How to Price a Garment: Costing Basics from the Factory Floor

Pricing is where good products quietly go broke. Founders either guess a price that feels nice, or copy a competitor without knowing that competitor's costs. Both are gambling. The professional way is to build the cost from the ground up, then price on top of it. Let me show you how we do it on the factory floor.

First, the cost to make one garment

Your factory cost (sometimes called the cost of goods) is the sum of everything it takes to produce one finished piece. Build it up piece by piece.

Fabric

Usually the largest single cost. It is consumption × price:

• Consumption is how much fabric one garment uses, including the small amount lost in cutting. Your pattern maker gives you this.
• Price is per metre or per kilo, all-inclusive.

Get consumption right. Underestimating it is one of the most common costing mistakes, and it hides until your bulk fabric runs short.

Trims and accessories

Everything that is not the main fabric: thread, buttons, zips, elastic, labels, hang tags, and polybags. Individually small, collectively real. List every one.

CMT: cut, make, trim

This is the labour and process charge to actually produce the garment: cutting, stitching, finishing and pressing. A factory quotes it per piece, and it rises with the complexity of the style.

Wastage and rejects

No run is perfect. A portion of fabric and a portion of pieces will be lost or rejected. Add a realistic allowance rather than pretending yield is 100%.

Overheads and sampling

Your sampling costs and a share of your fixed running costs have to be recovered somewhere. Spread them across the order so each garment carries its fair share.

Add all of this and you have the factory cost per piece, the real floor below which you cannot sell without losing money.

Then, the cost to land and sell it

The factory cost is not your full cost. Before a customer pays you, add:

• Freight, duties and inward logistics to get stock to you (your landed cost).
• Selling costs: marketplace or payment fees, shipping to the customer, packaging, and an allowance for returns, which are very real in apparel.
• Marketing: the cost of getting each sale.

Now build the price

Only now do you set a price, by applying a margin on top of your costs. A few principles:

• Wholesale vs. retail. If you sell to stores, they buy at wholesale and mark up to retail themselves, often roughly doubling it (a "keystone" markup is 2×). Your wholesale price must still leave you a profit after your own costs.
• Leave room for discounts. Set the full price high enough that a sale or an offer does not wipe out your margin.
• Check it against the customer. The lowest price you can afford and the highest price the customer will pay define your window. If those two do not overlap, the product does not work at this cost. Go back and change the cost, not just the price.

A quick sanity check

For every style, ask: if I sell this at my planned price, how much do I actually keep after all costs, and is that enough to run and grow the business? If the honest answer is "almost nothing", volume will not save you. You will simply lose money faster.

A note on tax

Prices, GST and invoicing have tax implications, and how you show and account for GST affects your real margins. Treat what you read here as commercial guidance. For how GST and income tax specifically apply to your business, work with a qualified chartered accountant. Getting the costing right is your job; getting the tax treatment right is theirs.

The habit to build

Cost every style on a simple sheet before you commit to it, using real numbers from your suppliers rather than hopeful ones. Pricing stops being a gamble the moment you can see, line by line, exactly what a garment costs you and exactly what it earns.