All You Need to Know About Garment Costing and Pricing
Running a successful apparel brand means more than designing cool clothes—it means knowing your numbers. If you’re not dialed into your costing and pricing, your margins can slip away faster than a trendy style goes out of fashion.
Understanding how garment costing and pricing work not only helps you stay profitable in business but also enhances your competitiveness.
In this post, we will dive into what garment costing and pricing are all about and how best to apply them.
Key Takeaways
- Garment costing is figuring out the total costs that go into making a piece of product. It factors in the costs of fabric, trims, labor, logistics, overhead costs, etc. A cost sheet is often used for this purpose.
- Garment pricing, on the other hand, deals with figuring out the right price to sell your products for maximum profit.
What is Garment Costing?
Garment costing is the process of calculating cost and determining the total expense of making a piece of clothing. Often, this cost includes everything from fabric to packaging to labor and more.
It tells you how much it costs to produce one unit of a garment, so you can:
Set the right selling price
Track your profit margins
Negotiate better with suppliers and factories
Avoid underpricing or overpricing your products
What’s Included in Garment Costing?
The manufacturing cost of a piece of clothing is often influenced by the following factors:
Let’s now look at each factor more closely.
1. Fabric Type and Quality
Fabric type and quality will probably account for the largest chunk of your production costs, taking up to 60–70% in some cases.
As for options, you can select from a wide collection of fabric types, including cotton, polyester, silk, etc.
2. Trims and Accessories
Trims and accessories are another set of cost components that will take up a sizable amount of your budget allocation. They include zippers, buttons, threads, labels, tags—all the small things add up.
In the cost sheet, trims and accessories are tracked as individual line items to ensure each expense is itemized and accurately accounted for.
3. Labor Costs
Labor includes cutting, sewing, finishing, and inspection. Costs vary widely based on where the factory is located or if outsourced to a third-party service provider.
4. Production Quantity (MOQs)
The economies of scale play a big role in the apparel industry. Essentially, the more items you produce or purchase, the less you would pay per unit. Mass production of labels, packaging materials, and custom items can further reduce per-unit costs due to economies of scale.
5. Design Complexity
As a rule of thumb, the more complex your designs are, the more it will cost to produce them.
6. Wastage Allowance
No matter how efficient your production process is, you will eventually end up wasting materials. The goal is to keep the waste as low as possible, to keep your costs low. Technically, this is known as waste allowance.
7. Shipping & Logistics
This accounts for the costs of bringing raw materials into your warehouse and getting the finished product to your customers. Shipping and logistics are critical parts of the supply chain, directly impacting both cost and delivery timelines in garment manufacturing. It can also include freight fares and import duties.
Why is Accurate Garment Costing Important?
Setting aside time to accurately calculate your costs is anything but fun. It can be a harrowing task that can drag on for hours on end. So why bother?
1. Helps You Price Smart
You can’t set the right price if you don’t know your operating expenses. Costing helps you build a pricing strategy that protects your profits.
2. Keeps You Profitable
Garment costs can change due to fabric prices, shipping, or labor. Regular costing ensures you’re not losing money without realizing it.
3. Allows You to Plan Efficiently
Whether you’re sampling or doing bulk production, knowing your cost per unit helps you plan your inventory, cash flow, and markup.
4. Builds Transparency
A well-prepared cost sheet improves communication with your team, suppliers, and partners.
What is a Cost Sheet?
If you are going to cost your products correctly, you need to know how to build a cost sheet. A cost sheet is a document that lists all the costs involved in making a specific garment. It shows how much you’re spending on fabric, labor, trims, packaging, and more. Cost sheets can be created using different methods to suit various business models and ensure accurate cost analysis.
You can use it to:
Set accurate prices
Track your profit margins
Compare costs between styles or seasons
Negotiate with suppliers and factories
What Should a Cost Sheet Contain?
A cost sheet should capture the cost of:
Raw materials – Fabric, labels, zippers, and other accessories
Labor
Overheads
Packaging materials
Wastage allowance
Logistics and duties
Costing Sheet Example
Here’s a snapshot of a costing sheet in its basic form:
Garment Costing Methods
While there’s no one-size-fits-all approach to costing garments for maximum profitability, there are proven methods and techniques that you can use to figure out the best pricing strategy. They are as follows:
Standard costing
Activity-based costing
Process costing
Job order costing
Target costing
1. Standard Costing
The Standard Costing technique is very straightforward. It involves evaluating production costs based on historical data and expected inputs. It factors in variables such as fabric cost, labor, trims, overheads, etc.
It is fast and simple, and useful for repeat styles.
2. Activity-Based Costing (ABC)
Activity-Based Costing is a lot more detailed compared to standard costing. In this arrangement, costs are broken down by activity, then linked to products based on how much of each activity is used. So if one garment needs more embroidery or handwork, it’ll show a higher cost.
3. Process Costing
Used when identical garments are produced in large batches or continuous flows. It’s done by dividing the total production costs by the number of units made.
For example, if you spend $10,000 to make 1,000 T-shirts, each one costs $10.
4. Job Order Costing
The Job Order Costing technique will best suit you if you produce customized orders in small batches. It works well for special collections or sampling, but can be time-consuming.
5. Target Costing
For target costing, you start with a target retail price and desired profit margin, then work backwards to set your maximum production cost.
With this method, garments are priced by determining the final retail price first and then subtracting the profit margin and production costs to ensure profitability. It offers better costing control, but can limit your creative input.
How to Minimize Production Cost and Maximize Profits
Making great clothes isn’t enough—you need to make them profitably. If your production costs are too high, your profits shrink. If you’re not keeping an eye on both, you could be losing money even while making sales.
So how do you keep production costs at the barest minimum while at the same time maximizing profits? Here are some creative ways to go about it.
1. Optimize Your Fabric Usage
Fabric is usually the biggest cost in garment production, and could account for up to 70% of your entire costs.
What can you do to cut costs on fabrics?
Use markers effectively.
Design with fabric-saving techniques (like reducing panels or seam lines)
Buy in bulk to get better rates
Choose fabric widths that reduce leftovers
2. Simplify Your Garment Designs
Producing complex garment designs will only add to your marketing costs. So, if you can, keep things as simple as possible. You will spend less and make more – if you position your brand appropriately.
3. Improve Production Planning
Poor planning leads to last-minute orders, overtime pay, and missed deadlines. To avoid this dilemma:
Plan ahead for fabric and trims to avoid air freight
Consolidate orders to reach higher MOQs (and lower unit cost)
Use a reliable production calendar
4. Streamline Your Supplier Network
Having too many suppliers often means higher prices and inconsistent quality.
Here’s what you can do about it:
Build long-term relationships with a few trusted vendors
Negotiate better rates for repeat orders
Work with suppliers who can offer multiple services (fabric + trims + cutting)
Pricing Your Products Correctly
It’s not enough to know what it costs to get a product off a production line – it’s important to know how to price it correctly to make the most profits without scaring customers away with exorbitant prices.
In other words, it’s about finding that sweet spot—where your prices cover costs, bring in profit, and still make sense to your customers.
Here’s a breakdown of the steps to price your products correctly:
Know your total costs
Define your pricing goals
Choose a pricing strategy
Factor in all sales channels
Test, learn, and adjust
Best Practices in Garment Costing and Pricing
To achieve maximum profitability, fashion companies must adopt best practices in garment costing and pricing.
This starts with using up-to-date and accurate data to calculate the total cost of each garment, including all direct costs like raw materials and labor, as well as indirect costs such as overhead and marketing expenses.
Leveraging garment costing methods, such as standard costing, activity-based costing, and target costing, enables businesses to determine the most effective pricing strategy for their products.
Regularly reviewing and updating cost sheets ensures that pricing remains competitive and reflects current market conditions.
Effective cost control and production efficiency are also essential; by streamlining processes, reducing waste, and optimizing resource allocation, companies can minimize production costs and protect their profit margins. Staying proactive with these best practices allows fashion businesses to respond quickly to market changes and maintain a strong position in the apparel industry.
Gaining Competitive Advantage Through Costing and Pricing
Gaining a competitive edge in the apparel industry requires a strategic approach to both costing and pricing.
Fashion companies that deeply understand their total cost structure, using robust garment costing methods, can set prices that maximize profit margins while staying attractive to customers. Cost control and production efficiency play a crucial role; by streamlining operations and minimizing waste, businesses can reduce production costs and reinvest savings into growth initiatives.
Additionally, leveraging data analytics and ongoing market analysis allows companies to fine-tune their pricing strategies and respond quickly to shifts in the competitive landscape. By consistently optimizing costs and pricing, fashion businesses can achieve higher profitability, stand out in the market, and secure long-term success.
Make Costing Easier With Uphance
Let’s be real — managing your costing methods manually is tough. You are better off using an automated system like Uphance, designed uniquely for apparel brands. With Uphance, you can:
- Manage BOMs (Bill of Materials) with real-time updates.
- Keep an accurate track of your costs.
- Handle Weighted Average Costs (WAC) history.
- Manage labor costs and vendor services.
- Monitor margins by product, channel, or customer
And so much more. Curious to see if Uphance is a good fit for your business?
Contact our sales team right away.
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