How much are the things that you buy worth? The fashion industry’s opacity means it’s hard to tell. But considering luxury brands run profit margins of as much as 30%, the one thing you can guarantee is that it’s a fraction of what you pay for them.
Fashion has always had an odd relationship with value. As the epitome of how capitalism values brand over function, a T-shirt can now cost more than a cooker if it’s got the right logo. A pair of shoes can be as much as a degree. And for your outlay on luggage, you could buy a family car.
Take the fabled Hermès Birkin, a handbag with a two-year waiting list and five figure price tag. Why so much? According to the Parisian brand’s erstwhile boss, Patrick Thomas, it’s because “there’s always one craftsman responsible for the whole process of the bag, from the start to the end. To create a single bag, it costs around 15 to 20 hours.”
Considering they kick off at around £10,000 (and escalate quickly from there), that translates to around £666 per hour for the basic model. Can anything be worth that? Well, according to the founder of new brand Oliver Cabell, probably not.
“There’s essentially three large conglomerates that control 75 per cent of a $220bn market,” says Scott Gabrielson, who launched
“They cost less than $100 to make and were selling at the shopping malls close by for $1,200,” he recalls. “It turns out that legal loopholes allow you to do 90 per cent of the origination in a certain country, then finish the handle or whatnot in another country and claim origination.” So while the consumer thinks they’re paying for the calloused handiwork of a Milanese craftsman, he’s probably only sewn the handles on. And that Made In Italy tag.
Gabrielson wanted to do things differently – and reveal on how the fashion industry actually worked. He focused on bags, “because they had a the highest markup in luxury fashion,” he says. “They sell for 12-20x the cost to make.” Instead, he’d cut out overheads so his consumers could buy
Selling direct to the consumer isn’t groundbreaking. The internet has dissolved those walls between maker and buyer, although for most luxury brands, the markups have proved less soluble; a Versace bag is still as much fromas on the rack Harrods. Gabrielson’s idea is more radical: publicise every cost, from materials to manufacture to markup, so customers can decide whether that’s a price worth paying.
It’s an approach that’s already won over Italy’s best factories, which are normally off-limits to all but the biggest brands, doing the biggest volumes. “They like the fact we’re being transparent about precisely where everything is made,” says Gabrielson. “Because it means that unlike other brands, we can’t just move production to other, cheaper countries.”
Good for the factories, and good for consumers. The size of the world’s biggest brands – and their priorities, now that the demands of shareholders are at least as important as customers – brings ancillary costs. So as well as the leather, the labour, the shipping, you also pay for your big name brand’s marketing spend, its Parisian head office, its runway shows. You’re spending significantly more on the label stamped on the bag than the bag itself.
The brand adds an 80 per cent markup to cover its own costs (and make a profit), but that’s still a fraction of the $1,695 luxury equivalent. And, you can guarantee you’re buying something made where it claims it’s made, not in a Bangladeshi sweatshop. And that peace of mind is priceless.