Summary
the demonstration with Levi's jeans , a high-margin brand par excellence, and the figures they put forward seem realistic to me (on the other hand, as soon as you go upmarket with a selvedge canvas from Japan, the prices are far removed from Levi's).The wholesale price can still inflate, because a brand often does not have the skills to canvass and find distributors, so it calls on showrooms or distribution agents who will take care of all of this work and who act as as commercial intermediaries . And you obviously have to pay these people (the commercial function is very often outsourced by a brand for a whole bunch of reasons).
The wholesale price is still going up...
But be careful, wholesale prices are a taboo subject in men's fashion. Nobody wants to talk about it, and nobody will talk about it! This is information that must absolutely remain confidential otherwise the players will be deprived of valuable negotiating leverage. As such, asking the wholesale price of an item of clothing in a store as an average customer is very rude.
Everlane caused a stir by releasing this infographic a year ago. There are, however, some nuances to be made... If the cost price of $6.70 is credible, the final sale price is totally exaggerated by Everlane, it would in reality be around $35-40 and not $50 .
Furthermore, this infographic excludes the ultra-beneficial role of distributors and attempts to reduce them to simple intermediaries gorging themselves with no role to play (while they distribute, commit to stocks, and promote the brand). The most curious will read interesting testimonials from store owners on this infographic here.
If there is a lot of excess among brands, distributors and the media (and we are probably the only ones to talk to you about it without bullshit), we must not fall into oversimplification either.
“OK, THE DESIGNER SELLS HIS CLOTHES TO A SHOP AT A WHOLESALE PRICE, I UNDERSTAND…” WHAT THEN?
And now it's you who comes into play, by buying the clothing! The store sells what it bought. But obviously, the store will sell for more than its purchase cost.
In general, a multi-brand store resells clothes at twice their wholesale price . But be careful: if we add VAT , the pieces are sold for 2.5 times the purchase price.
The final selling price (the one you will read on the label) is called the retail price , also called retail price (to look good at dinner parties) or boutique price . This margin of 2.5 obviously varies depending on the brand, the item, the store... Sometimes it is more: 2.6 or 2.7 or 2.8 (even more expensive than the rent of the Location is expensive, which is why they tell you that many nice shops are off the beaten track. Once again, these indicative margins take into account VAT in the final price.
The classic cost structure of little-known brands but with excellent quality/price ratio.
Our shirt bought for €25 at the factory (this is a cost price which is still high-end when it leaves the workshop) was sold for €55 at the store (price excluding VAT). This same store will therefore resell this shirt for €126 to the end customer (that's you). Except that by adding the 19.6% VAT, we arrive at a final sale price of €150. This is the price you will read on the label.
And this is how we go from a cost price of €25 ( without VAT ) to a shirt for €150 (with VAT) in store. But once again, nothing is set in stone . Depending on the image of the store, she may decide to compress her margin and sell her shirt for €140 to boost her sales, because she considers that a shirt costing more than €140 is too expensive for her customers.
"WHAT?! THEY'RE SELLING US TWICE AS MUCH AS THEY BOUGHT! BUT IT'S THEFT!"
No ! NEVER fall into this trap of thinking it’s theft! Be aware that a store absolutely cannot survive if its margin is 2 (including VAT). It becomes impossible to pay rent, employees, inventory, profit tax, etc. It's simply impossible. And I remind you of something fundamental: in France, VAT is 19.6%... And as a customer, we tend to forget this a little too often.
And then a store never sells its entire stock. The margin on their sales therefore covers unsold items (which can be around 65% before sales and 30% afterwards).
When a brand chooses to make little margin at the beginning, it must prepare for a crossing of the desert of 3 or 4 years , because the mid/high-end men's fashion sector is going through a difficult period in France, and profitability can sometimes put 6 or 7 years to arrive.
FrenchTrotters is the typical example of a store that gives a certain quality label to a brand.
THERE ARE SO TWO MARGINS...
Yes, there is the distributor's margin, and the designer margin (= that of the brand). So when you buy a shirt for €150, more or less €55 will go to the designer and the rest will go to the boutique (subtracting VAT of course).
I'm not going to dwell on the miscellaneous charges, but know that of these remaining €100, there is not much left for the store manager (less than half of this €100 in any case). And we never realize that .
Once again, I'm simplifying things a lot, but it's to make it easier for you to understand.
I'll also let you imagine to what extent the distributor's margin can drop during sales periods, after two or three markdowns... Fortunately they make up for it on volume! Except when the sales are bad (worst possible situation for a store).
Note: by multiplying the two margins, we obtain the total margin. If the designer margin is 2, and the distributor margin is 2, that makes a total margin of 4 (or 5 if we count the 20% VAT).
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In the rest of the article , we talk about the new economic models that are revolutionizing fashion, and we explain ours to you (with a little revelation at the end! 😉). And you can, as usual, ask us all your questions.
