Retail Strategy 101: Wholesale Clothing vs. Private Label Clothing

MakersValley Blog | 5 Differences in Retailing Wholesale Clothing vs. Private Label Clothing
Tiffany Chimal

Tiffany Chimal

The Amazon Effect tells the story of Amazon Fashion, a strong competitor in retail, grabbing as much as 4% of all U.S. retail sales in 2017, and gives insight into why it's wise for large and small apparel brands to plan retail strategies that keep their businesses sustainable for years to come in spite of powerful competitors like Amazon Fashion.

6 ways to source apparel for your retail inventory

A sustainable retail strategy keeps your cost per unit low, sells fast, and makes for happy customers who love your products.

How can you do that? It comes down to how you source (or make) the fashion products you sell.

Challenge the "Amazon Effect" with your own private label clothing line, Made in Italy. | MakersValley Blog

Finding clothing to sell in your online shop or retail boutique can be done in six ways:

  1. Buying wholesale clothing brands
  2. Cutting & sewing private label clothing yourself
  3. Manufacturing your own private label clothing 
  4. Dropshipping
  5. Importing clothing made by fashion designers (i.e. “going to market”)
  6. Jobbers

Of these six sourcing methods above, each comes with its own pros and cons, but let’s focus on buying wholesale vs manufacturing your own clothing designs, or private label manufacturing your own store brand.

The Basics of Selling Wholesale Clothing

Where do I find wholesale clothing for my boutique?” is what fashion entrepreneurs ask themselves when they’re sourcing fashion products to sell. Working with wholesale clothing suppliers has a number of advantages and disadvantages, namely:

  • Selling standard products - Wholesalers will provide you with catalogs of dozens of products that have already sold in boutiques worldwide. That’s why when you go shopping you can often see the same garments in multiple stores. Wholesalers will sell the same catalog products to your boutique and everyone else's. Although you won’t be selling a unique product that no one else has, sourcing clothing from wholesalers cuts down the time you have to spend sewing your private label yourself or traveling to markets or fashion trade shows.

  • Large initial minimum orders, smaller reorders - Wholesalers require large first-time minimum orders, restocking fees if you send unsold merchandise back in poor condition, and no payment terms. That means they want 100% cash upfront, and they want you to buy lots of products in your first order.

  • Fast turnaround from order to shelf - Typically working with wholesalers to get products for your shop is faster than manufacturing your own private label. You simply order the products you see in the catalog, pay for the order, and receive the shipment in a couple of weeks. However, fast turnaround sometimes means that high quality won’t be a priority. If you’re looking for high quality clothing, be sure to vet your wholesale suppliers by starting with small orders and spot checking the quality before you sell it.

  • Less control over price - Since you’re selling a wholesaler’s products, an increase in their sale price to you will mean a decrease in your profit margin or an increase in your retail price to customers. You want to avoid the latter of the two options since customers grow wary as prices gradually rise. When working with wholesalers, you’ll also need to keep an eye out for wholesalers who sell the same products online that they sell to you, but at a cheaper cost than your retail price. This happens when your wholesaler sells retail, and it’s crucial for you to find out about it before deciding to work with them.

  • Sell established wholesale clothing brands - Wholesalers will offer you established fashion products that have sold well worldwide already. Their products already have a brand identity so you don’t have to spend money on marketing them or adding your brand label to them.

 

The Basics of Selling Private Label Clothing

Many retailers use a mix of fashion sourcing strategies to stock their boutique inventory. Oftentimes, maturing boutique owners will balance a wholesale first strategy by gradually increasing their offering of high-quality store brand apparel as they find their confidence

Launching a high-quality private label fashion brand starts with finding a quality clothing manufacturer. Working with great manufacturers, instead of wholesalers, to create your private label products comes with many benefits, for example:

What's better? Buying wholesale or creating your own private label clothing brand? Find out in this blog from MakersValley.

  • Unique products that you can’t find on Amazon - One of the greatest benefits of having your own private label clothing line is being able to offer unique apparel that you know customers will buy.
    Your private label brand will not be established like wholesale brands, so you will need to do a little bit of marketing to grow sales.

  • Small batch order production - Private label apparel manufacturing allows you to choose your order quantity with more freedom when you use the right resource. Most manufacturers have minimum order quantity requirements, but with MakersValley’s network of Italian manufacturers, for example, you can find some with very low minimum orders, starting from 20 product units, 100% Made in Italy. There is also a growing number of small batch domestic apparel manufacturers popping up. However, you will usually pay a higher price per unit working with a U.S.-based apparel factory than an overseas factory. Manufacturing small batches of your private label lowers your risk since you can make a small quantity of products, see how they sells, then reorder later if and when you sell out.

  • Slow fashion - Private label manufacturing requires a time investment. Finding a quality private label apparel manufacturer will take time; so will making your first garment sample, production order, and shipping your products. Many boutique owners start out by diversifying their clothing supply chain slowly by sourcing, for example, 60% of their products from wholesalers and creating the other 40% as their own private label clothing line.

  • Increase your retail profit margins - With private label clothing, you can increase your profit margin because you will be buying your products at the manufacturer price, instead of paying the manufacturer price plus the wholesale distributor’s commission. For example, if you buy a red dress from a wholesaler you may pay $20, of which $18 goes to the wholesaler and $2 goes to the actual manufacturer who made your product. Then, imagine you turn around sell that dress to customers for $40. However, if you work with a private label manufacturer and pay $10 for a red dress, $10 goes straight to the manufacturer because you've cut out middle men distributors. When you sell your dress for the same price of $40, your profit increases from $20 to $30.

    *Another strategy is to sell your private label clothing line to other boutiques to create a new revenue stream for yourself.

  • Have 100% product control - When you have a private label clothing line, you have the final say on how your product looks before you sell it to customers because you designed it. When you make your own private label clothing brand, you alone control the design details and labels sewn on your garment. Customers will need to come to your online shop or boutique to find your special product, rather than just defaulting to Amazon or the boutique next to yours. Plus, if customers have feedback on your products, you can actually implement their feedback into your next production order of that piece to make it sell better.

Mixing Up Your Inventory Formula

As mentioned before, Amazon is a fast-growing retail powerhouse. They're also a great example of a fashion retailer that isn't afraid to source both wholesale clothing and its own branded private label. In fact, according to One Click Retail, their top-performing 2016 private label apparel categories included men's bottoms, women's intimate apparel, women's denim, and men's underwear. 

After reading this breakdown, how what inventory mix will you use to balance wholesale and private label clothing brands?

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