Let me first point out that I have no connection to Everlane what so ever. I respect and appreciate their business model but I don’t own any of their clothing. They make basic silhouettes for men and women that are meant to be high quality garments at a fraction of the price. They accomplish this by eliminating their wholesale distribution and sell directly to their consumers through the Everlane website. Since they have no need to cater to wholesale, they avoid the mark up that comes with that process. By doing so, they claim to pass the savings on to the customer. Also, they are completely transparent regarding the cost of their items. Which is obviously appreciated by their customers. As of 2015, their revenues were reported to be around $50 million.
So now lets examine the quote above and see what made this potential customer so upset. The item in question seems to be a cashmere v neck sweater that they are selling for $110. The majority of the cost is in the materials which is said to be approximately $40. The next highest cost is the labor at $13.53. The remainder is hardware, transportation and duties. Now, first lets take a look at the material which is cashmere. Cashmere is a highly regarded material that is produced by Cahsmere goats. It is known to insulate better than wool from sheep and is much softer on bare skin. The pricing of textile is by the yard. Cashmere could run anywhere from $18-$260 per yard. All of this is predicated on quality, weight, and origin. This doesn’t include shipping costs(I’ve had to pay $100 to ship 80 yards of fabric from Japan).
Judging from the pictures of the sweater in question, the garment requires close to 2 yards of fabric. Lets assume the lower end of cost and say that they used cashmere for $18 and needed about 2 yards per piece. Just the fabric alone would be $36 without the cost to ship to the factory. The description claims that they used “grade A cashmere” so they probably opted for a better quality. just by adding $2 to the yardage price it can easily be $40 for the materials alone.
Next, lets look into the labor cost. They claim that the labor cost is $13.53. This is very plausible. This garment was cut and sewn in China, in a factory that employs 800 people. Despite public perception, it isn’t as cheap to manufacture goods in China as one might assume. With the improvement in the economy, the standard of living improves as well, along with the wages. China’s middle class population is greater than the entire population of America! A factory with 800 employees yields a ton of overhead. Since factories are volume based, they will require minimums. The production must be able to cover costs of the employees, maintenance, and utilities. So this per unit cost could easily be $13.53.
Currently I’m working on a my own collection and one of the items is a long sleeve crew neck sweater. I ordered the materials from Japan and I’m having the item cut and sewn in Los Angeles. My total cost of producing the item is $69. Sewing alone is costing $22 per piece. My quantities are obviously much lower than Everlane and I’m working with a much smaller factory, however it’s still worth noting. Producing an item could end up being very expensive.
For my previous business, at our peak, we were distributing around 100,000 t-shirts annually. These tees were being produced in various factories around the world mostly China, Honduras and India. The tees would be shipped to our warehouse in Los Angeles than sent to our printer to get screen printed. Next it would be sent out for quality control and packaging. This entire process cost us $5.50 per unit for cotton tees and $6.60 for tri-blend tees. We would wholesale our items for $12. For stores that would order greater quantities, we would offer a discount down to $10. Stores would than sell our tees between $28–32. It seems like a huge jump from $5.50 but that’s very typical in our industry. The fashion industry has a ton of overhead, warehouses, sales teams, tradeshows, etc. Even though our margins look healthy, we were barely able to sustain our company. We did last 7 years, but it was a huge struggle.