Polo Puzzle: What Goes Into a $155 Price Tag?

The hardest thing is logistics: delivering product orders on time as a small brand which outsources manufacturing is really hard. Big retailers, like Nordstrom or Macy's will give you a window of a week (maximum) and will not accept your orders if it goes over. Conversely, they also have set packaging and other compliance related requirements which will increase the cost / item. In particular they have these ERP systems that small brands cannot afford. Smaller brands end up outsourcing being plugged into their ERP systems as well which will also increase the cost of the article.

I used to work in a clothing store and the markups on clothing, especially more fashionable items, never ceases to amaze me. Unfortunately, this article didn't really get into most of it. They explained why the shirt cost $29 to make as opposed to $1-2 for a cheap shirt from China.

What I find fascinating, is how we get from $29 to $155 at the store, or $2 to $30 for a cheaper shirt. The vast majority of the cost of a clothing item comes from putting it on a shelf in a well-staffed store.

I think this highlights why we have made a shift from a manufacturing economy to a service economy in the US. The kid who waits on you in an American mall costs much more on a per shirt basis to employ than the arguably more skilled seamstress, even when the seamstress is in the US.

I have a few Polo (Ralph Lauren) shirts that i wear that I bought in the very late 90s. I'm not saying that the 300+% markup is valid, but I've worn a shirt in three different decades.

But will this last? With the phenomenal cost of running a retail establishment, it's probably cheaper to run an online store -- even if you offer free, shipping-costs-paid returns for any item that doesn't fit!

More and more people I know are finding themselves shopping online instead. There's a whole host of advantages:

1. The selection is way better, while the retail shop often has none of the styles you want, forcing you to go to specialty stores. Of course, online, "going to a specialty store" doesn't require driving.

2. Even though many people love browsing, the shopping experience is often just terrible. Online, searching for a particular type of clothing or style takes basically O(1) time, thanks to search, while in a retail establishment, you have to cart yourself across the store repeatedly. And online stores typically have images of models wearing the clothes, giving you a better sense of how it would actually look.

3. Some sites online offer actual, specific measurements for all their clothing instead of vague sizes like "6" or "10", whose meaning isn't even constant for a given manufacturer. I've never seen anything like this in a physical store.

4. It makes impulse buying easier, since you don't have to drive anywhere.

(and much more)

If Amazon can put the pinch on retail books and electronics, can sites like Milanoo put the pinch on retail clothes and cut out the middleman? I think there's still a lot of room in the online fashion space, and the margins surely have to be better. This is a harder problem than those approached by the typical HN startup, due to the problems of dealing with physical goods, but there's nevertheless been a lot of successful companies in that space lately.

It's really not much cheaper - if you look at the Zappos financials from when they were acquired, their margins were razor thin. All of that "free" shipping costs a lot of money.

The real opportunity to lower markups is in manufacturers selling direct.