We’re not here to sugar coat things, and we’ve also grown accustomed to hearing it almost every day in our shop: our clothes are expensive! For a lot of our customers, they’re not the kind of pieces you buy on a whim (no matter how badly you wish you could). And we get it. We are not only designers, but also young entrepreneurs (read: not-quite-bank-rollers) and savvy shoppers ourselves.
Now “expensive” is a relative term, what’s expensive to one person might not be expensive to another. And this doesn’t just boil down to a dollar amount, it also takes into consideration what you value. After 8 years of marriage, I have learned that my husband and I “value” different things when it comes to how we spend our disposable income. He loves tech gadgets/toys and I love fashion. Period. Just kidding, I also love good food and wine.
In the name of transparency (or transfarency as Southwest likes to say) we wanted to break down how we generally go about setting the prices for our products, compared to the fashion industry on the whole.
It’s actually rather simple math:
The Fashion Industry Standard (American Retail)
- Industry MarkUp: traditional keystone = 4X cost of goods or 2X wholesale price, luxury markets often implement a triple keystone, which is 300% of wholesale price or 6X cost.
- Industry MarkDown: 25-40% typical sale, up to 50-75% at peak discount (75% is likely the most a company will markdown to break even on the costs of production)
- Our MarkUp: average 2.5X cost (materials and labor)
- Our MarkDown: 15-25% typical sale, 30% peak sale
We’re not the first to share this information, or to set our markups and markdowns this way. Everlane made waves when establishing a transparent pricing platform that demonstrated how they compare to the garment industry around them for every product. This inspired many other ethical designers like myself to share this information publicly.
For our brand, there are a few reasons we’ve come up with this pricing structure. While keystone markup seemed too steep for the retail category we intended to compete in at market, research showed that 2X cost wasn’t quite enough to sustainably grow a product based business. Therefore we settled on a 2.5 initial markup (IMU) average. When it comes to markdowns, despite the increasing trend to discount and price gouge (typically due to overproduction) we try to meet our customers desire for a deal when we can, offering limited discounts while preserving some semblance of a profit for the sake of Gallagher’s flourishing.
At the outset, we desired for Gallagher to be sold in boutiques and larger stores around the country. So we dabbled in wholesale as it fit our business’s needs, timing, and preferences. While we’ve enjoyed the wholesale partnerships we’ve been able to make, in 2020 it became clear that this was not a stable revenue stream for our brand, and with the opening of our own shop, we pivoted away from this pursuit, only maintaining the relationships that we previously had established. While we do not plan on completely closing the door on wholesale, at this time our plan is to keep it limited to relationships that are mutually beneficial.
Direct to Consumer:
Of course, selling directly to our customer base was not only our first choice when it came to revenue streams, but also the one which returns the highest profit for the business. Opening the shop at Selden Market was a concerted effort to double down on this platform locally
While attempting to pay a fair American wage for the production of our clothing here in Norfolk, our prices cannot meet the mass market reach that a brand like Everlane does while paying for large scale production overseas. The reality is that while the average income and cost of living continues to rise in America, the price of most goods now manufactured overseas have fallen drastically over the years. We take great pride in the quality of our goods and the quality of our employees' livelihood and we are not willing to default on either for the sake of a larger market share.
We hope this information is helpful to you as you consider shopping not only with us, but with other small businesses that you support. We wouldn’t be here without you, and we value all your feedback, even if it’s still “too expensive”.