Understanding the price of a garment
Before arriving in the hands of the consumer, the path of a garment is very long indeed. From purchasing the fabric, to cutting the pattern pieces, to delivery; there’s a ton of steps that have to be considered before the piece lands on a garment rack. A path where the weight of one specter looms large for every brand: price.
On the client’s end, it can be difficult to make a choice and decide on who to trust when purchasing a simple sweater. That’s not surprising, as the retail price is often not correlated to the true cost of the garment. A brand that manufacturers abroad is not always synonymous with bad quality, and vice-versa.
But, beyond mere numbers, there is the value given to a garment by the market. This psychological price can place a brand on a level that is more or less desirable because of the strategic choices taken. In fact, between benefits and customer loyalty, there is a whole process that determines how a final price is set.
What is the right price?
For a garment, the right price is logically the price that everyone, from the consumer to the designer, feel comfortable with. The sweet spot between benefits and the famous “market value,” which is far more important than it may seem.
This is reflected by the care that most brands put into setting a coherent price. Indeed, if the price of one single garment is shifted upward, the pricing of the entire collection has to be tweaked according to that one number.
The right price is hence one that does not make the client feel like they’re being taken advantage of, and leaves the designer knowing that they will earn a little something after all, in spite of the many phases the product goes through from conception to production. Because producing a garment is expensive! And one of the major expenses is the price of raw materials.
The price of a garment is first calculated according to the price of the raw materials. Indeed, all fibers are not created equal and obviously, leather doesn’t cost the same as rubber. Moreover, within the same type of material, there are sub-categories, which are more or less qualitative. Cotton is the best example of this. It is also important to point out that the price of raw materials are in constant evolution. Take the example of felt, which has gone up some 30% over the past 10 years. This illustrates the complexity of this particular step, pricing, which also has to take into consideration the blending of synthetic and natural fibers that certain brands practice, which also makes it difficult for a client to understand the “why” behind a price.
To source good raw materials, it is crucial to find one (or several) good supplier. This can be a truly challenging step for a designer, one that can take ages and whose aim is clearly to find the best product. The sourcing step can be especially difficult for small brands who have neither a reputation to leverage nor experience in this domain.
And yet, finding a good supplier is key to developing a quality product that can potentially attract a higher profit. Beyond this simple calculation, finding the right person is also the beginning of a partnership based on trust and not just price.
Over recent years, manufacturing has, more than ever, incorporated questions about transparency. Between manufacturing in Asia, Europe, or France, each brand places great value – or not – on its manufacturing process, which obviously has repercussions on the price of the clothing. After the Rana Plaza catastrophe, the world became aware that prices should not be the sole driving force, and that human and sanitary conditions were also important to customers when making their choice.
The manufacturing site has a tremendous impact on the final price of clothing. There are three main price ranges, based on local salaries, that can also be grouped geographically:
• The least expensive countries like Bangladesh, Cambodia, India and even Pakistan. • The cheaper countries like Turkey, Morocco and the Philippines. • The more expensive countries: France, England, Spain, Portugal.
Within these groupings are nuances, since Chinese factories, for example, are better at producing certain fibers. Choosing them does not necessarily mean that quality is being overlooked.
Hence, there are some very good factories in China just as there are some bad ones in France. Nevertheless, manufacturing in Asia allows cost savings and a choice of factories in almost every domain. How many people realize that 70% of clothing purchased in Europe come from Asian countries?
In Europe, the question is a bit more delicate, as we can separate the continent into two parts. On one side you have Eastern Europe, where manufacturing is relatively cheap (Romanian salaries are close to Chinese salaries) and where the product can move quickly thanks to the open borders. This results in savings for transportation costs for the brand, in addition to boosting their garments’ desirability with the “Made in Europe” label. On the other side, we have Western Europe, whose factories are more respected, but also more expensive. Hence, brands have to find the right balance between quality and savings when making their choice.
Nonetheless, if raw materials and manufacturing costs represent a major part of production costs (for example, 50,30€ for a pair of suede desert boots sold by Jules & Jenn for 115€) middle men also have an important role to play here.
A product’s profits are mainly calculated according to the middle men. Raw materials, production costs, transport; all of this is already set in the first pricing of a garment. However, few people realize that the final retail price includes a series of add-ons that, in the final run, the designer or brand don’t make much off of. That is why certain brands set very high margins, which give the consumer the impression of being taken advantage of with every purchase.
In fact, many brands use a strategy of starting off with low margins that they raise over the following years, as they evolve. Some of these hidden costs include the fees for sales agents, who find the potential sales points; the resellers costs, marketing fees, but also VAT and transport taxes… all added costs that the consumer doesn’t always think about when choosing a garment. Hence, a final price tells a veritable story in which every player has a role but also an influence.
This is why certain brands have decided to use more economical models in order to be able to propose better prices. From doing away with some middle men (by dealing directly with the factory, for example,) selling online-only, or cutting advertising budgets, brands like Atelier Particulier, Maisons Standards, Hast, Lepantalon, and Paname Collections, have positioned themselves as active players in their pricing process, without focusing exclusively on profits, and are using transparency as their main selling tool.