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Pricing Finnish design

WHAT DOES IT COST TO DESIGN, MANUFACTURE AND SELL SUSTAINABLY PRODUCED CLOTHES?

Pricing design may rise questions in many. Are we too used to shirts that cost only 10 € and alienated from the actual production process? What does the pricing look like when the rights of both people and animals are valued and the environment, durability and maintenance are taken into consideration while manufacturing a garment? We opened the prices of Tauko’s dress and Vuonue’s wool beanie.

DRESS BY TAUKO DESIGN

Roughly, the TAUKO cost structure consists of four areas: manufacturing, brand, retail, and VAT. Each of them can be broken down into smaller parts, again with their particular cost structure.

As an example, let’s look at the Crystal dress, which is, when it comes to the cost division, an average product for TAUKO. The dress is sold for 259 euros. The price includes the Finnish VAT, which currently is 24 %, in other words, 50,13 euros.

The total production cost of the dress is 95,90 euros. The most significant production costs come from materials, salaries and other running costs for the sewing and dyeing companies. Other production costs come from transportation between material suppliers, production facilities and final distributors.

After the production costs, Tauko’s share of the price is 71,20 euros, which covers design and development costs, personnel, marketing and other running costs such as the rent for their studio in Helsinki. Additionally, the brand takes the risk of overstocking, i.e. of items that we are not able to sell to retailers and consumers.

The retailer margin for a non-online shop in the fashion industry is typically set to be half of the retail price excluding VAT. In the case of the Crystal dress, this is 104,44 euros. The non-online retail structure envisages the shopkeeper to buy in products in advance and thus taking the risk of not selling the products.

When selling at an online shop-in-shop, such as Weecos, the risk of not sold products is kept by the brand. In the case of Weecos, this is reflected in their share per item: Weecos takes a commission of 20 % as the traditional shopkeeper takes 50 %. Weecos receives 41,77 euros, and TAUKO gets 167,10 euros when selling in Weecos.

WOOL BEANIE BY VUONUE

The wonderfully breathable and soft yarn of all Vuonue's beanies come from the farm's own Finnish landrace sheep and other sheep farms nearby. Only the finest and the softest wools are chosen as the beanie’s material.

The price of wool is generally not profitable for sheep farmers, and therefore, a lot of wool is disposed in Finland. Vuonue wants to tackle this problem and pay the farmers a fair compensation for high-quality wool. There are several phases in the production. First, the wool must be picked up from the farmers, and before sending it to the spinning mill, it must be cleaned. When the yarn returns from the spinning mill, it is washed by hand and dried. The pom-pom's of the beanies are dyed by using colors from nature, for instance, onion shells and mushrooms. After this, the beanie is knitted by hand.

In the final price, the share of manufacturing is 38,37 euros. The cost of one beanie’s wool is about 2 euros, and the spinning with shipping fees back and forth is around 5 euros. The rest of the manufacturing price, in other words, the salary, is 26,37 euros. From this amount, the tax is also taken. Shipping is around 5 euros and the VAT (24 %) of the beanie is 13,60 euros. The marketing, photographing ant other costs are around 5,50 euros.

Weecos takes a 20 % commission, which is 10,53 euros. If the retailer’s share of the price elsewhere is higher, the amount remaining for the entrepreneur is smaller.