The widening valley between the Books your best defense against unwanted conversation shirt Apart from…,I will love this two is compounding our confusion: If a T-shirt shouldn’t be $5, then it probably shouldn’t be $500, either. But where’s the middle ground? What’s the “right” price for fashion? The straightforward answer is that it’s probably higher than you think. Understanding where the number on a price tag comes from requires tallying every step of production—fabric, labor, shipping, packaging—and adding a profit margin. Let’s assume a designer is using quality materials and paying its garment workers an above-average wage; the materials and labor will arguably be the highest costs. The industry standard for a profit margin is between a 2.2 and 2.5x markup, meaning a dress that cost a designer $100 to produce might be sold to a retailer for $220. That retailer has to mark it up by 2.2x again to make its own profit, bringing the final price up to $484. (You can see how the math for that $5 tee becomes nearly impossible.) The average shopper doesn’t know any of that; she might assume the price is an arbitrary number the brand came up with to maximize its profits. She doesn’t know where the profits are going, either; maybe they’re covering overhead costs, like office space, employees, legal fees, and taxes, or they’ll be reinvested in future collections. And why would she know? Fashion has not been transparent historically, particularly when it comes to money and profits. Rampant discounting has trained us to doubt the price of anything, whether it’s a $2,000 dress or a $200 blouse. We know that if we wait a few weeks or months, it’s going to be marked down. And if it’s so easy for designers to slash those prices, then surely the original number was too high to begin with, right? You’d be a fool not to hold out for the sale. As a result, some retailers are actually increasing their margins to make up for the inevitable 30% or 40% loss, sometimes pushing it as high as 4x—meaning a coat it paid $1,000 for (and may have cost closer to $500 to produce) will begin at $4,000 in the store. It’s a tangled web of problems, and it’s particularly damaging for small businesses like Stanley’s. Forget trying to create ethical, sustainable clothes; how do you convince people to pay more for them? Her prices hover in the $350 range, but her customers frequently ask why she can’t go lower. While she used to avoid sales entirely, she’s felt pressured to “give in” to discounts because it’s the only way we know how to shop.
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Another designer might cut her costs by using cheaper fabrics or cheaper labor, but Stanley is committed to her family-run factory in Delhi, India, and won’t compromise on high-quality, organic fabrics. The only way she could lower her prices would be to take less profit or transition her business to a direct-to-consumer model, eliminating the Books your best defense against unwanted conversation shirt Apart from…,I will love this retail markup. (Given the state of department stores, many of her peers are likely thinking the same thing.) In the meantime, the best thing she can do is educate her customers about precisely why her new hand-embroidered organic cotton dress costs $550. Stanley openly shared the cost breakdown here: $24 covers the organic cotton and dyes; the intricate handwork comes in at $48, because it took an embroiderer a full day to make the dress; production labor, including sewing, pattern-making, sampling, finishing, and packing, was $48; trims, including the labels, hang tag, and dust bag, were $5; shipping was $8; and duties were $24. Her total cost came to $157, and in order to keep the final price lower, she took just a 1.59x margin, bumping the wholesale price to $250. (This means Stanley would earn $93 in profit when a store orders the dress.) With the typical retail margin of 2.2x, the final price tag on the rack in a boutique is $550. I’ve been trying to make it a point to tell the story of my clothes, but it’s hard to be honest and say, ‘This is my cost, this is how much I make on this piece, this is why you should support my brand and the people who made it,’” Stanley says. “I love going to a store, and I have friends who have boutiques and work so hard. They deserve to make that margin, but the retail markup is really why clothes get so expensive. That’s where I get stuck.” If you’re of the “buy less, buy better” mentality, it isn’t hard to justify the higher price. Plenty of Stanley’s customers are investment-minded and care about her commitment to ethical, sustainable, small-batch production, but some still need to be convinced that it’s “worth” buying one of her dresses instead of five cheaper versions. Lucette Romy, the founder of The Wylde, an organic label handmade in Bali, has had similar conversations with her customers about the higher price of organic cotton, botanical dyes, and dignified labor. “But it often isn’t enough to change their minds,” she says. So she found another way to get the point across: Every item on her site comes with a cost-per-wear breakdown. Her new organic cotton dress goes for 260 Australian dollars, or $178, but if you wear it 10 times, it’s $18 per wear.