Okay, after the last blog “building your fashion budget” a lot of you asked about building your product cost, sales plan and, a friend of mine (yes, Tina, this is for you), asked me why designer bags are so expensive. Well, since this is the kind of question that everyone asks and it is something that comes with building your fashion budget, it seems appropriate to listen to you all and answer this question. Believe it or not, building your cost is also not any rocket science, it is about the materials you are using, development, manufacturing, and, obviously, the brand's name.
For most big brands you are paying for the name on top of the brand’s costing, but if you think about it, there is no miracle or rocket science here. Why high-end leather bags are so expensive is the same reason why quality diamonds are expensive. First, the extraction of the prime material, the process involved in creating the material and making it suitable for a bag (or jewelry) is one of the main things that increase the price of the final product. This brings me back to when I mentioned the budget and the fabrics/trim sourcing. The cost of development will be based, mainly, on what materials you are using. Once you know your materials, you can start building your budget and costing per garment.
Ordering high-end materials not only increase the final price of your garment, but when you are investing in great fabrics, you also want your product to be perfect and have the best quality. That means that development prices will also be higher. Not only for product development itself, but the manufacturing will also have a higher price. Just see it in this way: I am ordering a high-end crocodile leather, I am going to develop a tote bag with zippers, branded chains, and hardware, the development will need two or three rounds of samples, everything needs to be hand-cut and the final manufacturing will be exclusive with not a lot of pieces. Now, seeing this, does it make sense why high-end brands charge that much for their products?
Speaking more technically, to build your product costing you will calculate how much fabric is needed per garment, you will include the price of the labels that go in the garment (brand label, care label, hang tags), all the trims (zippers, chains, snaps, buttons…), the packaging cost (poly bags, tissue paper, sticker) and the cut and sew price. Ok, this is very technical and a lot of information probably none of you can understand right now, BUT do not worry, God is good and he invented excel sheets with formulas for everything, lol (but for real). Jokes aside, this is all heavy to understand and digest just by reading at the first time, I get it! But the main thing is, all of these details are what help you build the costing of a product and, once you know the final cost of your product, you can calculate your sales price. Using the most expensive and highest quality materials will obviously bring your cost up, so your selling price needs to be higher, after all, you are in business to make profits. In some cases, brands will add even more percentage on top of their products because the brand is already well known - aka the designer bags you all ask “why are they so expensive?”
Building your brand from the business plan up to an actual garment and the entire product development process is something you all know I love and it is my daily basis, but one of the steps involved in product development that I love and I love guiding my clients through is the budgeting and costing. Of course, the business side of this industry! Lol, but for real. Creative minds that come to the fashion industry because they love being creative sometimes forget that this is a business. If you are in business you are here to invest and make money. Building your budget and costing can tell A LOT about your business. This will not only help you build your sales price but will also tell you your marketing investment. Ok, I already said this in a different post, but let me repeat it: your marketing needs to be coherent to your production size. You do not want to be sitting in inventory. But something else regarding your marketing is: your marketing needs to be coherent to your product costing. Investing in quality materials and developing a high-end product that will sell for $600 or $1,800 (as an example) you know that your marketing needs to be, not only strong, but it needs to be done by people who know what they are doing (aka: strong and match your product’s image).
As I started saying, budgeting and costing are not rocket science. Yes, it is a lot of numbers and a lot more business insights instead of the “fun and cool” side of the fashion industry, but these two steps are fundamental to launching a successful line. These two steps cannot only tell you your first investment, but also your selling price and your marketing investment. It also explains why designer bags are expensive (your welcome Tina!). The process of building these two steps goes further and involves more math than what I mentioned, but, again, if you are one of the creative minds that do not like to calculate, have a team that can help you with that. Not liking does not mean you should not understand how budgeting and costing works. Now, before saying you want to start a new brand and buy high-end fabrics, start sourcing prices and writing down numbers!
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