Since our ethical fashion range went live on Kickstarter we have had many visitors to the site. However, most of them are not converting to backers which suggests they are not the right customer and not willing to pay the premium prices that ethical fashion costs. So, why is ethical fashion more expensive than the high street and the supermarkets?
Most large retailers manufacture in countries where the wages are extremely low so as to maximise on their own profits. One of the biggest garment manufacturing countries at the moment is Bangladesh, where most garment workers receive just 3,000 taka a month (approximately £25) but a living wage is calculated to be 4000 taka a month (£45). Ethical brands use manufacturers that pay their staff a real living wage, as well as paying living wages themselves. Manufacturing in the UK that means paying £9.30 an hour or £10.75 in London.
Economies of Scale
Large high street retailers and supermarkets will order vast amounts of each style which means they can buy them as much lower unit costs. They will be buying 1000’s of metres of fabric at a lower cost too. Ethical brands are much smaller and so would have much smaller orders meaning their making and fabric costs will be much higher. For example a t-shirt can cost a high street retailer as low as £3 to make, pack & ship based on an order of over 4000 pieces. (That’s before they put their retail mark-up on it) It costs me as a start-up nearly £18 because I can only aim to reach 50 pieces.
Large companies have enormous power which they use to help drive down prices. Factories owners often have the threat or worry of losing orders unless they can bring their units costs down to the point where they make very little money themselves. This is why the garment workers are paid so little and work in appalling conditions. There are so many factories and other poor countries vying for business that a retailer can easily go elsewhere to find a better deal.
Most budget fashion is cheap because it’s made with synthetic fabrics. The price of organic cotton is substantially higher than these and conventional cotton because the extra money is used to grow cotton more sustainably, to cover certification checks and provide better lives for the workers. Big brands will often dye or print vast amounts of fabrics different colours or prints to use in different ways too, so reducing their costs further.
Big retailers have huge customer bases and massive marketing budgets, whereas ethical fashion is still a relatively niche market. Until there is more demand for ethical fashion, in a similar way to the organic food movement, the prices will stay high. Investors are less likely to invest in ethical companies unless they can see evidence of customer demand, so companies wanting to do the right things struggle to grow on their own.
Because large fashion retailers are able to buy their products at such low cost prices they are able to add on high mark-ups. Fashion items are normally marked up at 2 or 3 times the wholesale price. Remember that t-shirt that cost under £3 to make? With a retail mark-up the retail price would still be only £9. These large mark-ups also give big brands the ability to discount heavily when they need to shift stock. Ethical brands have higher making costs as seen above so can’t add so much of a mark-up and are therefore limited to how deeply they can discount. This affects again how many customers they can attract.
So, does this make you think more about the value rather than the high costs of ethical fashion?
Hopefully it helps you to understand how difficult it is for ethical brands to survive especially in today’s world of fast fashion.
Resources & References