The T-shirt: Fashion's Money Maker
While there are many highly marked up items in the fashion world, perhaps the most marked up item is the simple T-shirt. It is the icon for many of all ages to wear. A nice one can be worn just about anywhere depending on the the other attire. They are durable, easily washed and can advertise your likes or dislikes for the world to see. It is worn to make a personal statement many times or to convey something you are not (like, wearing a University of Texas T-shirt to imply you went to school there). I recently had a cap with CA on it. I was in Florida and some guy came up to me and asked me what it meant. Being from California, I said California. Then, he asked if I went to UC Berkeley, I said No. Anyway, wearing a T-shirt can provide discussions about it.
Many of the T-shirts we buy in the US are made in Bangladesh and other third world nations. Labor is dirt cheap and working conditions for the workers are poor. Many of the high end fashion designers have them made there, like H&M, Puma, Calvin Klein, Tommy Hilfiger etc. The basic cotton grown in non-US countries is not Pima cotton, which is produced in the US. Cotton in Bangladesh sells for around $4 a kilo and from that, four T-shirts can be made. Pima cotton is higher quality cotton, it costs $5.50 a kilo. A T-shirt made of cotton and polyester is actually cheaper to make than one that is 100% cotton.
Labor to make them in Bangladesh is about $38 a month for a worker. Two months ago, 1100 people working making clothes died when their building collapsed. In China, the same worker earns around $150. If the Bangladesh worker wages were doubled, T-shirt prices would rise by 12 cents. If your T-shirt has a pocket on it, this increases labor costs per shirt because it requires two more workers for it. Imprinting on the T-shirt runs from a 12 cent cheap ink to 25 cents for more high end shirts.
As to costs to produce a single T-shirt, low end ones cost $1.60, a Tommy Hilfiger runs $5-6. The firms making them in Bangladesh charge 20% to brand names. In one large garment factory in Bangladesh, 160,000 T-shirts are made daily. Their profit margin never is more than 2.5% because the fashion makers push down prices. The most skilled worker in the garment industry is the sewing machine operator who earns between $80-100 a day in Bangladesh. Last year, Bangladesh shipped 22,000 pounds of T-shirts to one high fashion maker, Armani. But many more companies are using the country to produce clothes more cheaply than China.
As to the price, the main reason for differences is only in the brand name, quality differences are minimal for what you get. When you go and buy a Replay brand T-shirt, you will pay $52 for it, so the profit is $45 to the fashion brand. A lower end T-shirt at Aeropostle or Walmart usually runs $12 or so, the profit there is $10. A Tommy Hilfiger T runs around $40, cost to make is $5, so Hilfiger makes a cool $35 profit.
But, before you go and spent money on a T-shirt, I would check your local Goodwill and other second hand stores where they sell for $2-3. Many times, you will find a cool shirt that was not worn or in like new condition. It is amazing what people get rid of. Of course, if you are that rich that it does not bother you to pay $40 for a T-shirt that only cost $5 to make, go for it.
The high markup in T-shirt manufacturing has nothing to do with quality, most are similar in quality. What you are paying for is the "name".