The Problem with a Wholesale Supply Chain
In 2015, David decided that his brick-and-mortar boutique in Brooklyn was at a crossroads. He was making less than what he used to make selling wholesale products. David had been buying and selling a well-known mens brand of designer jeans in his boutique, for years. He used to buy 100 jeans for $87 each at the wholesale price, spending a total of $8,700. He then retailed these jeans at his boutique for $175 each. His profit margin was $88 per unit. He realized that nowadays he was making $60 in profit instead, and every day that number kept getting lower and lower. His retail price stayed the same, but his wholesaler’s prices kept gradually increasing.
He approached his boutique owner friends and asked them for advice on how they manage wholesalers. He discovered that he was not alone, in fact, wholesalers increasingly sell their products online at cheaper prices than they sell them to retailers, and they were also selling the same wholesale products to multiple boutiques in the same neighborhood as David’s, but at lower prices.
David started to piece it all together when customers would come into his boutique and instead of buying the clothes there, they would buy it on Amazon or at a nearby boutique for cheaper. His special products were available at multiple retailers, and he had no way to differentiate himself. Plus, with the high minimum orders for each product and the wholesaler’s price control rules preventing him from discounting the retail price, he realized he needed a new approach. He decided that instead of buying clothing only from wholesalers for his boutique, he wanted to create a unique, high-quality apparel product that no one else had and his customers couldn’t find anywhere else.
The Solution: Italian-Made Private Label Clothing
Armed with advice from his peers, David grabbed his bestselling jeans off his rack and wrote down all the modifications to them that his customers have been requesting for years. David didn’t know how to start designing clothes so he did some research for private label manufacturers online and contacted MakersValley to learn more about how to get something manufactured and starting his own private label of jeans. His private label strategy blossomed from here and he considered the factors below.
Considering the Minimum Product Quantity
David started comparing how many jeans he buys wholesale against how many he actually sold each year. Since several customers had already shown interest in these jeans and given him feedback directly on how they’d like to see them changed and upgraded, he felt he already had some pre-orders that he could consider when planning to take the first step to manufacture his own private label. He realized that manufacturing 100 pairs of jeans in 6 different sizes would be the best way to start. If he started with 100 jeans, he could see how well they sold in his boutique and on the next production round make small changes to them if needed.
Planning Your Manufacturing Timeline
David knew that he wanted his private label jeans on his racks in time for the Fall/Winter 2016 season. That meant his private label manufacturing process needed to be done and he needed to receive the products in store by August 30, just in time to start selling.
Manufacturing a custom product takes longer than wholesale, so don’t think of the process the same as you would about fast fashion. The manufacturing process requires prototyping (6 weeks for each prototype), refining and sampling (6 weeks for each pre-production sample), production (6 weeks for production), and international shipping (1 week).
Knowing that, David worked backwards to figure out his manufacturing timeline since he would be working with a high-quality Italian manufacturer overseas to make his jeans. He knew that most brands do 4-7 prototypes of each new article of clothing, but he was confident that since he had a highly-vetted and experienced Italian manufacturer working with him, he could get the perfect pre-production jeans sample in one try.
David figured that if he made a first prototype, reviewed it, and gave feedback to the factory for a second pre-production sample, he could then approve his production order, and in total, the process would take 19 weeks. He added a few weeks for buffer just in case, and decided to start his private label manufacturing process on February 28, 24 weeks (6 months) before August 30.
Getting the Lowest Cost Per Jeans Unit
David used to buy 100 jeans from his wholesaler for $87 each at the wholesale price, spending a total of $8,700. He then retailed these jeans at his boutique for $175 each. His profit margin was $88 per unit with the traditional wholesale model.
On the contrary, for private label garment manufacturing, MakersValley connected him with an independent manufacturer in Italy that quoted him $19 per jean to produce his own Made in Italy jeans design with 100% Italian denim. The business decision was an easy one.
Should You Sell Private Label Clothing?
By manufacturing his own private label jeans, David spent a total of $1,900 for manufacturing, $300 for gradings (sizes), $125 for the prototypes, $597 in MakersValley membership fees ($199/mo for premium membership), and $459 for shipping & custom duties (to ship the jeans from the factory door to his boutique), for a total manufacturing cost of $3,381 (his total cost). He saved a total of $5,319 by making jeans using MakersValley (instead of the traditional wholesale model) of $5,319.
After transitioning from traditional wholesale to starting a private label brand, David’s profit margin increased to $156 per unit (versus $88 per unit with the wholesale model), resulting in a profit margin increase per unit of 177%!
Want to learn more about how to find a manufacturer for your clothing line or a private label jean manufacturer?