An investigation into Lidl’s £5.99 jeans last weekend underlined the murkiness that surrounds retail prices in stores and how much garments actually cost to make, but perhaps we can learn from one US retailer that is establishing a serious business out of being completely up front about its sourcing costs.
The Observer newspaper calculated that, to sell at that price, Lidl would have to pay people 23p an hour. The article, published on Sunday, has been shared more than 26,000 times and attracted almost 1,000 comments – many suggesting that jeans with a much higher retail price point will be made in similar or the same factories as those sold for a pittance.
I’m often left wondering at the true difference between a polyester top made in Bangladesh priced at £19.99 in one high street retailer to a polyester top made in Bangladesh priced at £79 in another.
Everlane silk dress at $98
This thought process among consumers is what is fuelling Everlane, a San Francisco start-up that prides itself on “revealing its true costs” and showing the mark-up. The contemporary etailer, which was founded in 2011, made almost $50m (£35.4m) in sales last year and expects that to double this year, according to US tech site Re/Code.
It sells a silk short-sleeved dress for $98 (£69) and details where it is made – at a factory in Hangzhou, China, that employs 240 people and was founded in 2003. You can see a gallery of pictures from the factory on Everlane’s website, although its name is undisclosed.
So far, so good. That in itself is not new: the world’s second-biggest clothing company, H&M, has made its supplier list public since 2013 in a bid to make its supply chain more transparent. But where Everlane goes one step further is outlining the costs behind each item. So the price of the $98 silk shirt is made up of materials ($22.17), labour ($12.39), duties ($2.29) and transport ($0.95), making its true cost $38.
Everlane chooses to retail that at just under a 2.6 mark-up, while it argues “in traditional retail a designer shirt is marked up 8x”.
Everlane has 70 employees and ships to 300,000 customers in the US and Canada, according to a company blog post in November last year. It does not currently ship to the UK, although this could be on the cards as the company grows. It says: “We have a long road ahead of us. And a ton of ambition. We know we’ll expand our line and enter new markets, but the truth is, we don’t have an exact destination in mind. What matters most to us are values – and ours won’t change, even if we end up designing homewares, furniture, or even building an Everlane hotel in 20 years (it’s true – we’ve talked about it).”
Of course, it is a lot easier for an online startup to be completely up front about costs and prices than more established retailers with complex supply chains and costly overheads. It simply will not work when you start to build in wholesale relationships or anything more detailed than a straightforward supplier to retailer structure.
But it could definitely prompt consumers to start asking more questions about the clothes they buy and how they are made. And retailers need to be ready with some answers. Although it has not hit our shores yet, the internet means there is nowhere to hide for very long.
Everlane’s supplier in Hangzhou
Everlane’s pricing strategy