All Pictures are of Gaziano & Girling shoes (and have nothing to do with the post, just for looks)
Not long ago I was able to peruse the internet in the hopes to see what was going on in the minds of others (in regards to shoes of course). There are a few forums that I scour through from time to time to read the gossip and get great pictures from. I happen to stumble across a thread that really made me realize something that I had obviously known about, but had not really put much thought to. This is the fact that 98% of the brands that I, or other people like me (for instance the forums), talk about are all ones that own their own factory (or are bespoke makers). Think about it. Who do I praise on here? G&G, Carmina, Edward Green, Corthay, John Lobb, Laszlo Vass, St. Crispins, J.M. Weston etcâ€¦. They all own their factories, which means that they control everything.
Now, this idea grabbed my attention because I was reading a thread about a brand that does not own their own factory, but makes good shoes, and other people were critiquing them and thus comparing them (in both price and quality) to other brands that did own their own factory. I realized that the idea of comparing a shoe brand that does not own their own factory, to one that does (within the same price-point) is like comparing an apple to an orange. Why? Well, allow me to explain. First off, when you own your own factory you control everything: cost, materials used, QC, channels of distribution, retail price (especially if you have your own store), etc.
This gives you a great advantage and inevitably leaves the decision to make a great or inferior product, entirely up to you (the factory owner). But when you donâ€™t own your own factory, you are left at the disposal of the factory that is making your shoes. You canâ€™t control the factory production cost, unless you were to supply them with all of your desired materials, and you canâ€™t control the quality day in and day out, unless you were to spend a few months there while they were making your collection. Your retail price (to get the same product) will inevitably have to be higher, from a simple mathematical point of view. Letâ€™s look at that below.
For example, letâ€™s take Brand A (who owns their factory) and Brand B (who gets their shoes from Brand A). Letâ€™s say that Brand Aâ€™s production cost is Ł50, their wholesale price is Ł125 and their retail price is Ł325. That means, if they sell their shoes in their own store they sell them for Ł325 and make Ł275 of profit/pair (for this simplistic scenario, letâ€™s assume VAT does not exist). Not bad huh! Now, if they sell their shoes to another retailer, they sell them for Ł125 (make Ł75 profit/pair), and the retailer will sell them for Ł325 and make their x2.6 mark-up. Win-win.
NOW, letâ€™s say that Brand B is small and has to sell his shoes to other retailers to start out. There is an industry retailer mark-up average of x2.5-x2.7, so letâ€™s bear this in mind. That means, if Brand B gets his shoes from Brand A at Ł125 and wants to sell them to retailer X, he will have to add some money on top of that Ł125 wholesale price in order to make anything. Letâ€™s say that he only adds Ł45 (which is a justified amount to stay in business) and that he sells them to retailer X for Ł170. So retailer X buys them, puts a x2.5 mark up and the shoes now retail at Ł425 (the same shoes that retails for Ł325 but now under a different Brand name).
That means because Brand B is a designer getting his shoes from Brand A (a factory owned brand), his shoes are inevitably going to be more expensive to get the same quality as Brand A. A smart purchaser will see this and unless Brand B is offering out-of-this-world design, will just buy Brand A. Therefore, in order to compete with Brand A, Brand B will have to find a factory that can make the same calibre of shoe at a lower production price, but try and maintain the same standard of quality. This is precisely why I did not get my shoes from England, because at the wholesale price they offer, my shoes made by them would retail in the Handgrade price-point, but would only be of Benchgrade caliber. Anyone who knows shoes, would therefore not have purchased my product. And this is why you cannot compare a brand that does not own their own factory to one who does, because the one that owns their factory, has far more control over the end product, in both price and quality and can always undercut even their own clients.
As all of the retail world is like this, from food, to clothing, to cars, to everything, it made me wonder how all of these people could be on this forum making these irrational comments, when in their own sector, they probably have the same issue. Whatâ€™s even worse is when people start comparing factory made shoes to handmade shoes. That is just plain stupid as they are worlds apart, yet I see it all of the time. People if only we used a bit more common sense we would quite possibly be able to answer most of our own questions and understand these things without slagging off scenarios and simple facts of business that I am sure many of us are guilty of. This is business and unless you are too moaning about your toilet paper and the price difference what you probably don’t realize is that many of them are made in the same factory!
|Courtesy of Leffot|