Cost of Production

[Yanka]

You are so right, thanks for putting it all together.

 

[stilista]

I know I could produce something for approx $5. If I used the usual 3x mark-up and made the the retail price $15 it would be assigned a certain place in the marketplace. If, however, I want to sell in stores such as Colette and Harvey Nichols I can't offer them my item at $5 wholesale as it's not "prestigious" enough for them to buy. I offer it to them at $50 wholesale with a $150 retail tag. They snap it up...because the bigger, more famous stores buy it the smaller copy-cat stores want to buy it too.

You simply have to decide which market you belong in and price yourself accordingly. Too cheap and you are making a fatal mistake, much worse than overpricing.

 

[butbeautiful]

whaoo didn't know that!

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.

 

[butbeautiful]

Ever heard of the mass production factory that you are working with, produce your stuffs secretly or in excess so that they can sell at a lower price or something for profit?

 

[sakina]

The thing is you're not paying only to produce the product, you're paying the rent of the factory, the store/boutique you bought it from, all the workers who handled the product. You also have to bare in my mind that it's not mass produced. For example, in WalMart they can afford to make only $.05 profit per item because everyday they'll sell thousands but only so many people will buy a pair of dior jeans so they need to make a much higher profit per item.

 

[mishahoi]

^ i see a lot of marc by marc and custo stuff sold from HK and other asian countries on ebay for too cheap, i always wondered if the factories were making extras and then selling them off...

 

[butbeautiful]

i think they were making extras.

if not, how can one be so detailed in copying?

 

[horriblyjollyjin]

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.

I'm sorry if this has already been mentioned, I haven't read the whole thread yet, but you mean "divide by four", not three

 

[horriblyjollyjin]

by the way, APC pay $18/yard for their selvedge denim, I too believe jhaime's figures are a bit off.

 

[Lena]

I'm sorry if this has already been mentioned, I haven't read the whole thread yet, but you mean "divide by four", not three

oops right

 

[Lena]

I know I could produce something for approx $5. If I used the usual 3x mark-up and made the the retail price $15 it would be assigned a certain place in the marketplace. If, however, I want to sell in stores such as Colette and Harvey Nichols I can't offer them my item at $5 wholesale as it's not "prestigious" enough for them to buy. I offer it to them at $50 wholesale with a $150 retail tag. They snap it up...because the bigger, more famous stores buy it the smaller copy-cat stores want to buy it too.

You simply have to decide which market you belong in and price yourself accordingly. Too cheap and you are making a fatal mistake, much worse than overpricing.

even though i totally agree on the market placement issues, i cant honestly see how can an indie designer produce a quality, low scale, EU manufactured product at 5 quid wholesale price

company maintainance, shipping etc could be very close to covering the 5quid cost without leaving much of a profit profit..
everything is getting so much more expensive lately due to new oil prices and when deciding on wholesale prices there are too many extras to be added on pure manufacturing price

 

[LoveMyBoots]

A recent article in New York Magazine...

The High Price of Fashion
Why should a dress cost more than a car?
By Josh Patner

$33,905
Organdy ruffled gown with embroidery and jabot details at Yves Saint Laurent, 3 E. 57th St., at Fifth Ave.; 212-980-2970.
$595
Silk satin sandal at Christian Louboutin, 941 Madison Ave., nr. 74th St.; 212-396-1884.
$38
Tights at Wolford, 619 Madison Ave., nr. 58th St.; 212-688-4850.
$32
Ruffled bikini at Victoria’s Secret, 1328 Broadway, at 34th St.; 212-356-8380.

Fashion has never been more expensive, but conversations about that sort of thing take on far greater urgency outside fashion circles than they do inside the gilded bubble. The Yves Saint Laurent gown on this page is $33,905; a bank teller makes $20,000 a year. Louis Vuitton makes a handbag that costs $20,000; the average car is, like, $30,000. Luxury retailers say prices have risen 25 to 50 percent over the past five years. Is the price of being fashionable out of control?

The prices quoted above are not from the invitation-only haute couture; they are ready-to-wear prices from the best department stores and boutiques. It’s hard for most people to fathom such outlandish excess; it’s become hard for the excessive spender to feel the full glory of her excess when the status barometer is forever on the rise. The Economist reports that time-shares in private jets are in demand. The New York Times, in an editorial hammering executive pampering excesses, says that “flaunting your affluence now requires a megayacht at least 80 feet long, with its own helipad, gym and antique furniture.”

But which of us mortals walks into the megayacht department looking for the one they can afford? We do, however, shop for clothes, and so the question is unavoidable: Why does a dinky little slip of a cocktail dress cost $2,300? The question is reasonable. The answer, not particularly so. Clothes are functional; fashion’s most vital charge is to press beyond reason, to play on dreams in the midst of the everyday. Less-lavish minds see things differently. Here is Thoreau, from Walden: “I say, beware of all enterprises that require new clothes, and not rather a new wearer of clothes. If there is not a new man, how can the new clothes be made to fit?”

When these worlds collide—how do you explain a $33,905 dress to a man asking for insider tips on finding bargain-price shoes?—voices rise in lieu of conversation. (“That price is immoral!”) Pronouncements are made. (Here’s one from me: Vibrant fashion exists outside of morality.) But even for those who love clothes, who accept fashion’s inevitable follies, the question persists: Is it still worth the money? The cost-value ratio of being fashionable remains spidery. There is no one reason why fancy clothes cost what they cost. Most “luxury” goods are European exports, and so steep duties and the weak position of the dollar against the euro contribute to exorbitant prices. Globalization of status brands is another contributor. The regionally unique fashion find is a long-gone memory from the luxury-liner age. That means that to some people, no price is too high for a hard-to-find, limited-edition dress or handbag.

Not very satisfying answers. The frustrated fashion fanatic who loves to shop for a few new things each season is right to be frustrated. But even hard numbers add up to no easy explanation. Take, for instance, the estimated line-item costs that go into making that $2,300 black lace cocktail dress:

Outer fabric = 3 yards @ $50 . . . . . . . . . $150
Lining = 3 yards @ $10 . . . . . . . . . . . . . . . $30
Buttons, zipper, hooks, etc. . . . . . . . . . . . . $15
Misc. (label, shipping, etc.) . . . . . . . . . . . . . . $5
Labor (cutting, sewing, pressing) . . . . . . $200

Manufacturer’s total first cost . . . . . . . . . $400

At a normal keystone (Seventh Avenue lingo for a doubled markup), the manufacturer’s wholesale cost for the dress would be $800, the retailer’s $1,600. But it doesn’t usually work that way. “The dirty little secret of pricing,” says a 25-year garment-center veteran, “is how much of a margin is made at both the wholesale and retail level. Some designers charge more than double and some stores charge more than double, and everyone makes money along the way.” Designers sometimes increase their price if they think a garment looks worth the money, while retailers use their own markup formulas to cover overhead expenses, satisfy shareholders, and pad the profitability of sales. All of which means the $1,600 dress can be yours for $2,300.

And perhaps one reason the dress costs $2,300 is because that’s what shoppers want to pay for it. Some people’s search for identity goes no further than wanting that expensive bag on that movie star in that issue of InStyle. Shoppers who have to imitate Kate Moss to express themselves are a retailer’s dream; they’ll pay any price if you clock them wearing that Dior Saddle bag.

It is too easy to see fashion as the devil. The truth of the matter is that as prices have risen, they have also fallen, and great fashion has never been more democratic. While Fendi CEO Michael Burke says unapologetically, “We have gone back to our elitist roots; our definition of luxury is the result of the human hand,” Coach’s president and executive creative director, Reed Krakoff, believes the opposite. “Accessible luxury in no way means that it’s less luxurious. In terms of things you can quantify—quality, workmanship, materials—we are on par with the best bags out there.”

Walk into Rugby, Ralph Lauren’s new collegiate shop on University Place and 12th Street, and you might think you’d crossed the threshold into the Polo mansion at Madison and 72nd Street. The woodwork has the same luster, the rugs are piled just as deep, but a well-cut tweed blazer is $298 rather than $895. A $178 Coach handbag brings top-notch design to women previously priced out of the status-handbag wars. Zara, the Spanish-owned interpreter of runway style, delivers a fresh collection of designer look-alikes to some 626 stores worldwide nearly every three weeks, selling for less than the tax on the original. Karl Lagerfeld and Stella McCartney have designed collections for H&M, the Swedish retailer geared toward trendy teenagers and young adults, that have pieces priced below $100.

Agitation over the high price of being fashionable seems misguided when style, in fact, knows no price tag. High price is no guarantee of high style. Anyone who knows clothes will tell you that fashion is not what you wear, but how you wear it.

Consider the evolution of the word luxury. It has paradoxically come to mean “style that everyone can afford.” Christian Dior recognized early on that marketing was everything when people actually need very little; luxury, for him, was anything more than food and a bed. Dior poured luxury over rich women’s bodies as though it were champagne and then grew rich himself, selling champagne dreams bottled as department-store perfume. Such magic was to be expected from a man who revived glamour after the Second World War. These days, using the word has become an indulgence in itself.

To read this ad from Bloomingdale’s is to begin pondering luxury’s ascendant subsets: “Indulge in the ultimate luxury . . . a breathtaking mink, now at irresistible savings.” Tory Burch, who is Martha Stewart–ing her own luxurious Fifth Avenue life into a retail success, says she began with the idea of “a luxury collection at a good price.” Even Abercrombie & Fitch, makers of $90 blue jeans and $158 sweatshirts, calls its scandalous nudie catalogue “Casual Luxury.”

Robert Duffy, president of Marc Jacobs International, says, “Luxury is something you don’t need, it’s something you want. The bag of potato chips I ate for lunch today was a luxury.” It seems that today, when people are worn out from bad news and broken promises, the promise of indulgence is one worth believing in. “How can I say this Abercrombie sweater is luxury?” asks Sam Shahid, who developed the company’s image. “It’s easy. You put the word on there. You tell them it’s luxury. Luxury is the best you can buy. Luxury touches you. I feel safe. I have the best of it.”

The best of it. Luxury is what you want. Fashion has never been more expensive. Fashion has never been more democratic. The handbag that costs as much as a car. The bank teller’s salary. Department-store perfume. The bargain-basement shoes. Does any of this even make any sense?

It does. Prices are not out of control, but these are the kinds of questions that always come up when people talk about fashion. What, exactly, would fashion that is in control look like? His-and-hers Mao suits? The bank teller has dreams, too; a $33,905 dress may never be hers, but why shouldn’t she—and we—dream of it? Fashion is like art. Even if we can’t afford the painting in the museum, we love looking at it.

No debate about fashion can exclude the priceless value of joy. The tender heart feels safely revealed in a Swiss organdy dress; the burning heart set free when the dress is silk charmeuse. The alchemy is real when a visionary designer, skilled craftsmen’s hands, and the most beautiful materials on this Earth come together. You can see the magic. But if you feel like a million bucks carrying your $178 bag, you see the magic, too.

Styled by John Vertin

Find this article at:
http://www.newyorkmetro.com/fashion/06/spring/15735/index.html

 

[Lena]

ahh excellent article and so on the point.. thanks for bringing this in Boots

 

[ShesElectric]

I paid $300 for my Prada robot (Jack)

No way! I got mine for $19.00... CANADIAN!

I got it at the Holt Renfrew Outlet (which is pretty much Canada's Saks Fifth Avenue). It was marked down pretty low but I am pretty sure its origional was only about $275.00 Canadian...

At the Outlet (which I think is the only one in the province of Ontario...) They have regular price, then mark-down, then somewhere around 60% off the mark-down to give you the final price... That's an estimation.. I got it last month.

The store is heaven sent. I got a Burberry dress for $59 down from somewhere in the $300.00's I think. I got tons of DKNY leggings, a dolce & gabbana bra for $24.00, and a gucci purse for $300 < the mark down was fairly low. So anyone in Ontario - check it out!!!

 

[em 692]

i just read that Paper Denim & Cloth will be lowering the prices of their jeans by moving production from Los Angeles to Mexico and the Dominican Republic...

 

[Lena]

the true cost of cheap clothing -observer article

The true cost of cheap clothing

At a Cambodian factory that supplies some of the biggest names in British retailing, Nick Mathiason and John Aglionby hear pleas for a fairer deal for hard-pressed workers

Sunday April 23, 2006
The Observer

We do the same work as they do in other factories. They just pay us less,' said Nut Chenda. A complaint familiar to workers around the world, perhaps.

But Chenda may have a point. The Cambodian woman works as a machinist for the Fortune Garment and Woollen Knitting Factory, about 20 miles from the Cambodian capital, Phnom Penh. The Taiwanese-owned business sells garments to some of Britain's biggest retailers - among them, household names such as Next, Debenhams and BHS, headed by Philip Green.

Nut Chenda and all the workers The Observer spoke to last week outside the Fortune factory gates earn between $50 and $60 a month. Even in Cambodia - one of the world's poorest countries - that is low, especially as neighbouring factories, it is said, pay $90 to $100. Though Fortune maintains it pays a 'fair wage above the legal requirement'.

That may be true but it is only part of what appears to be a story of harsh conditions and aggressive responses to union activity. Almost all the 30 workers interviewed said conditions in the factory were poor. Most people work in rooms of 600 people, they maintained. 'There are not enough fans and only two doors, which are kept closed,' said Chenda.

'In the washing room there are lots of chemicals and the ceiling is not high, so it gets very hot and stuffy,' said another woman, who asked not to be named. 'We are given masks but they are not good enough, and we often suffer the effects of chemical inhalation.'

Yim Sarun works in the washing room. 'When the buyers come to inspect the factory the managers bring out the best equipment, like good gloves. They also open the doors and increase the ventilation. But no one is allowed to talk to visitors and after the buyers leave they close the doors and take away the [new] safety equipment.' Though workers admitted old and dangerous washing machines, which frequently caused accidents, were replaced last year.
..............
As prices in first world shops falls, consumer concern about how this is possible has risen. Dan Rees is director of the Ethical Trading Initiative, an industry-wide body of retailers and unions that promotes best practice throughout the supply chain. He said there had been progress among some retailers over health and safety issues and hours of work, but only up to a point. 'The best companies swim against the tide of globalisation,' Rees said. 'The biggest challenge is integrating ethical decisions in an environment of falling prices.'

It is a challenge perhaps too rarely met. But in recent years, media coverage of sweatshops in faraway places that produce footballs for Nike or T-shirts for Gap has forced giant retailers in particular to come clean and publish transparent auditing mechanisms as well as join industry-wide bodies to promote best practice. Numerous examples of company profits being dented by consumer boycotts on environmental or ethical issues explain why a new breed of 'reputation managers' has evolved over the past decade. The negative stories have also spawned audit firms that assess factories on behalf of retailers.

Maybe there is only so much retailers can do. And is it their responsibility to ensure that a factory they don't even own treats its workers fairly if no national laws are explicitly being broken? In the Fortune case, two of the companies involved - Debenhams and Next - are members of the Ethical Trading Initiative. They have received praise from that body for taking the issue seriously. Nevertheless, problems at the factory persist. The workers at Fortune struggling in a hot and noisy factory on low pay at the bottom of the supply chain need more than just a talking shop.
................

for the whole -long- observer article click here
http://observer.guardian.co.uk/business/story/0,,1759240,00.html

 

[iyemstoopid]

thank you for posting this. we had a speaker who came to our economics class yesterday. she worked for an agency which inspected "sweatshops" in indonesia, india and other countries. workers typically worked 12 to 13 hours a day in horrible conditions, and made about 70 dollars a month, with no health benefits, workers unions, etc. she said about 95% of clothes where produced in sweatshops. her company also broke down the cost of a typical sweatshirt which retailed for 40 dollars, and found about 18 cents of that actually went to the maker of the clothing, 40 cents to the company, 5 to the store, and 4 to the wholesaler. the rest was in the fabric, shipping, etc

 

[irresistable_loz]

*Bump*

Sorry... too amusing to not bump

I'm starting to get an idea of why things costs so much, especially in limited production. I'm going to be launching this S/S (southern hemisphere) and realistically won't make more than 10 items per style/colour. Which means...

$250 pattern
$200 sample
= $450, (450/10 = $45-50 approx) + approx $100 per item production =

Approx $150 cost, x2 to make a profit = $300, x 2.5 for retail = $750 retail.

A bit hard for consumers to swallow when they are used to paying half that for items made in Asia, as is the case with the majority of Australian designers these days.... Anyway.

 

[ettebe]

*Bump*

Sorry... too amusing to not bump

I'm starting to get an idea of why things costs so much, especially in limited production. I'm going to be launching this S/S (southern hemisphere) and realistically won't make more than 10 items per style/colour. Which means...

$250 pattern
$200 sample
= $450, (450/10 = $45-50 approx) + approx $100 per item production =

Approx $150 cost, x2 to make a profit = $300, x 2.5 for retail = $750 retail.

A bit hard for consumers to swallow when they are used to paying half that for items made in Asia, as is the case with the majority of Australian designers these days.... Anyway.

I know what you mean.

Sooner people realize that cheaper made garments made in Asia is the problem, sooner people can start buying quality made garments from their country.

I have yet to figure out the cost of production for my line. I might low ball everything to try and under cut competitors.

 

[Always Looking]

Wowza! Great read!