An Introduction to Pricing Transparency

An Introduction to Pricing Transparency
Pricing Transparency is a bit of a deep dive into the ethical business world.It is mostly related to accountability; proving to consumers that they’re not being extorted. It also paints a picture of how companies price their goods. Every business needs to make a profit in order to stay in business (and stay financially sustainable). This is a basic fact that seems to have been forgotten in some industries where sale-culture is prevalent.

Sale-culture is the cycle of needing to put goods on discount in order to make sales, thereby only attracting customers in this way and making less money on full priced items. The clothing industry often finds itself in this situation. Based on my personal experience in the fashion industry, I know that some brands use this knowledge in their pricing strategy – initially pricing a product higher than needed because they know it will eventually be put on sale, though they still need to make their margins. (A discussion on sustainable buying and planning another day!)

Knowing this, pricing transparency has been increasingly used in the ethical fashion world to justify price points, known to be higher than fast fashion brands that many consumers have grown used to. It allows companies to point to the quality materials and fair labor that go into producing clothing, while showing that their margin allows them to remain in business.

The brand, Everlane, is a perfect example of this. Under each product, there is a “Transparent Pricing” section, which splits the cost of the garment into five categories: materials, hardware, labor, duties and transportation. They specify the cost of each of those categories and add it up to show the true cost of the garment. Beneath that, they show their final price, compared to a traditional retail price. Therefore, you can simply calculate their margins. Although I wonder how they spend their margin and what they base those traditional retail prices on, I don’t want to take away from the fact that by sharing this information, they are empowering their customers to better know what they’re buying.

Bruno Pieters, the creator of the recently closed high fashion brand, Honest By., took this concept a step further. With his brand, he created the first 100% transparent company. His mission was “to enable our customers to make the most informed choice when they shop.” Each product was presented with an extensive amount of detail including material information, manufacturing details and a full price calculation. This price calculation itemized every element used in the garment’s creation with an associated cost. This included everything from the fabric, wash labels, thread and hang tag chain, to the wholesale and retail markups. They also explained what those markups entail. For example:

“The wholesale mark up covers the costs of Y/PROJECT for staff, research, design, patternmaking, samples and marketing.
The retail mark up covers both Honest by’s e-shop and retail shop costs such as purchasing of new collections, webshop operational costs, rent, insurance, communications, intellectual property rights, maintenance costs, legal and accounting costs and marketing.”

On October 8th, 2018, Pieters announced that the brand would be closing the following Monday. Despite this, he does “feel the Fashion community has made progress when it comes to transparency in fashion.” Everlane and other brands practicing pricing transparency are a testament to this.

Liz Pape, founder and CEO of own brand, Elizabeth Suzann, wrote a conprehensive article about “pricing, consumption, our business, what it means to be a consumer and a producer of things, and lots of stuff in between,” titled Money Talk in January of 2017. This article is a must-read for anyone interested in the business of fashion, or fashion in general. However, I want to highlight her example of the pricing of one of their most popular garments (see visual below).

Liz describes in detail what goes into the cost to produce the garment, as well as what they do with the profit. What made the deepest impression on me was how extensively she discusses the profit in the article. This insight is quite unique unless you are working at a fashion brand and are privy to their finances. You can read the full article.

Understanding how clothing is priced is as important as being able to judge the quality of the material. When companies talk about their pricing and explain their costs, it increases customer’s trust because they’ve been empowered with knowledge. When their values are reflected in the product either in style, quality, or sustainability, the customer feels even better knowing what they’re paying for.

In line with this, UK menswear brand, Ivywake, has announced plans to share their pricing model on their website. Ivywake is already transparent in many respects by sharing where they source and manufacture their products. This increased level of transparency shows the direction that the industry is going in.

Fast Fashion has formed a generation who has bought into the throwaway culture and has devalued the quality of clothing. At the same time, this generation increasingly cares about the environment and sharing truthful information. When products reflecting those values cost more than their fast fashion counterparts, it’s understandable that these customers want to know why. Transparency solves this, justifies it, and often goes a step further to make the customer feel good about their purchase. These feelings create a huge advantage. Brands are picking up on this in an increasingly deeper level and sharing more. It’s an exciting direction for an industry traditionally cloaked in mysterious secrecy.

*Ivywake is a Sustainable Made Simple brand partner. You can support them and us by purchasing Ivywake clothing via the shop page!

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