Let’s be honest. When you’re down the rabbit hole of online shopping, getting enticed by shiny things like discounts, promo codes, and free shipping can be easy. And while some large brands can more easily absorb a lot of these costs to promote their businesses and stimulate sales, it creates expectations which smaller and more mindful or local brands cannot compete with.
Here you’ll find my very candid take on what it’s like to mindfully price a fashion brand and the challenges I face.
Retail Pricing and Markup in Fashion
By the time a customer unboxes their online order, there is just so, so much that has gone into creating that item, which is hidden from most consumers. This can make pricing certain items an outright challenge.
Take, for example, hernest’s new Comfy Tencel Organic Cotton Shorts. While you’d think designing and producing shorts should be a fraction of what it takes to make pants, that’s not the case. Shorts are actually just as complicated to make, requiring time and effort that quickly erodes their profitability for hernest. While shorts are a staple (and a solid seller) for most fashion companies like mine, I find it nearly impossible to charge a retail value that captures the effort that goes into designing and manufacturing them.
Would you agree that there’s a certain market expectation preventing companies from charging $150 for a pair of lounge shorts? Oh, for sure there are brands that do! But, hernest strives to provide products at a fair price.
Our internal cost to produce shorts is $46.30— this is how much it costs to get a pair of shorts ready to ship to a customer.
We then sell them directly to you for $89 on our website. There is no middle person here. We avoid traditional retail (for now), because we’re committed to fair pricing. Traditional retail markup is usually about 100% (for example if hernest sold its shorts to XYZ retailer for $75 and then XYZ store would mark them up to about $150.
If they were listed for $150, how likely would it be that they would actually continue to sell versus sit in the stock room?
So, how does that $46.30 break down? Well, $22.15 of it is the fabric we use (which, as you know, is super special and not your average blend). The fabric has been through it's own process to this point, but that's for another time! Then $11.40 goes to labour, $2.23 goes to the all the trims, and 0.99 goes to labels and garment protectors, and 6.50 for freight (it has varied between $3-$7- but freight has risen extraordinarily if the last 6 months), and then there’s $3.03 in profit to the Manufacturer.
Other things that aren’t factored into the $46.03 landed cost of our shorts are the fees that go into physically storing inventory (avg. of 0.50/month), picking and packing labour costs ($3-$5), the actual shipping mailers we use ($1- $4.75 eco-friendly ones, at that), and the actual shipping/postage fees (which for these shorts is between $12-21 depending where a person lives or how many items in their cart) and the carbon offsets we’ve committed to.
This leaves profitability of about $15-$20 / pair or 16-22%.
Why Share Info About Transparent Pricing in Fashion?
With 16-22% leftover in profit, this shorts scenario might make you rethink getting into the fashion industry altogether. To be frank, it’s not a career that I got into because of truckloads of cash pulling up the driveway. It’s a career that I’ve carefully carved out because I’m deeply passionate about driving meaningful change in the industry.
So, why share these stark realities with my actual customers?
Well, first of all, because you asked for it. In our recent customer survey, you voiced wanting more educational information about how pricing works. And this inspired me to tell you more about what it’s like from my perspective as an owner.
We’re also sharing this type of transparency with you because there is usually a void between brands and customers that means lost context about how items are priced. For example, hernest discloses the profitability to the manufacturing partner, a number that’s often left off the disclosure or gets lumped into the “labor” cost over-inflating that number.
This matters because it can obscure a company’s production standards. For example, we purposely work with partners in Portugal that provide living wages to their workers (here’s a look at living wages in Portugal). We also ensure that our partners provide their workers with safe environments, giving them rights and protections that other countries in the fashion manufacturing sector cut corners.
Our manufacturing partner follows the agreed employment contract between the Portuguese Textile Association and the Textile Workers Union.
This contract reviews work conditions, sets minimum wages per categories, creates bank-hours so that the worker can be effectively compensated for the actual work, etc…
The wage of workers depends on category, experience, level of productivity and dedication. According to the employment contract in 2020, our Manufacturing partner needed to pay an average wage of 635€ to seamstress and 775€ to technicians (manufacturing and administrative). Added to this, there is a food subsidy until 4,77€/day.
They are currently paying more than this collective contract and, whenever possible, reward workers with bonus payments, everytime they exceed expectations. Our manufacturing partner is annually audited. And in these audits employment contracts are checked, and random workers are interviewed by auditors to guarantee that Social and Etnical duties are followed.
From Sylvie Senra (CEO) “ I can't answer on behalf of workers about why they like to work here.
What I can say is that, we (board) believe that our greatest strength is our staff, the people who believe in us and collaborate to achieve better results every day. In that sense we encourage an open and good relationship with all of our employees. Also, and despite we are a small company, we provide Training, Safety measures and Medical assistance (free of charge) to guarantee the wellbeing of our workers every day.”
We’ve all seen some of the horrific human rights abuses that happen in clothing factories around the world. Not contributing to this or perpetuating it was something that—right from the get-go—was a non-negotiable for hernest. So, I built that into the pricing model and never shy away from communicating it.
Factory work is a tough environment to be in but it can still be an equitable one to the people creating the garments we all wear. Our primary production partner is a small, women-owned business that imbues a deep sense of pride in their work. Over the years, we’ve built our relationship on trust, transparency, and shared values.
Please Consider Avoiding Shiny Object Pricing
What I mean by “shiny object pricing” are any of the gimmicks that retailers use to discount, discount, discount. I get it—we all love a good deal—but when retail companies train their customers to wait for sales of 50% off or more, it devalues the work, encourages our culture to over consume and creates incredible amounts of waste..
Paying more (or rather, paying full value) for a garment not only supports small businesses and their partners from a profitability standpoint but it also can significantly reduce the carbon footprint that goes into making it. According to Rolland Geyer (author of The Business of Less), investing in labour is perhaps the fastest way to reduce the carbon footprint and get fashion aligned with the boundaries of our planet, because people’s time (or labour) has no inherent environmental impact.
So how can you help to break the cycle and use your buying power for good? Paying a fair price with a brand that ensures fair labour is just the start. We encourage you to also consider changing your shopping habits to do more with less (you can read all about this mission here). Instead of repeating the cycle of accumulating vasts amounts of trendy fashion pieces that make your closet explode, this season we’re challenging hernest customers to take a look in their wardrobes and try to breathe new life into favourites and staples with fresh styling tips.
Please share your style with us on social media and don’t forget to tag @hernestproject!