what's the real price of clothing? how much does it sell for in China?

Factual Questions
1

the several times of my life when I had the misfortune of having to go shopping for clothes myself, I have noticed that prices of cheap, run-of-the-mill clothes are, well, variable. Sometimes shirt costs $6, sometimes shirt costs $13. Same with jeans (with a bit higher average). Same with sneakers.

Which makes me think that perhaps the real, bulk price at factory’s door is actually pretty low, and the cost at Walmart and similar is really just retailer expenses plus profit. Well, so does anybody know what the real cost is? I would guess that one way to approximate it would be to look at the costs of clothing over in China in provincial cities - there the retailer expenses should be low because of low salaries and moreover the customers simply don’t have much money on them and want to buy things cheap. Maybe there are other ways, like examining bulk order prices on Alibaba, but I am having some trouble parsing the poorly written, no price specified postings there.

Ok, so any thoughts here? What do clothes sell for in China? What do they sell for in bulk? What’s the straight dope on the rag trade?

2

Actually, retail clothes can be relatively expensive in China, given local incomes. The cheapest knit sweater from a retail outlet will cost four or five dollars. A low-quality pair of shoes will cost around nine dollars. A heavy coat can easily cost twenty dollars.

And if you want a name-brand, it will cost more. A tee-shirt from a fashionable store can easily be ten dollars.

3

A lot of people don’t realize how mercilessly Walmart squeezes the Chinese suppliers. There is relatively little per piece profit in a Walmart deal for a Chinese manufacturer. It’s all a volume calculation. Shipping costs as a part of the total are relatively small. A Chinese manufacturer selling goods in China might well have to charge more per piece to a local Chinese distributor as the volumes are likely to be much smaller than the shiploads being sent to the US.

The spread is not nearly what you think it is.

4

Anybody who worked retail for a while can probably verify that my experiences were not unusual. I worked at Miller’s Outpost in the early 90s. Full retail prices were between 500 and 1,000% of what we damaged out items for.

A concrete example: a sweater sells for $60 full retail. We’d have sales where the item was marked down anywhere between 10 and 50% and we were still making a profit even at the half-off price. If it didn’t sell by the end of the season, it was put on a discount rack where we would try to get someone to buy it at a greatly reduced price. By then, only the people who worked for the store would remember what the original price was. The discount price was $12, which was just 20% of the full retail price. We would still be making a small profit on this item, or we would have shipped it to the outlet store.

That was the next step, in fact. Periodically, we were asked to cull older items and “damage out” pieces which couldn’t be sold due to some defect. We’d write up the SKU and item description, type of damage, and disposition. Damaged clothing was shipped to the warehouse for disposal, other culled items were sent to the outlet store. Anything sold at the outlet store would still expected to generate either a small profit, or at least break even.

The outlet price of this example item was $6. The cost to the retailer was (my estimate) about 3/4 to maybe half of the outlet price. I was not a manager, so not privy to any actual accounting costs, but I was told that we expected to make a small amount of money even on outlet sales, even when taking all the shipping and personnel costs into account.

This is going from memory, but the reason I remember the sweater used in the example is because I kind of wanted to buy it when we got it in the store, and I remembered writing it up for a ridiculously small price when it went back to the warehouse. It was shocking how much it cost versus how much they sold it for. That’s when I looked at other stuff and did a quick estimate of how much the markup was.

Personnel costs are the single biggest expense in running most businesses, particularly retail, so a big chunk of that had to have been devoted to paying my salary, but it’s still an enormous markup over what the company paid for it directly from the manufacturer.

5

Your questions are very hard to answer because (with respect) I don’t think you really know what you are asking. Each of your questions has a totally different answer, and for multiple good reasons. I suspect the crux of it is that you use the term “real” without defining what the heck you mean.

You quite probably really could buy the same shirt for much cheaper from the factory door in China than you really could really buy it for from a retail store in the US. Each price would be as real as the other, in at least one (important) sense. There is no one “real” price. There is a price, at a place, at a time. And there are other prices at other places, at other times.

6

I don’t know about that. I think it was pretty clear he was trying to get at what the fully absorbed manufacturer’s cost is. He made a mistake in assuming that Chinese end buyers pay something close to that. I’d also disagree that it’s not more “real” than the other prices. A final retail price or a distributor price can be changed immediately just by making a decision. The manufacturer can’t cost reduce without making a real change somewhere. Obviously they’re both *meaningful * prices but one is more *real *by any reasonable definition of real.

7

Well, in fact you’re making the same error as the OP, and ignoring the fact that the retailer itself, like the manufacturer has to cover a range of costs. Perhaps the article in question, relative to its wholesale price, is marked up significantly. However, that does not mean that the retailer is making overall a large profit. The retailer has to carry a wide variety of overheads that are integral to being able to propose the item to the public, plus cover costs of “failed” items - clothing not sold, gone missing, etc.

As publicly listed retailers do not seem, in general, to have enormous margins (profits net total cost), the analysis post by Sleel above seems wrong - that is incomplete in not accounting for non-observed costs (relative to a retail worker bee), direct or indirect, to running the total operation.

8

No I’m not. In fact, I explicitly ignored the manufacturer’s range of costs and spoke only to their fully absorbed manufacturing cost.

The manufacturer has to spend certain real dollars (or yuan) to make a sweater. If they don’t buy yarn and pay a laborer there’s no sweater. You can only cost reduce your sweater by making an actual change to the production of the sweater, perhaps cheaper yarn. That’s the “real” cost to any lay person or to anyone who has ever actually run a manufacturing business, or is familiar with the basics of cost accounting.

On the other hand there are prices you sell your product for. The manufacturer sells his sweater for some price, hopefully covering their cost to produce it and SG&A, the retailer sells it for something higher than that trying to cover their costs. But those are all numbers that can be adjusted at any time, irrespective of its actual cost or costs incurred trying to sell it.

You can easily sell a sweater for less than it costs to make it but you can’t make a sweater for less than it costs to make it. It’s entirely reasonable to ask what the actual cost to produce something and really pretty bizarre to say there’s no such thing. Why would you assume that just because code_grey wants to know the cost he doesn’t understand that everyone needs to earn their margin?

9

My experience in China is that if you imagine the cheapest possible price you could offer to someone without insulting them, they would sell it for 1/2 of that to a good negotiator.

Much of what is sold in the informal markets are counterfeit, over-runs, or seconds. But I got some really good quality items like a Columbia jacket for a tenth of the price it’d be in the US.

But almost anything sold at retail has a huge markup. A 50% markup is really common. So a $10 retail item might cost $5 wholesale, and the manufacturer’s cost might be $2.50. Generally, less expensive items have a greater markup.

10

Keep in mind that while dollar prices might be half the American Price, the average household income in China is 1/10th the American equivelant.

They may be paying $10 for that $40 pair of Jeans, but while that’s 0.1% of an American’s income, it’s .24% of their income.

11

It is and it isn’t. Clothing retailers do this because for msot of them it’s a wild flaming guess as to what’s going to be fashionable ahead of time. (Zara is a rare exception). A grocery more or less has stable prices. Some items liike milk and eggs may vary a bit over time, but not much.

Clothing is weird because it’s value fluctuates wildly over the course of a year (any given peice could go from almost no value to huge value and back to none), a lot of seasonality, and durable goods (most people buy some clothes every year, but only a few people, most of them women, really buy a lot).

Net result is that to keep the biz going, they buy a wide variety of clothes, sell whatever’s hot at a dear price, and then start heavy discounting. When it comes down to it, they’re mentally thinking of the “standard” price as about half the list price. The constant sales and promotions thus don’t really cost them much, because the “sale” price really IS the normal price. The only real sales are to clear inventory between major shopping seasons. But they buy clothing and slap a 60$ or 80$ or $100+ label on it because it’s good salesmanship and its does get them a few high-price sales, whcih they need to make their profit.

12

I stopped buying clothing at retail stores abour four years ago and started buying like my girl friend does, consignment stores and Salvation Army. Not only am I paying a tenth of what the same cloths would cost new but the only thing people have noticed is that I have more higher quality clothing than I ever had. Polo, Nautica, Timberland Levis and Nike shirts, sweaters, pants and jackets that would normally have cost me upwards to $100 to own can be had for under $15 all day. The only thing I buy new now is shoes and underwear because who would want to wear those from someone else?

13

Its also important to remember that the “real” price depends on the volume of factory. Without Walmart ordering 1 million shirts the price goes higher because of how factories scale. So at 1 million shirts perhaps its $4 a shirt, but if we all stopped buying retail then that contract would end and the cost would be $15 a shirt.

I think there’s a sentiment here that manufacturing is one big rip-off. Its not. A lot of this stuff is pretty efficient and depends on a large system of retailers, wholesalers, and manufacturers to work together. Sure, stuff like Gucci that have large premiums dont have equally large manufacturing costs, but commodity stuff isnt like that.

14

You are attributing a precision to the OP that simply doesn’t exist. You are suggesting that the OP wants to know the actual base cost to the manufacturer of the product yet if you actually read the OP most of the questions revolve around how much things would sell for.

15

That’s true, I have an uncanny ability to read through other people’s rambling and understand what they’re really getting at.

code_grey asked what the real cost is then guesses that “one way to approximate it” is by looking at retail prices in China. He then goes on to conjecture why it would be a good possible approximation. It isn’t, and people have explained why. Hopefully code_grey will come back and tell us if he’s only interested in retail prices for clothes in rural China or if he’d like to know about manufacturing costs for Chinese garment shops but I’m pretty confident in my understanding.

16

Princhester,

I agree with Fuzzy Dollop. I am interested in estimating manufacturing cost of the items. Maybe tomorrow somebody figures out a cheaper way to do retail trade in America and cut down on the markup. But the cost to buy this stuff from China still puts some minimum on the price that things can be sold for.

As far as volume issues go in China, ok, maybe we should look at not small Chinese retailers but at Chinese Walmart. Presumably Walmart in China buys also in big volumes with similarly high pressure negotiating tactics. And salaries of Chinese employees of Walmart in China and the rents that they pay there for the buildings are all lower than in America.

17

WalMart in China is a bit of a premium brand, and their goods often cost significantly higher than local retailers. In any case, their clothing selection is extremely limited- as far as I can tell they only stock clothes for old ladies.

So it’s probably not a good comparison.

18

I’ve been hoping somebody who has textiles made in China would come along and give you a good answer but there has never seemed to be enough people on the board with that kind of business experience. It’s not as unlikely as people seem to think. I make consumer electronics in Asia in relatively low volume. I don’t mind sharing some information anonymously. When we have a product with an MSRP of say $60, we can produce it for a fully absorbed cost of about $12.50. If we had the demand for,say, 50,000/month we could get that below $10 but probably not far below. For what it’s worth, when we started we made functionally similar products in the U.S. for over $50 each, but at volumes of about 1000/month. Most of the enormous cost reduction is due to moving production to Asia, although seriously scaling up volume has helped of course.

But, I work in consumer electronics not textile and I don’t have any personal experience to answer your question with.

19

I can only talk from the consumer point of view, as a long time resident in China. but still, it may give some idea of where things are. First of all, a recommendation if you want to learn a bit more about clothing manufacturing in China: this documentary.

  1. China is already losing competitiveness in the worldwide clothing manufacturing. Producing in Thailand, Bangladesh or Vietnam is cheaper and even the big Chinese manufacturers are moving there (ask Li & Fung, for example).

  2. Consumer prices in China are difficult. even sven, for example, talks about some consumer prices that are only true either for foreigners who don’t know how to get them lower or for well-to-do people in the main cities. The price you pay for clothes in China, as the price you pay for anything else, depends on who you are and how well you can negotiate. In that sense, it is a bit misleading to talk about “real price”.

  3. In Shanghai, where I live, it is said there are three prices: the laowai (foreigner) price, the Mandarin-speaking chinese price and the Shanghainese-speaking Chinese price.

  4. Quality and price are not independent. Usually when you pay little you don’t get as good quality as if you pay more, that is true everywhere. However, in here high (and I mean high) prices, in my experience, do not mean better quality.

Let’s go to the examples:

Shirts: A normal store can charge you around 60 yuan for a long-sleeve formal shirt. A high-end store can charge you perfectly a couple of hundred or more. A cheap place in a fake products market or a small store in a normal neighborhood can charge as few as 30 yuan, and having the shirt made for you in the tailors market can throw you back around a hundred, I think.

Shoes: Taking into account that is difficult to get sizes bigger than a 40, my wife just got a couple of pairs of heeled, high boots. Chinese brand, cow hide. Chinese taste. Around 400 yuan both pairs (59 USD). Having shoes made can mean around a thousand yuan, and a high end store can actually ask you to give them one of your eyes in return.

Baby clothes: It might not be the example you are looking for, but for me it is easy to talk about it now :stuck_out_tongue: We have several high end stores in Shanghai, including, case in point, Mothercare. Prices in Mothercare are quite similar to what they are in Europe, so basically is a shop for expats and wealthy Chinese. As a second tier, you have the Chinese brands, more or less well known, from Goodbaby (Mothercare is in China through a JV with them) to Lijia or similar. As a third tier you have markets with small shops like Puan Lu…

Price for a long sleeve bodysuit:

First Tier: 50-60 yuan
Second tier: 30 yuan
Third tier: 10-15 yuan

The interesting thing is that the third tier clothes are also Mothercare branded, and a very similar quality to the ones you can buy in the real shop. Why? Well, there are two reasons: clothes that do not pass the quality checks because of things like mistakes on the colors or the drawings, and clothes that come from over manufacturing (the Mothercare suppliers keep the machines producing a bit more than needed and sell the surplus to the local market).

End result? You can find very good prices AND qualities, if you know where to look.

20

I can tell you that Thailand is starting to lose a lot of this industry to Vietnam, which has much friendlier foreign-business laws and is more stable politically. Our recent political unrest has been making many manufacturers think twice about being in Thailand.

I can buy a real pair of Levi’s manufactured here or in Vietnam for maybe US$27 to $30. Not any fancy kinds, just your basic Levi’s. I recently paid $90 for a pair of real Nikes made in Vietnam.