The Story Behind the Price

Jan 3

As a buyer and a fashion merchandising graduate, I thought I would share some insight with you. Right now, I’m sure you’re just as tempted as I am with all of these mega sales. You might be wondering how stores can afford to discount so much. Well, I’m here to explain!

Sales floors are the last stop in the retail chain (before customers). The thing to remember is that everyone gets a piece of the pie. I’ve created a super basic chart to explain.


So at this point, you can see that the fabric is sold to a manufacturer. The item is produced and sold to a wholesaler or distributor. From that point, it goes to a retailer and then to you! Obviously this hikes up the price substantially when everyone is trying to get paid. I didn’t even mention the designers , marketing, labor, and transportation at all, which definitely adds up! That’s why some companies go directly to product development (which I’ll discuss next week) to cut out all the middlemen.

So how do the retailers make a profit? Well, the items you buy are generally marked up 50% or more. Specialty stores, like lingerie or gift shops, have a 60% markup. Fashion or trendy stores, like Forever 21, have at least a 70% markup (because you know it’s going to be marked back down at the end of the season).  That means the neon belt that cost you $20 really probably only cost $5 or 6 to produce. This article about jeans pricing  is wonderful in understanding structure (visual below).


Why it may be frustrating to think that the products you love being made for half of what they cost you, that’s the nature of the beast. It’s retail and everyone is just trying to make a profit.

What else are you interested to learn about retail?



  • Catherine Harper

    That’s such a great point, and also shows why companies are quick to send free clothes to fashion bloggers. :) I learned so much about this when I briefly sold Mary Kay, since the idea was to buy things for $1 and sell for $2, to make a profit. The company was making their profit from the consultants, since we had to buy our inventory to sell, so they got their cut first.

    • blackblondeone

      Then you definitely understand markups. It’s just crazy to me how many layers of markups are involved, right?

  • Kim A.

    Lindsay, this was very interesting and I’m glad you put together a post on it. I never knew so many people were involved in the process. You just don’t think about it that extensively when buying something. Hmmm, what happens to the clothes AFTER the outlets? Where do they go from there if they aren’t sold?

    • blackblondeone

      Great question! I know a little bit about this, but I’ll do more research and a post to follow up!

      • Kim A.

        sounds good! i would be interested in knowing.

  • Guest

    I’m very happy to see this discussion growing and I want to contribute a documentary I watched while studying human geography. It’s called T-Shirt Travels (it’s available free here: and it explores the life cycle of clothing that gets shipped overseas. I think that a majority of Westerners feel they’re helping create access to clothing via donation but in fact, it’s nearly obliterated the natural textile and fashion merchandising industry in the selected developing countries. The documentary takes a closer look at this process. Again, great research; love the topics you choose to explore here.

    • blackblondeone

      Wow! That sounds really interesting. I will definitely check it out! Thank you for recommending it!