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Retailers vs manufacturers

Retailers are often at odds with manufacturers due to retailers’ desires to appease their customers by selling merchandise at the lowest price.

The majority of apparel production cost is attributed to materials and labor.

Retailers vs manufacturers

In a 2016 article about the true price of manufacturing clothing, Burag Celikian provided the figure of $13.53 for labor and $40 for materials for a cashmere sweater with a retail price of $110. Even though apparel production is very labor-intensive, around the world the actual cost of labor to sew garments, relative to the final retail price, is often a very low percentage.

This is directly related to the wage paid to the people who sew and otherwise assemble the garments, keeping in mind that the United States imports 97 percent of its apparel (AAFA, 2015) and the four largest apparel exporting countries are China, the European Union, Bangladesh, and Vietnam.

As of 2017, the United States imports most of its apparel from China (36 percent), Vietnam (11 percent), India (7 percent), Mexico (5 percent), and Bangladesh (5 percent).

Refer to the table available in the downloads section for wage rates in countries with large apparel manufacturing sectors.

Retailers are often at odds with manufacturers.

This situation is due to retailers’ desires to appease their customers by selling merchandise at the lowest possible price (while still reaping a profit) and manufacturers’ wish to be paid as much as possible for the merchandise they produce. Manufacturing companies, therefore, comply with retailers’ needs for low wholesale prices by hiring a cheap labor force and requiring high productivity while workers are on the clock. Many complex ethical dilemmas result from this tenuous relationship.
The marketplace factors that are driving the need to reduce labor costs include the concentration of retailers and growing global competitiveness. Retailer mergers and acquisitions result in larger retail companies whose market power allows them to pressure manufacturing companies to contain production costs. Rather than the historical practice of manufacturers quoting their costs, retailers now demand that manufacturers meet their often-decreasing cost limits.
When factories cannot comply with retailer demand, they are passed over as retailers find manufacturers willing to accept their orders. As retailing becomes progressively more globalized, competition heightens, fueling initiatives to reduce production costs to improve margins. Product costs can be substantially reduced when employing cheap labor, and retailers and brand manufacturers have increasingly more options when seeking the least expensive labor cost possible. The growing global market for laborers further intensifies the competition for low wage rates.
For more information on the average monthly wage rates of apparel workers please refer to the attached table available for download below.

These situations present opportunities for ethical dilemmas because working conditions and employee compensation are directly related to the costs of apparel products. With relatively low labor costs in newly developing countries, the cost of labor is actually decreasing as a percentage of a garment’s total cost. As apparel manufacturing has moved to predominantly less developed countries, the price of apparel products has fallen and the products themselves have become more available to members of growing affluent and middle-class markets.

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Manufacture and Design Ethics in the Fashion Industry

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