Real Cost of starting own clothing line

[Bali86]

Hi all,

I really need some advice on costs of running a clothing brand. A Good Quality dress we bought for £10 and thought we will sell for £20.00, is infact costing us £40 Plus just to sell.

I already have a business background and along with my wife, we decided to make a niche clothing company. After designing the clothes and choosing materials. Speaking to a manufacturer in China, We ended up with a figure of how much each of these will cost.

To minimise risk and to fill the site with more items, we decided to keep the number of items we order low, 100 pieces is the lowest number we managed to get anyone to agree to.

I'll share 1 item as any example.

Item 1, is a Navy jumpsuit. We agreed on a price of £10.10 We decided brilliant we can sell these for £24.99. This sounded brilliant in theory.

However upon my research and in between my wife being impatient, she placed an order for the first 3 items. So now we have 300 items sitting in our living room and the dilema listed below.

These are the costs i found when i placed first order and did some research on the later stages of doing this as a business:
Jumpsuit: £10 This is after she chose good materials and the design almost looked designer.
Tags: £0.60 Tags 60p each.(1000peices and thread)
Shipping £2. Shipping From china to us cost £600. Divided by each items, thats £2 on per dress.
Vat £2. Vat 20%(we can claim this back in the future)
Duties: £1.20 We were Charged 12% in Duties, rang HMRC and they confirmed.
Pictures £1.5 Hiring a Model and taking pictures in a nice location, plus ghost manikin pictures
was working out to £150 per item type. Divided by 100 items/ Thus about £1.5
cost added per item.
Ads £19 This was the biggest killer... After running some test on dropshipping sites and
speaking to some owners in a similar market, i found that it was costing them
around £19, to get a buying customer via facebook ads. An average customer for
them would place an order of £55. However they ran a drop shipping company,
which i figured would put allot people off and thus the high cost. Yet, to be safe i
wanted to use that figure, its the only figure i have.

There's other cost, such as Vat, which we will have to charge the customer and website costs etc, shipping out cost of £3.60. First class recorded once we are registered with Royal mail.

Total Cost £40 plus.

However all of the above spiralled the cost of our £10 to £49. What am i doing wrong? I know each of my customer wont be from Fb ads or Adwords in the future, once we get established and there's other way's to advertise. But any tips would be welcomed, regarding lowering costs.

 

[Page]

Why do you think you are doing something wrong other than expecting to make a profit

Your post illustrates wonderfully the hidden and extra costs that build up and up

The misleading figure is the ad cost and the input VAT which should not be there if you are going to be VAT rated

It is whatever works for you and many might not spend a penny on adverts but can sell the stock for less

Then yeah great to have a model but ...

And on it goes - maybe work out how little of this you have to do and split it out into fixed and variable costs - and then decide which of the variable costs you are going to take onboard

 

[Bali86]

Thankyou for your answer, i feel im messing up somewhere, because i can see on other sites, which are also UK based. For example, a similar type of trousers we have designed, they are selling for 29.99 -£34.99.

Mine is costing me £12 to produce, then when i add all the cost as i demonstrated before. It works out to £45. Even if i take £19 for ads off, it still doesnt leave any profit.

When i say similar, its not the same stuff, but its the only 2 non designer sites i can find. The 3rd similar clothing site i can find is expensive, but they justify it because they have designer clothes on them. Its called TheModist dot com. I cant paste the link here, unfortunately, as im new.


We were hoping, to make similar looking stuff, with good materials, yet not designer and almost Zara type prices. That was the initial idea behind the project. All of a sudden, we'll have to sell stuff at £70-£90 prices, to make a 10% profit. Which i cant justify the effort/ large investment for, at the moment.

Again as you can see the above site, has nice pictures, this is where the model you mentioned, would have came in.

Regards
Bali

 

[Alan]

I had in my head for some reason that manufacturing to retail would have to be 10 to 1.

I found this article that suggest I may have been close https://hypebeast.com/2015/3/the-costs-of-starting-a-fashion-brand-production

I think you have several problems - minimal production run sizes, no scale of brand for marketing yet you can't charge premium designer prices.

Reading your original post I got the impression you were setting out to compete with high street brands and prices, something without scale you seriously won't succeed at.

But you mentioned 'niche' but talking about £40 items - which obviously I don't get.

What would you need to do to get you £10 dress to retail at £100? How can you make it more desirable?

I think you are learning some great lessons though.

 

[Mr D]

None of those figures should have been a surprise for you.

I'm not familiar with the item type so no idea if the production cost is too low or too high, the costs should have been known or estimated before placing an order.

To be looking at 5 times production cost to retail price is not bad.

To be honest the times I buy clothing wholesale from UK supplier I'm looking at £10 purchase price and £25 selling, you are adding steps to that.

Is the price you can sell the item for taking into account your actual costs too high?
Your costs could perhaps be altered, volume changing price and arranging your own shipping / better rate of shipping.
Your advertising may be thinking too low. Facebook ads are one aspect of advertising, your problem is always going to be being noticed.

 

[Furqan721]

Hi all,


However all of the above spiralled the cost of our £10 to £49. What am i doing wrong? I know each of my customer wont be from Fb ads or Adwords in the future, once we get established and there's other way's to advertise. But any tips would be welcomed, regarding lowering costs.

Hey,

Here is the answer from a manufacturer and also exporter of Gloves, Gym accessories and sportswear to UK and USA.

I have read your post in detail and here is what I have found. This will definitely help you because I know where you are doing wrong in marketing point and manufacturing point as well.


1: Shipping cost is too much for 300 pcs of three products you got, I can't understand how much weight those 300 pcs and why it was not VAT Paid ? We ship items from Pakistan to UK at a price of 3.4GBP /KG and its VAT PAID. So my clients won't pay VAT in UK.

2: Duties, Right now you have paid duties, next time, do check how you can legally avoid duties

3: Photographs: If you have low budgets, why you are looking for a model photo shoot or premium photo shoot. You can get good photos on Dummy, or even you can ask your manufacturer, or some Chinese model on freelance platforms, to have photos of your products. That will definitely reduce cost of photoshoot.

4: Shipping cost is always there, so its not gonna decrease

5: Facebook Ads: Why you thinking FB ads is the only option ? You can use, low budget, like 3GBP/day on FB, Insta ads and also use SEO, Local SEO, Google Adwords and Email Marketing for targeting different segments of customers.

You can definitely save a lot using, low cost photoshoot, cheaper shipping with VAT Paid from the Shipper country, and also find someone else for sampling and cost of your products.

Thanks

Furqan Arshad

 

[antropy]

However all of the above spiralled the cost of our £10 to £49. What am i doing wrong?

Well the answer is obvious and right next to the question - you're spending too much.

You came in to the business naively wanting to deliver something of very good quality and happy to pay fair prices to do so - am I right?

Instead, the attitude you should have taken is trying your hardest to save money at every step, negotiate hard, don't pay 60p for a label, that's what you'd pay in WHSmith on the high street!

Pay as little as you can for everything, scrimp and save wherever you can, cut corners on price wherever you can, if you can get away with not spending on something - don't do it, if you can get something for free, use that, if you can make something yourself, make it yourself.

Spend as little as physically possible while delivering the least you can get away with that will sell - that is what all profitable businesses do, while trying to give the opposite impression.

Out of interest, what are yours and your wife's business backgrounds?

 

[Chris Ashdown]

There is no reason why you could not have had them made in the UK and many small firms would have taken orders for as small as 50 of each design or you could have searched your locality for a seamstress who would have done the work as a self employed person or company on even smaller numbers, with the advantage that things could have been cheaper in costs and no import or shipping costs

The modey costs are a long term advertising cost and not directly applied to the first batch of garments, presumming if they take off they will be reordered

Facebook are a waste of time for your products EBay would be a better place with costs about 17% of sale price

A shop in a box website would be a cheap way to start with and can be expanded once you get established and know what extra features you may need

Never buy from abroad unless you have some local QC in place to check each item before going to shipment also make sure whoever you use you supply full size size plans either in card or electronic, Large to one person is never the same to another and the same for size 8. 10. 12 etc just ask your wife

Looking to the future work out all the costs beforehand

With hundreds of small factories around Britain manufacturing clothing, there is no reason to consider the far or middle east as the cheapest option

I would suggest one that may be able to assist in smaller numbers but would expect you to have sourced fabric and fittings etc in Gt Yarmouth Stores in Great Yarmouth. there is another I forget there name at Long stratton in Norfolk and a third who we used to use a long time ago http://kkwear.co.uk/

 

[dan19900]

Some of your figures are high (model, ads) but your figures are clearly miles away from being a successful business, you've not accounted for returns either which will be fairly high for clothes.

 

[Gecko001]

This is probably one of the most useful threads I have seen in the years I have been coming here. It is a lesson for any would-be online trader.

In business you have to do it to find out things out. That often involves paying over the odds at first until you get up on your feet and start running. Maybe a swimming analogy would be better. You cannot learn to swim by reading a book about it or by training on dry land. You have to get into the water. The OP is at least getting into the water.

 

[mattk]

Firstly, there are some other costs, such as transaction fees and the cost of returns, which you have missed.

However, trying to be positive, your £19 ad cost seems unnecessarily high. Why not try to sell on marketplaces such as eBay or Amazon? You can promote your products for free via social media. Try posting interesting fashion-related content in order to get followers, not simply spamming links to your own products.

You say you have a website, do you have a blog section? There are a number of Wordpress plug-ins available which can take fashion news items from RSS feeds, post them to your blog and then tweet and post them to your Facebook page - completely automating your social media.

 

[Gordon - Commercial Finance]

Marketing probably shouldn't be added to each unit like that, however you probably need to reconsider your marketing spend anyway. Companies like ASOS and others are spending £30,000 per month on marketing. In order to get a sniff, you need to be able to do similar, at least initially.

 

[Mr D]

Marketing probably shouldn't be added to each unit like that, however you probably need to reconsider your marketing spend anyway. Companies like ASOS and others are spending £30,000 per month on marketing. In order to get a sniff, you need to be able to do similar, at least initially.

Yes, the cost of getting an unknown brand in front of people such that they buy it can be quite high.

 

[DontAsk]

I already have a business background

Really? Why did all these issues come as a surprise. Shipping, duty and VAT, especially, should be no-brainers.

Pictures £1.5 Hiring a Model and taking pictures in a nice location, plus ghost manikin pictures
was working out to £150 per item type. Divided by 100 items/ Thus about £1.5
cost added per item.

Only true if you are never going to re-order the same item.

Why can you or wife not be the model? Lots of nice locations around.

 

[Nikki Hesford]

Sorry Im late to the party here, but I can hopefully offer you some advice. I made my name in fashion (I was on Dragons Den in 2010, subsequently received £250k of investment, sold into ASOS, Jane Norman and a number of others and did around £600k through E-commerce)

Firstly, £19 cost of acquisition on ads means you are doing ads all wrong. Your ad sets, audience, budget, creative... none of it is working if you're spending so much. If you're using Adwords then you need to be focusing on Shopping and retargeting, for search you need to be using long tailed low bid keywords such as "gold sequin minidress size 12" instead of "gold minidress" - the reach is lower but the CPC is lower and overall lower COA.

Secondly, 60p a unit for tags is ridiculous! Shouldn't be more than 8p, assuming its a basic kimble swing ticket.

Duties, they are what they are. Sometimes Chinese manufacturers down-grade the customs value to reduce duties, or call small qty 'sample stock NCV (no commercial value)' but obviously that's a bit illegal.

Hard to advise further without seeing your brand, SEO, social pages, product range, on-site navigation.... but please contact me via my website or FB page. Happy to give you some advice for free on a call in exchangee for FB review

My website is nikkihesford dot co dot uk
FB page: Nikki Hesford Business Academy

 

[Page]

Sorry Im late to the party here, but I can hopefully offer you some advice. I made my name in fashion (I was on Dragons Den in 2010, subsequently received £250k of investment, sold into ASOS, Jane Norman and a number of others and did around £600k through E-commerce)

I am curious are you still active in these areas and if not what went wrong or maybe right or changed to make you move on

I am asking because I had a look at your website and was wondering if you had moved on from your original business

 

[Nikki Hesford]

I am curious are you still active in these areas and if not what went wrong or maybe right or changed to make you move on

I am asking because I had a look at your website and was wondering if you had moved on from your original business

I exited the company in 2014 - for personal reasons. My baby son passed away in 2013 and when I was expecting again in 2014, my priorities changed and I no longer wanted to put my kids in full time childcare to run a factory. I stayed until the baby was born and then sold it off after that. We did have a sale for it, but it was on the condition of me staying on for 12 months and that wasn't do-able so it was asset stripped

 

[Nikki Hesford]

Gordon, £30,000 a month? Try more like £700,000 a month on marketing for ASOS (4.5% of turnover)

 

[BlackMagicX]

Facebook Ads will cost a lot more than you think. I'd expect to be spending between 2k and 5k a month minimum. Especially with a new pixel. If you're not a great Facebook Marketer, then double.

You also need to consider your own time, postage, packaging, returns. I mean, you should be selling at £100, otherwise, you'll be out of business in 6 months.

 

[Gordon - Commercial Finance]

Gordon, £30,000 a month? Try more like £700,000 a month on marketing for ASOS (4.5% of turnover)

ASOS are turning over £15.5 million per month???

 

[mattk]

Gordon, £30,000 a month? Try more like £700,000 a month on marketing for ASOS (4.5% of turnover)

This says ASOS H1 2018 Group Revenue was £1,158m and they spend 5.0% on marketing. I make that £9.65m per month.

 

[Gordon - Commercial Finance]

That is insane. Although does illustrate the point.
Although they’re not a brand per se and perhaps more like a marketplace of sorts, that’s who you’re competing with, and they’re spending £10m a month

 

[Page]

The days of build it and they will come are long gone

 

[deniser]

I have a suggestion. Find a teenager/person in their 20s to take some decent mirror selfies and produce a good profile and then upload the products to the Depop app.
They charge 10% (I think) commission plus you have Paypal receiving money costs. There is no fee to list so you won't lose anything by giving it a go.
Easy way to clear your stock - provided they are the fashion young people are looking for.
My daughter and her friends buy and sell there all the time.