We get some questions why our T-shirt is priced at 499 DKK. In this post we will lay out our budget to tell how and why we end up at this price. But we will start by comparing our sales price to a branded quality T-shirt sold in a boutique (retail).
Cutting out the middlemen
The big difference between these cases are the number of steps involved. When middlemen (agents, distributors or shops) are added you multiply the price with ~2.7 to get the approximate sales price including taxes.
Our production cost is around 210DKK, making a sales price of:
210 x 2.35 = 499DKK
A branded quality cotton T-shirt have a production cost around 85 DKK, making the retail price:
85 x 2,7 x 2,7 = 583DKK
These are simplified examples and the profits may vary, but it illustrates the consequences of having several steps from production to sales. There are simply more people or companies to take a cut from the sales price.
Even though our production cost is higher, we are able to keep our sales price lower than other brands.
Fig. 1 Comparing to other branded cotton or Merino T-shirts sold through a retail store, approximate distribution of costs and profits.
Distribution of our costs and profit
In Denmark there are 25% tax applied to almost all products from food to clothing. This equals 100DKK of the sales price.
The mayor expense is the Merino fabric itself, costing around 90DKK for 1 meter. Which makes around one T-shirt. Compared to cotton it is around 10-20 times more expensive.
We have chosen to use local production to support the Danish industry, insuring a sustainable, high quality and flexible setup.
The cost of producing in Denmark/Poland is around twice as expensive as manufacturing in the far east, costing around 50DKK
We spend around 90DKK on marketing when selling one T-shirt, this might seem like a lot, but compared to other brands our budget is at a minimum.
We rely on mouth to mouth and recommendation of our products.
Shipping & Warehouse
The cost of shipping varies between 29DKK and 149DKK, depending on the destination. To this a handeling fee and storage at the warehouse is added. Making an average of 50DKK per T-shirt
This doesn't take up much in the budget, as everything is done online with very few employees. There are very few steps from production to sale, minimizing this cost compared to our competitors.
We spend around 10DKK on administration per T-shirt.
Profit & Salaries
As we are still in the start-up phase, we are only paying out minimal salaries. The 109DKK left is invested to improve the products, grow the company and develop new styles.