Costing a product is a full-time job and usually takes many people. You can look at costing in a couple of different ways. As a merchandiser, let’s say you had 10 styles, and we wanted to have a certain markup. If you’re selling within your own stores, you usually want at least a 75% to 85% internal markup. If you want to retail a jacket for $695, and you already know that your landed cost needs to be 20% of that to get your 80% markup.
A designer wants this beautiful satin made in Italy. When you’re looking at the cost of goods, around 70% is the raw materials, like the thread, the trim, and the zipper or button. A designer goes to Premiere Vision and finds the most beautiful Italian satin they want to use. If you are going to get the 75% or 80% margin you want, the jacket is going to be $1500 compared to the $695 or the $595 you wanted.
You go back to the design team and tell them that if the market can’t retail nor our brand can retail a jacket this high, there’s no the cost value is not there. Start taking things out of it. Can we counter source material in another country that looks and feels the same but not the higher quality? Can we take a few pockets off of it to lower the cost?
Let’s say a loss leader is the one item that is the showstopper—the most fashionable piece. You need it to draw everyone in to look at the collection, but you already know you’re going to get a lower margin on it. It might be 40% or 50%. You’re going to do a few units, but the other nine styles are going to have higher margins. That’s a trick that all fashion brands use. It’s called blended costing. They look at key items, but they also look at it as blended because ultimately, it’s the blended total that really makes a difference.

Branding is a unique opportunity for entrepreneurs.

In today’s world, there are so many ways an entrepreneur can use branding to strengthen their business. For little to no cost, entrepreneurs can post branded content across social media platforms to sell product and grow their business.

The Branding Challenge

The challenge with branding, however, is that it can be difficult for entrepreneurs to be creative and come out with unique and differentiated content. As a low-cost strategy, many entrepreneurs are using branded content, and this is saturating the market and creating more competition. Entrepreneurs will publish great content on social only to find that they are only gaining a few likes and not generating the attention and engagement they need to sell product and successfully run their business. To be successful, entrepreneurs need a couple hundred thousand, or millions, of likes to achieve significant business growth.

TikTok is the Latest Dream Machine for Marketers

With global popularity, TikTok is gaining traction as one of the most popular platforms for advertisers. With 15 seconds to capture consumers’ attention, advertisers are leveraging music and parading to something fashionable to develop memorable branded content.

It’s a common human trait that we can receive information faster that we can send it, so in 15 seconds brands have enough time to tell their whole story, brand it, and repeat it umpteen million times. And the best part? It cost literally nothing.

The catch, however, is that to be successful on TikTok, you need to be more creative than the next guy. With so many brands fighting for consumer attention, your content must be differentiated and unique to be successful. So, for all the entrepreneurs looking at low-cost solutions to share their brand message, TikTok is a great option. But you must be that much more creative to succeed.

Fashion is changing rapidly and speed to market is a huge part of this transformation. In the past few years in fast fashion we’ve seen a lot of disruption, decentralization, and Instagram monetization.

Think about the original fashion business supply chain and how it’s been set up with department stores and a push model of the industry deciding what’s available and what we’re going to wear. Everyone was shopping in malls to engage with products.

Today, we’re operating more on a pull model where customers can tell us more about what they want. We’ve seen retailers like Zara, Forever 21, and H&M operate in this model of what we consider fast fashion. The real difference is the speed to market and the time it takes for the production process for that product to make its way to a floor.

Zara has been able to innovate and engage with feedback loops and speed up the process to market. Engaging in smaller batch manufacturing is helpful when you’re competing for space on a manufacturing line. It takes more effort and resources to produce 30,000 garments in one place versus spreading out demand in several factories since you’re competing with other retailers and brands to get manufacturing facility space and capacity.

Using fashion education, you can pivot more quickly when you’re dealing with fewer units. There’s opportunities to use customer feedback to shorten production lead time.There are so many points in the supply chain where, when you’re dealing with less units, it becomes easier for stores to more quickly funnel their product.

In historical department store retail, it could take six to nine months to go through this process. Fast fashion really disrupted that process and we no longer have to wait for the season to end to continue iterating, innovating, and ultimately bring newness on our time.