Why Fashion Products Are Priced the Way They Are

Understanding How Fashion Products Are Priced

We all have different motivators to buy a product: price, brand, availability, materials, style, and the list could go on. Regardless of what motivates you to buy, it’s important to know the factors that determine how fashion products are priced and this post is just the tip of the iceberg.

Variables in determining the product pricing:

  1. Where is the product made and who by? Is the product made in the US? Since most manufacturing moved overseas, there aren’t many facilities or skilled people which increases cost, especially as demands for local manufacturing rises. That coupled with the fact that labor/environmental laws in the US are better regulated and higher minimum wages makes US manufacturing costly.
  2. Where are the materials made? Same concept as where the product is being made.
  3. What materials is it made of? A more obvious contributor to higher cost: high quality materials made with care cost more.
  4. In what quantities are they being made and distributed? The more made and distributed, the cheaper the item is and vise versa.

One exception to the rule is when a product is over produced, not made to expectation or made before the buyer removed it from the order and then sold off for much cheaper. Outlet malls are an example of where the product might go, although that’s not the majority of items at an outlet mall. There are a other exceptions, some of which I list below the pricing structure.

So how are products priced? Here’s a basic formula for how they’re calculated: 

calculating retail and wholesale prices for fashion

Another variable which isn’t in the ‘basic’ pricing structure above is an additional markup for a showroom or sales rep which usually takes anywhere from 20-30% of the wholesale price. Also, if you’re selling to a larger retailer/department store, they will most likely want a discount on your wholesale prices because they are ordering a large sum. Every brand had a slightly different markup that works for them.

Another exception, which seems to be a trend now with online sales, is selling direct to consumer. This allows for you to significantly reduce the price as you don’t have to accommodate the retail markup. The hardest part about this is that you have to sell your product online in a competitive marketplace. This also means that you could never sell anything wholesale to retailers. When you work with a retailer, they have their own market which reaches new clients that you likely won’t have access to online. Direct to consumer sales are not easy, but for niche products it may be the way to go.

At the end of the day, the product you’re buying is from a business which hopes to make a profit in order to continue making products for you. When you buy something, you’re choosing to support that business so it is important to be informed.

This thought can be exhausting, I know. No one has time to research and make sure that everything they buy is ‘morally made,’ let alone, have the money to spend, likely on a higher ticket item. Wouldn’t it be nice if we could just trust that the company is doing what’s best? This is one reason why buying from a specific company which has the same morals as you is great. They will do the filtering for you, rather than you having to investigate every product you buy. Just like paying an expert in another field, you’re paying a store to know what products you should buy.

So the next time you have ‘sticker shock,’ ask yourself, how was it made, and where was it made? Same thing with a product on the lower end. There is always a reason for why fashion products are priced the way they are.

Related/Recommended readings:

Overdressed: The Shockingly High Cost of Cheap Fashion

More on fashion business: The Fashion Designer Survival Guide, Start and Run Your Own Fashion Business