The difference isn’t just in how much workers make and the conditions they work in, but also the work they’re doing. Elizabeth Suzann top-stitches high-stress seams for durability, according to Pape, and uses French seams, which leave no raw fabric edges exposed, ensuring edges don’t unravel and giving the inside of the garment a cleaner look. These methods are most common in high-end clothing, since they’re time and labor-intensive.

Factories focused on quickly and cheaply churning out large quantities of clothes, on the other hand, typically use a serging machine to finish edges, which isn’t necessarily a problem. The greater concern is that they may also cut corners when sewing clothes to save time, leading to items that fall apart after little wear.

Material: The greatest cost in producing the top is from the silk material the brand uses. It has a substantial weight, making it last longer, and the company pre-washes its fabric before sewing. The process takes time (meaning more money), and causes the silk to shrink up to 15%, so the company ends up with fewer yards of fabric than it originally purchased.

Again, the process is more common to high-end clothing, and makes for a better product. Brands working to produce cheaply and quickly don’t often pre-wash their fabrics. The item will shrink the first time you wash it, leaving you with something that looks and fits differently than what you initially purchased.

Elizabeth Suzann also likely pays more for fabric just because it’s buying smaller quantities. Huge brands leverage economies of scale to keep prices down, buying bulk quantities of fabric and ordering massive numbers of garments from factories.

Wastage: All brands have waste in the form of fabric scraps and factors such as human error.

Operating costs

The single largest set of costs in Pape’s price breakdown is made up of the many expenses involved in running a fashion business, such as maintaining an office space, paying non-production employees, and advertising. Every brand has these expenses, and they can vary quite a bit depending on how the company operates. Brands that run big ad campaigns need to bake those marketing costs into the price of their goods, just as brands with retail stores need to factor those costs into what they charge.

Because Elizabeth Suzann sells direct to consumers, the costs behind its clothes are different than they would be for a designer brand that sells wholesale to department stores or other retailers (which then sell to consumers). In a wholesale model, many brands follow a keystone markup structure (shown in the gif): They sell an item to a retailer at twice what it cost them to produce it to make their profit. The retailer, which needs to make a profit as well, then doubles the wholesale cost to arrive at the final price tag you see in a store.

Brands that “cut out the middleman” and sell directly to consumers, including Everlane and Warby Parker—and also Gap and H&M, which produce and sell their own clothes—don’t need to include that last retail markup. That can save money for the consumer and may give the brand more room for profit, though brands with their own brick-and-mortar stores do need to account for rent, staffing, and other costs.

It’s worth noting, though, that the markup retailers charge is what allows them to be in business and pay employees. The new crop of digital-only, direct-to-consumer brands may “cut out the middleman,” but they also cut out the jobs and economic development in towns and cities that retailers have historically provided.

Design and research: At the top of this group of expenses, Pape lists “Design + research,” not a material expense but still an important one that consumes time and energy. After all, fashion labels are selling design, as well as fabric and thread.

Designers are professionals like any others, and those at the top of their field command higher prices for their work. There are plenty of brands that are even more expensive than Elizabeth Suzann, and in many cases that markup may be due to the cachet of a famous and well-regarded designer.


The amount left after all expenses are factored in is the actual profit the brand receives on an item. In the case of Elizabeth Suzann’s Artist Smock, it’s just $18.50 per shirt, or 10% of the sale price. Pape says her company reinvests that amount in the business and its future.

Brands can have higher or lower profit margins, but fast-fashion labels such as H&M tend to get by on fairly thin ones. They sell massive volumes of clothing, so they do extremely well even on narrow margins. But to sell that many pieces of clothing, they need to keep costs as low as possible, which is why they often manufacture in countries with low wages and use inexpensive fabrics.

Labourers work at a garment factory in Bac Giang province, near Hanoi October 21, 2015. REUTERS/Kham/File Photo GLOBAL BUSINESS WEEK AHEAD PACKAGE - SEARCH "BUSINESS WEEK AHEAD AUG 1" FOR ALL IMAGES - RTSKHPK
A garment factory in Vietnam.
Image: Reuters/Kham

What’s the takeaway?

By itself, price doesn’t guarantee an item is made ethically, or that it’s high-quality. It does, however, reflect all the decisions brands have to make, and for that reason it can be useful to know how a company comes up with the amount it asks shoppers to pay.

“Really, when we’re choosing to buy something, what should matter is how much value it will have in our lives and how much we’re willing and able to spend,” Pape writes. “The cost to make it—or how good of a deal it was given that cost—is pretty irrelevant in practice. You won’t get any more enjoyment out of it, and simply knowing the cost won’t make it last any longer or serve you any better.”

It’s a point worth keeping in mind next time you go shopping, and one that should figure into your calculus in assessing the value of any item of clothing you’re thinking of purchasing.

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