Why Jeans Cost So Much: Premium Denim Makers Justify Markups

July 8, 2011  |  

By Alexis Garrett Stodghill

Huge price tags on designer jeans are commonplace, a sign of an era in which high-end denim is worn to communicate individual style. We can all remember when paying $50 for a pair of Levi’s was the average, and the vast majority of today’s market still consists of denim priced in that range. Yet, of the $13.8 billion jeans market, an elite 1% of customers are willing to shell out hundreds of dollars for what used to be considered workman’s threads. These jeans consumers — known as the premium denim market — might be interested in knowing what goes into designer brands like True Religion and Gucci that can cost them $200-700.

In exchange for their steep investment, fashion-conscious men and women receive jeans with runway-inspired designs manufactured in the U.S.A. In addition to the higher overhead required to produce clothing in the United States, manufacturers add a tremendous markup to the costs of producing their lines — as much as 260%. The Wall Street Journal reports:

It costs about $50 to make a pair of Super T jeans, True Religion’s best-selling style with oversized white stitching, estimates founder, chairman and chief executive, Jeff Lubell. The wholesale price is $152, he says, and the average retail price is $335. Of course, plenty of these jeans sell at substantially less than full price. […]

As with all fashion, a big part of the price of luxury denim is in the multiple profit margins taken at each level of production. Most any piece of clothing contains parts and services from potentially dozens of providers: from fabric and button makers, to designers and seamstresses, and wholesalers and sales agents. After all this, designers and retailers say the typical retail markup on all fashion items, including jeans, ranges from 2.2 to 2.6 times cost.

The detailed stitching on fancy pockets and funky metal rivets added by many premium jean brands are also rendered by hand in America or Mexico by workers paid far more than their Chinese counterparts. But don’t feel sorry for luxury denim manufacturers. They pass the cost of stylish embellishments right on to consumers. The result? Luxury jean makers receive a 40-50% margin of return on each sale, compared to 20% for regular jeans.

Of course, high-end denim sales are such a small fraction of the overall market that the larger profits garnered might seem necessary. The design expertise, expensive ad campaigns, and hand-rendering of details have to be paid for — and 1% of the market wouldn’t otherwise cut it without huge profit margins built into the prices.

But still, there is some evidence that premium denim makers are using the gullible desires of fashionistas to seem hip to turn a quick buck.

True Religion is planning the release of an even more expensive model than it typically produces called the Phantom, which will retail for as much as $375. At almost 400 bucks, the Phantom will actually lack all the involved embroidery of their best-selling jeans, costing more money even though the labor will be less. It is true that costs like raw luxury denim, which is produced in the United States by well-paid workers, might be a factor in such a steep price. But the fact is this company will be charging consumers more money to do less than it usually does for a similar product.

True Religion knows people will buy these jeans, because they are cool and new, and a fat price tag just makes them cooler to brand-conscious people. Exploiting that fact to make more money points to pure greed. And in America, greater profits are always their own justification.

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