We think it is important for you to have a thorough understanding of all the issues surrounding foreign manufacturing of collegiate apparel. A good place to begin is with some insight into the supply chain for imported apparel. A collegiate logoed sweatshirt retails for about $40.00 in most college bookstores. The process of converting the raw material and labor into that sweatshirt is known as the supply chain.
Illustrated below is a “value added” map that follows the steps in the supply chain. Understanding this picture will help you better understand why a garment costs what it does and how the revenue is shared along the process. Each step in the supply chain is characterized by someone adding value. That value includes labor, management, creativity, service and risk capital.
In this example, you will see that our sweatshirt is a “collegiate licensed” product and carries a royalty. This royalty is added to the manufacturing price and is collected on behalf of the university. These royalties help offset the costs of running a university and help lower tuition costs. If a school were not a royalty bearing school, then the retail price would be about $3.00 less.
We’ve heard a few people suggest that raising the wage rates for the sewing workers would not raise the retail price for imported apparel. The economic reality is that any increase along the supply chain will have an impact on every price up the supply chain.
Next month, we’ll explore price elasticity in the collegiate market. Can we raise prices and what will happen if we do?
