pay sales tax (something equivalent to VAT) ON TOP of the retail price. How wrong is that?

 

[purechris]

travis--I don't make any money when I sell things at 75% off....by that time you just want it gone and hopefully you've sold enough at full price or at a moderate discount to break even.

 

[AlexN]

Interesting discussion, especially about those Prada robots.

 

[Arturo21]

Yes, and thankyou Lena..you've been so informative!

 

[Lena]

you are welcome, my pleasure arturo

 

[jhaime]

This is how it works in our stores...

250% mark up from the price we buy the line in at...

For example...a pair of Evisu jeans...costing £235...

we'll buy them in for around £15-£20 a pair, depending on what size of order we have and what kind of relationship we have with their agency reps or credit management companies and so forth...it varies from shop to shop...or what part of the world the store is located in relation to the country it's manufactured in.

Regarding the production cost...those 1 pair of Evisu jeans retailing at around £235...you're talking about £2-£3....which is like what...$5-$6

They obviously have all their overhead costs to take care of...

If i stick those jeans on sale at 50% off, we're still making a sizeable profit.

It's the same for the rest of the clothing industry, just a less dramatic % increase.