I’m quoting retail prices from lower mid range shops- places where hip but poor students would shop- in a relatively remote city (four hours south of Chengdu.) I’m told clothing prices are higher here than Chengdu. Perhaps it’s much more expensive than it’d be in Shanghai. But around here prices retail prices from a mid-range chain store…Yishion, for example…would be around 30 RMB for a sweater, 70 for a stylish but fairly low-quality pair of dress shoes and 200 for a high-quality coat during the cold season.
Around here you can find cheaper stuff, but if you go much lower the quality takes a huge drop- you start getting crooked seams, scratchy fabrics, etc… And most options are much higher- most of my teacher friends shop at upscale mall-style stores (for example, Only) that can climb up to American prices. People in-the-know know how to find things in the off season and the like, but I’m assuming for this discussion we are talking about a retail experience like what’d you’d have in America- walk into a store, try something on, like it and pay for it.
It’s not reasonable because it shows biased thinking towards manufacturing costs vs shipping costs. Both costs are “real.”
To make a sweater, you have to pay for yarn, as you say.
But to showcase the sweater in a retail store, you have to pay for putting the sweater on a container cargo ship, have it trucked to the store and merchandised.
The cost at the point-of-time within China is not very useful because if the retailer didn’t put the sweater in his store, you’d have to add on the cost of purchasing an airplane ticket to China to acquire that sweater for the “Chinese manufactured price.”
To continue your type of cost analysis, what if the raw material such as yarn was imported from Japan or India? Then even that “China manufactured” cost is not real because he didn’t “make” the yarn – he only paid to import “ship” it. The “real” cost is the yarn manufacturer in India!
I’m a U.S. attorney who has had some experience in disputes between Chinese Clothing Manufacturers and US companies who purchase the goods for distribution in the United States.
My experience has been with brands that will pop up in stores around the country, but nothing on the scale of a GAP or Tommy Hilfiger.
These business relationships tend to be more complex than simply a U.S. company owning a factory in China.
From my experience typically you will have a U.S. retailer who wants the goods produced. The U.S. retailer will have few connections in China and cannot simply put an order in to China. But they know of a U.S. company (the “middleman”) that does have strong connections in China. They will then hire the middleman to get the goods produced. The middleman will order the goods from the Chinese factory.
I recall one particular case where the clothing was sold from the Chinese Factory to the middleman for approx $4.00 per unit. While I have no idea what the middleman flipped the clothing for to the U.S. retailer, these items ended up on the shelves of Babies R Us for $35.00.