

Polo Puzzle: What Goes Into a $155 Price Tag? - browser411
http://online.wsj.com/article/SB10001424052970204652904577195252388913754.html

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quantumhobbit
I used to work in a clothing store and the markups on clothing, especially
more fashionable items, never ceases to amaze me. Unfortunately, this article
didn't really get into most of it. They explained why the shirt cost $29 to
make as opposed to $1-2 for a cheap shirt from China.

What I find fascinating, is how we get from $29 to $155 at the store, or $2 to
$30 for a cheaper shirt. The vast majority of the cost of a clothing item
comes from putting it on a shelf in a well-staffed store.

I think this highlights why we have made a shift from a manufacturing economy
to a service economy in the US. The kid who waits on you in an American mall
costs much more on a per shirt basis to employ than the arguably more skilled
seamstress, even when the seamstress is in the US.

~~~
DarkShikari
But will this last? With the phenomenal cost of running a retail
establishment, it's probably cheaper to run an online store -- even if you
offer free, shipping-costs-paid returns for any item that doesn't fit!

More and more people I know are finding themselves shopping online instead.
There's a whole host of advantages:

1\. The selection is way better, while the retail shop often has none of the
styles you want, forcing you to go to specialty stores. Of course, online,
"going to a specialty store" doesn't require driving.

2\. Even though many people love browsing, the shopping experience is often
just terrible. Online, searching for a particular type of clothing or style
takes basically O(1) time, thanks to search, while in a retail establishment,
you have to cart yourself across the store repeatedly. And online stores
typically have images of models wearing the clothes, giving you a better sense
of how it would actually look.

3\. Some sites online offer _actual, specific measurements for all their
clothing_ instead of vague sizes like "6" or "10", whose meaning isn't even
constant for a given manufacturer. I've never seen _anything_ like this in a
physical store.

4\. It makes impulse buying easier, since you don't have to drive anywhere.

(and much more)

If Amazon can put the pinch on retail books and electronics, can sites like
Milanoo put the pinch on retail clothes and cut out the middleman? I think
there's still a lot of room in the online fashion space, and the margins
surely _have_ to be better. This is a harder problem than those approached by
the typical HN startup, due to the problems of dealing with physical goods,
but there's nevertheless been a lot of successful companies in that space
lately.

~~~
dagw
_Some sites online offer actual, specific measurements for all their clothing
instead of vague sizes like "6" or "10", whose meaning isn't even constant for
a given manufacturer. I've never seen anything like this in a physical store._

But at a store you can simply look the item, and if it looks like it should
fit try it on to see if it actually does fit. The actual size printed on the
item isn't that important in those cases.

The other aspect is that stuff like stitching, button holes, collar
construction, and general feel and quality of the material used is incredibly
hard to judge online, while trivial to judge in person. Stuff like this simply
doesn't matter when it comes to books and electronics.

Of course all these problems are solvable, but it is a much much harder
problem than selling books online.

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ahsanhilal
The hardest thing is logistics: delivering product orders on time as a small
brand which outsources manufacturing is really hard. Big retailers, like
Nordstrom or Macy's will give you a window of a week (maximum) and will not
accept your orders if it goes over. Conversely, they also have set packaging
and other compliance related requirements which will increase the cost / item.
In particular they have these ERP systems that small brands cannot afford.
Smaller brands end up outsourcing being plugged into their ERP systems as well
which will also increase the cost of the article.

~~~
yesbabyyes
_In particular they have these ERP systems that small brands cannot afford.
Smaller brands end up outsourcing being plugged into their ERP systems as well
which will also increase the cost of the article._

This sounds interesting, can you shine some more light on it?

~~~
ahsanhilal
<https://www.nordstromsupplier.com/NPG/EDIcompliance.html>

It's basically Electronic Data Interchange through which they make orders,
track shipments etc.

Here is how a typical one looks like:

[http://www.nordstromsupplier.com/Content/sc_manual/FLS%20810...](http://www.nordstromsupplier.com/Content/sc_manual/FLS%20810.pdf)

~~~
yesbabyyes
Thanks!

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redsymbol
As an entrepreneur, I'm wondering how the MacLanes got an article written
about them like this in the WSJ. It's a major, major PR boon for their
clothing business.

Are there any journalists or PR folk here who can comment? Or entrepreneurs
who have had coverage like this for your own company(s)? How can other
founders accomplish something similar?

~~~
mhb
See: <http://www.paulgraham.com/submarine.html>

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cjg
What I found most incredible was that the shirt cost them just under $30 to
produce, but would ultimately sell for $155 and this was considered a standard
markup.

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emehrkay
I have a few Polo (Ralph Lauren) shirts that i wear that I bought in the very
late 90s. I'm not saying that the 300+% markup is valid, but I've worn a shirt
in three different decades.

~~~
GFischer
When shopping for a washing machine, I found some articles that claimed that
the reason that Americans buy so many clothes and find that they don't last as
much as the rest of the world, is because:

1) they use top-loading washing machines

2) they use dryers

or even worse washing-drying combinated.

While I don't doubt that Polo chooses good cloth, it's standard here in
Uruguay for clothes to last that long. I've inherited a lot of clothes from my
father, and have tons of clothes to give away that are in reasonably good
condition.

The reason is that they've been either hand-washed, or washed in a front-
loading machine at a low temperature, and then dried in a clothesline (I've
never owned a clothes dryer).

For example, this article claims that clothes washed on a front-loading
washing machine last longer:

[http://www.networx.com/article/choosing-a-washing-machine-
to...](http://www.networx.com/article/choosing-a-washing-machine-top-loading)

Edit: U$ 500 for the cheapest front-loaders? I bought mine for U$ 200 (not in
the U.S. obviously, but with the humungous Uruguayan import taxes).

~~~
yummyfajitas
This sounds like a huge waste of labor. Suppose making a shirt (of whatever
sort of cloth) takes 5 hours of labor.

If you hand wash and line dry, suppose that's 5 minutes of labor per wearing.
If you wear the shirt every week for 10 years, that's 43 hours of labor on
washing for 10 years worth of shirt. It would only take 25 hours of labor
(compare to 48) to buy a new shirt every 2 years.

And this also assumes your time is equally valuable to the time of the guy
making the shirt - I consider my time to be worth far more than $5-15/day.

~~~
ricardobeat
What if the person doing the washing/hanging is paid even less than the one at
the factory?

~~~
yummyfajitas
If the maid's pay is 60% of the factory worker's pay, then you break even. I
also ignored the time cost of shopping every 2 years to keep things simple.

The only point I'm trying to make is that durability and preservation of
material goods is often overrated, and replacing things every few years isn't
necessarily a bad thing.

~~~
GFischer
Yes, I forgot, I pay U$ 5/hour to the maid, and I'm paid U$ 10/hour (for now!
:) )

And Uruguayans are used to earning very little compared to the U.S., plus
brand clothes are MUCH more expensive here.

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D-mo
There have been quite a few of these "price debunking" articles in the past
year, as if we all finally figured out that we're getting screwed. Software's
markup is similarly ludicrous, since there's very little variable cost to
serving up extra copies--even with cloud-based systems.

Another one on $550 chinos:
<http://www.nytimes.com/2010/04/29/fashion/29ROW.html>

Also, anyone else find this "killer app" notion in clothing to be funny? It's
like Bonobos claiming they've solved the "saggy butt problem" with a "curved
waistband." Genius!

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unohoo
It is for this reason (2.x markups) that I am working on an ecommerce startup
idea. I like the idea of selling actual product, making actual revenue and
knowing what your margins will be.

While manufacturing your own clothing is much more involved and logistically
complicated, its relatively easier to become an online retailer and buy
clothing at wholesale from existing brands and sell that. That also helps me
mitigate my risks (my domain knowledge is technology and not apparel
manufacturing/sourcing).

On a side note, I am currently looking for co-founders. I have a technical
background and have almost completed coding the site. If you are interested,
my email is in the profile

~~~
ahsanhilal
I used to be in the fashion business for a while. I owned and operated a
number of brands, sold to major national/international retailers. However,
from my knowledge the major issue with ecommerce is stock/inventory. Inventory
is a huge problem since it is a cash hoard, and because of ecommerce/ brick-
mortar retailers die . The basic problem: you have to buy before you sell, and
what if you buy wrong? Most retailers/e-tailers underestimate how big of a
problem that is.

Also, a lot of times, retailers will have 30-60 day payment terms, which is
basically the time you have to turn over the inventory. Also, if you do not
sell (in fashion) it becomes stale quick and then you have to sell at
discounted prices.

I am around to help if you need any advice etc. Have a decent amount of
knowledge in this area.

~~~
ndelage
Hi, i'm part of a tiny startup working on a subset of this problem, and would
love to pick your brain on a few of the challenges you mentioned. If you're
willing to help out with some advice, what's the best way to contact you?

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jrockway
So they've described how American Apparel makes their $45 polo shirts. But
they haven't described how $30 of materials becomes worth $155.

~~~
ahsanhilal
In clothing there is a standard wholesale markup, which is 2.0-2.5 of manf
costs, and a standard retail markup which is again 2.2-2.5 of wholesale cost.
This means that they are selling it to the retailers at around 60 bucks or so,
and then the retailer is selling it for 155. The 30 dollars provides money for
rent, warehousing, salary etc for the brand/wholeseller. For the retailer it
does the same. Retailers also sell in tranches (at 10-50% off) so they have a
distribution curve through which they set price bins

~~~
schiffern
>The 30 dollars provides money for rent, warehousing, salary etc for the
brand/wholeseller. For the retailer it does the same.

Fine, but they're shipping them out of their living-room.

The article would have been greatly improved if it gave a typical breakdown
for _those prices_ as well.

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aresant
Solving the "direct from wholesaler" for American made goods is a monster
opportunity.

$65 is a lot more reasonable that $155 and I'd buy twice as many at that price
;)

Etsy comes close but a startup that focused on a niche and curating quality
could be a fun and profitable challenge.

~~~
lsb
If you'd buy twice as many at $65 than at $155, then you've just proven why,
to maximize profit, they should be selling it at $155 instead of $65. 155n vs
130n is pretty straightforward, and the point of luxury brands is that not
everyone is wearing them.

~~~
dkrich
Not to mention that it has been proven in many studies that what people say
they would pay for something is never an accurate representation of what they
would actually pay. The actual amount is almost always found to be lower.

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robryan
So these will popup online for about $85 to $95. No matter how good the
service is I doubt going forward you will get a lot of volume at that type of
retail price. Retail cosmetics is really feeling this as people now refuse to
pay what is probably a similar markup.

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rdl
I'm curious how much something of exactly that quality made in China in
quantity ~50k/yr would cost. $10 per unit delivered in NYC?

