April 15, 2018
Sorting discarded textiles, sewing, cutting, dyeing, marketing, selling, designing, developing new fabrics, shipping, packing, taxes and still so much more! When you buy a dress from us, you get a bunch of many different things that might not have ever thought of.
Roughly, the TAUKO cost structure of a TAUKO dress 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, I chose the Haiku dress which is, when it comes to the cost division, an average product for us. It is sold for 225€ including Finnish VAT at currently 24%, i.e. 45,00€.
The total production cost of the dress is calculated with 55,40€. A major contributor to it are materials, salaries and other running costs of the sewing and dyeing companies. Other parts are transportation between material providers, production companies and final distributors.
The share for TAUKO is 35,29€, i.e. 15,7% of the retail price. This money covers design and development costs, sorting and research of materials, personnel, marketing and other running costs such as the rent for our studio in Katajanokka. Additionally, we take the risk of overstocking, i.e. of items that we are not able to sell to retailers and consumers.
The retailer margin in the fashion industry is typically set to be half of the retail price excluding VAT. In the case of the Haiku dress, this is 90,73€. This retail structure envisages the shopkeeper to buy in products in advance, and thus taking the risk of not selling the products. With her share, the stockist needs to cover costs for the sales staff, rents, marketing and in case of having also an online platform shipping and delivery service, stocking, product returns, and extended customer support.
It can be discussed in detail still, whether the cost structure is valid or if there is something that should be changed. The production costs can usually be lowered only buy producing bigger amounts, or finding cheaper work and textiles. Our share, including design and development costs can be reduced or increased depending on how many new designs and innovations come along, and these are directly influencing on our marketing and personnel cost. The retail business is changing a lot due to the new culture of shopping more and more online and in big markets. It is expected that the change of the structure will happen there as the channels of selling are changing, but is is yet to be figured out how.
Text by Mila Moisio