Apparel production pricing is an important factor that decides if the collection line sheet is going to be profitable or not. It is a very important task that needs to be done time and again every time there is a new collection on the way. And you are planning for the collection with the creative and tech pack designer. Apparel production pricing determines what would be your profit margin from a collection that you are pursuing. So, love it or hate it, you cannot ignore apparel production pricing. In this post let’s discuss what the hake is apparel production pricing and how it affects the collection plan. Fashion labels starting new often fail to consider this factor and are unable to see where they are licking money in the process.
What is Apparel Production Pricing?
Apparel production pricing refers to the process of determining the cost of production. The cost from the initial concept to the final product in the showroom. This involves assessing and calculating various parts used in the garment. The best way to understand the components is to refer to the fashion tech pack. And if it is created by a skilled tech pack designer, the job becomes much easier. Apart from this, you have labor expenses, overhead, wastages, QA, etc. You can get those operation details from the tech pack like in stitching, washing detail and wash care, print, and embroidery specifications. The goal of apparel production pricing is to establish the overall cost per unit. The cost incurred during the manufacturing process includes a margin for profit.
Apparel production pricing is a critical aspect of running a successful fashion business. And this requires a careful consideration of several factors including garment cost sheet preparation. These are production scale, market competition, and brand positioning to determine MRP. A price that meets both sustainability and market competition. It involves the financial intricacies of bringing your clothing line to market. It is important to create a synergy between the brand’s goal, and customer expectations.
Decoding Production Pricing
Understanding the intricacies of apparel production pricing is pivotal for any fashion business. Especially for those fashion startups who want to launch a successful clothing line. The costs involved in bringing a garment from concept to customer are many-sided and complex. It encompasses materials, labor, overhead, and many more factors. Let’s dive into the key components of apparel production pricing in detail. And how it provides insight and helps strategies and navigate the complex landscape of fashion brand building.
Material Costs
Material costs constitute a significant portion of apparel production pricing. And you cannot alter, avoid, and alter these costs. Those costs include fabric, trims, buttons, zippers, and other accessories. Those materials are required to bring the garment to life. So, choosing the right materials that align with your brand’s quality is unavoidable. And the cost consideration for raw materials is crucial. Although the percentage of it is not the highest in the total cost of garment, it has no alternative. You need raw materials to prepare finished garments. So, optimizing this part is important to get accurate apparel production pricing.
Labor Costs (Wages and Salaries)
Labor cost contributes the highest portion of total production cost in apparel production. The garment industry is a labor-intensive sector. So, the maximum working capital goes into hiring labor and paying them a salary. Labor costs encompass the wages, of those involved in the production process. Starting from pattern makers, cutters, tailors, QC and merchandisers, runners, etc. Also, factories sometimes take external support from print, embroidery, and washing units. Those supporting units are also labor-intensive sectors. So, overall the cost of labor takes a significant portion of total production cost. Check “Fashion Design and Production Pricing Dynamics” for a detailed explanation.
Overhead and Operating Expenses
Overhead costs are the day-to-day operational expenses of the garment unit. Those are rent, utilities, insurance, and administrative salaries. Those overhead costs are distributed across the total cost of production. This contributes to the overall pricing structure for each garment. Many industries fail to calculate the accurate production cost. This is because they tend to ignore some of it while calculating production costs.
Production Scale
The scale of production plays a pivotal role in determining per-unit costs. Order quantity is inversely proportional to the unit price to an extent. Usually larger the production run the lower the cost per unit. However, smaller runs may offer flexibility and reduced inventory risks.
Quality Control and Assurance
Maintaining high-quality standards is non-negotiable in the fashion industry. So factories and brands do employ quality checkers or agencies who do QA and QC. The cost associated with quality control measures contributes to the overall production pricing. Investing in QA is a long-term strategy and can enhance brand identity and customer loyalty.
Markup for Profit
Production pricing should include profit markup. This covers the brand’s expenses beyond production costs. This is a strategic decision and it is largely affected by when, where, and what you are selling. Also, what is the price of competitive products in the same segment? Calculate markup percentage considering your brand positioning and desired profit margin.
Currency Fluctuations and Tariffs
When you are producing your garments overseas, the currency exchange rate matters. Apart from this global sourcing of materials comes with currency fluctuations and tariffs. Those are external factors and you have very little control over them. So understanding those risks is essential to avoid sudden increases in production costs. Apart from this currency exchange rates decide how costly or cheap your cost of production is going to be. Almost 80% of the world market is governed by US dollars. So if there is a change in the Dollar value then the production cost will change considerably.
Sustainability and Ethical Practices
Consumers have become conscious and they prefer sustainable clothing. They worry about factories adhering to ethical practices and compliance. Incorporating eco-friendly materials and fair labor practices into production may incur higher costs. Communicating these efforts to consumers can, however, enhance the brand’s appeal.
Technology and Innovation
Investing in technology and innovative production methods can lead to production efficiency. This helps reduce labor costs and helps improve overall production pricing. Yet, in densely populated countries like India, Pakistan, and Bangladesh, this remains a debated issue. Staying abreast of industry advancements is key to maintaining competitiveness.
Negotiation with Suppliers and Manufacturers
Building strong relationships with suppliers and manufacturers enables negotiation for favorable terms. This usually happens when you do bulk purchasing for more than 4-5 times a regular intervals. Also, it helps negotiate better payment terms for your bulk purchase. A continuous order flow to the manufacturer creates a bond. This helps in a collaborative environment and helps get a favorable pricing agreement.
Mastering the art of production pricing needs an in-depth understanding of the garment production lifecycle. Also, the various components used to produce garments with their cost. So, to build a sustainable and profitable apparel brand, you need to evaluate the cost and act. By carefully evaluating each factor and implementing strategy your business is a success. Fashion entrepreneurs can navigate the complexities and make strategic decisions based on them. The apparel production pricing numbers show a way to your business decisions and brand positioning. We are shortly coming up with a simplified way to evaluate apparel production pricing. The product will be available on our tech pack template store soon. So stay tuned and keep getting informed.