WHAT IS THE RIGHT PRICE FOR FASHION?

On the luxury side, designers and retailers are actively discussing how to become open and honest about price and quality.

By Balthazar Malevolent

WHAT IS THE RIGHT PRICE FOR FASHION?

Fabric, pattern making, sampling, trimming, sewing, handwork, packaging, duties, shipping: This is an incomplete list of what you pay for when buying a new t-shirt. And that's before a wholesale markup (i.e., the profit a label makes on the item) or the additional retail markup if you purchase it in a shop.

Saint Laurent biker jacket.

Read that again and the concept of a $5 "worth" t-shirt would seem ridiculous, if not criminal. How can it be that all these resources, transportation, and people are just dollars or cents? Many of those costs are fixed; the price of cotton, even at scale, is not negotiable. In comparison, the person who made the t-shirt is much easier to exploit.

Maria Stanley, a Minneapolis-based independent, sustainably-minded designer, remembers her own experience working for a fast fashion company in Los Angeles ten years ago: "Retailers would tell us, 'We want 1,000 of this item for $21 a piece,' and the factory would quote us $40," she says. "However they would finally come down to $21. How do you get there? Who loses out? The fabric is a steady expense, so it's the staff losing out."

What is the "right" price for fashion? The straight answer is possibly that it's higher than you thought. Considering where the number on a price tag comes from demands tallying every manufacturing process – fabric, labor, shipping, packaging – and adding a profit margin. Let's assume that a designer uses quality materials and pays a higher than average wage to his garment workers; the materials and labor will probably be the highest cost. The industry norm for a profit margin is between a 2.2 and 2.5x markup, meaning a dress that costs a designer $100 to manufacture it would be sold to a store for $220. The retailer will mark it up by 2.2x again to make their own profit, taking the final price to $484. (You can see how the math is difficult for that $5 tee.) The average shopper knows none of this; they may believe that the price is an arbitrary number that the brand came up with to maximize its income. They still don't know where the profits go; maybe they cover overhead expenses, such as office space, staff, legal fees and taxes, or they'll be reinvested in future collections.

And why would they have known? Historically fashion wasn't straightforward, particularly when it comes to money and income. Rampant discounting has brought us to doubt the price of anything, whether it's a dress of $2,000 or a blouse of $200. We know it's going to be marked down if we wait a couple of weeks, or months. And if designers can cut those prices so quickly, then the original number was obviously too high to begin with, right? You would be a fool not to hold out for the sale. As a result, some retailers are actually raising their margins to compensate for the inevitable loss of 30% or 40%, sometimes pushing it up to 4x — meaning a coat it paid $1,000 for (and may have cost closer to $500 to produce) will start at $4,000 in the store.

This is a tangled web of problems and it's particularly harmful for small businesses like Stanley's. Forget about trying to create ethical, sustainable clothing; how do you persuade people to pay for it more? Her prices are in the range of $350 but her clients still wonder why she can not go down. While she was completely avoiding sales, she felt pressured to "give in" to discounts because that is the only way we know how to shop. Another designer could cut her costs by using cheaper fabrics or cheaper labor, but Stanley is committed to her family-run factory in Delhi, India, and will not compromise on high-quality, organic fabrics. The only way she could lower her prices would be to take less income or move her company to a model that is direct-to-consumer, removing the retail markup. (A lot of her peers actually think the same thing, given the state of department stores.)

While the best thing she can do is educate her customers exactly why it costs $550 for her new hand-embroidered organic cotton dress. Stanley freely shared the cost breakdown here: $24 covers organic cotton and coloring; intricate handwork came in at $48, because it took a full day for the embroiderer to produce the garment; manufacturing work, including stitching, pattern making, sampling, finishing, and packaging, was $48; trims, including labels, hang tags, and dust bags, were $5; shipping was $8; and duties were $24. Her total cost came to $157, and she took just a 1.59x margin, bumping the wholesale price down to $250, to keep the final price lower. (This means Stanley would gain $93 in profit if the company purchased the clothes.) With a typical retail margin of 2.2x, the actual price tag on the store's rack is $550.

If you're of the philosophy of "buy less, buy better," it's not hard to justify the higher price. Many of Stanley's customers are investment-minded and care about their commitment to ethical, sustainable, small-batch production, but some still need to be reassured that purchasing one of her garments is "worth" buying instead of five cheaper versions. Lucette Romy, the founder of The Wylde, an organic label produced in Bali, has had similar conversations with her clients about the higher prices of organic cotton, botanical dyes and dignified labor. "However, changing their minds is often not enough," she says. So she found a different way to get the point across: The cost-per-wear breakdown of every item on her site comes with it. Her new organic cotton dress goes for 260 Australian dollars, or 178 US dollars, but if you wear it 10 times, it's 18 US dollars per wear. By the time you wear it 50 days, it's less than 4 USD. If, as you should, you intend to keep this number for years, the number would come down to pennies. Clearly that is a bargain.

Optimists have indicated that the pandemic has begun to reorient our priorities around family and health, rather than material products. The Primark shoppers who camped out overnight before reopening tell a different story — but those shifts in value take time and the fashion industry still has a hope to lead the way and change course. It would be so wonderful to think that people are calming down and that the industry is uniting to set new boundaries. To be more sustainable, to care about others, about our world, morality and dignity - all these aspects seem so real and fundamental. Designers such as Rick Owens, Victoria Beckham or Alexander Wang have been moving in this direction since the beginning of their remarkable careers.

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