Wholesale Clothing - Understanding the Pricing Structure
Is it fair to say that the discount clothing industry is incredibly competitive? We think so. Between well-established brick-and-mortar retailers and their online counterparts, consumers now have more choices than ever before. It turns out that discounted pricing structures reflect those choices. This concept is great for those businessmen who buy out wholesale or discounted clothing and resell them to the clients at a great price and make good amount of profit. In regards to the today’s market and economy to go with the inexpensive clothing is the best idea to live a stable life.
So just how do pricing structures work? Much of it comes down to the simple law of supply and demand. Nevertheless, both wholesalers and retailers always need to pay attention to what's known in the business world as 'margin'. A margin is the amount of profit earned as a percentage of the total revenue earned. In the world of clothing, wholesale margins are the primary driving force behind the price consumers pay at the retail location.
Margins and Mark-Ups
A lot of people confuse margins and mark-ups as being the same thing. They are not. And in fact, an online company like UKfashionwholesale.com has to pay very close attention to both. Here is a brief definition of the terms:
• Margin – Think of the margin as how much money is left over after all the bills are paid. We will use small numbers to illustrate. Let's just suppose the entire cost of doing business for one month is £100. If a company takes in £125, it has realised a £25 profit. The margin is calculated by dividing the profit by the total revenue. In this case, the margin would be 20%.
• Mark-Up – The mark-up is the amount of money the wholesaler adds to the price he paid to ensure all costs are covered and profit is earned. Decades ago, the standard retail mark-up was about 40% for clothing. Wholesale buyers would add £40 to the price for every £100 they spent. However, things have changed. The fierce competition brought on by Internet retailing has reduced those mark-ups dramatically.
A wholesale company like ours first takes a look at the amount of mark-up necessary to cover our costs and earn a profit. Then we may adjust the price in order to achieve the margin we desire. As long as we continue meeting our margin goals, we consider the business a success. Having said that, sometimes we have to accept lower margins during down times.
