Has your cost of goods sold increased?
For many clothing and fashion brands, the answer is yes!
When I speak to prospects about their brand one of the problems I hear about in recent times is the struggle of rising costs of advertising and manufacturing products.
The fact is… materials have increased since the pandemic. Much of the clothing industry is very heavily reliant on the global supply chain. When the pandemic hit, the factories making the goods shut down, as did the ports shipping the goods around the world.
Now at the time of writing this (July 2022), the War on Ukraine is another damaging factor with regards to price inflation across all sectors.
Almost every eCom clothing brand could benefit from finding a couple of ways to decrease cost of goods sold, resulting in more positive margins.
So in this article, I am going to offer a few ways in which you can decrease your COGS and increase your margins for your clothing brand.
Let’s take a look below…
- Find Lower Cost Materials
Try to find lower cost materials. Ok.. pretty obvious one, but needs to be mentioned. When I say find materials at a lower cost, it doesn’t necessarily mean to go for low quality materials. However, new sellers come up all the time or new technology that can provide the same raw material at a lower price.
Therefore I would highly encourage you to find cost effective materials because realistically this is probably your biggest cost and therefore, the first thing we need to look at to increase margins.
- Negotiate For a Better Deal
If you don’t succeed with the first option, perhaps you can try to negotiate a better deal or discount with your current supplier. It’s certainly worth having a conversation to see if there is any room for improving your current deal structure. Maybe free shipping to the warehouse or a reduction in the price based on amount of material, etc. can be included in the deal.
- Use Automation
Use technology and automate labouring where possible: Labour can be a huge part of the COGs, and sometimes technology could help and replace that human factor, reducing the labour costs.
So there you have it… just a few ways in which you can approach the idea of reducing your costs of goods sold.
Pro Tip:
One of the best metrics you should be improving on at every stage of your brand’s business development is your average order value. (AOV). The more transactional value you can acquire per customer, the more profitable you become.
If you can sell more products, you acquire the demand of more materials to develop your product. When you start purchasing materials at scale, you put yourself in a position to purchase from your suppliers at a discount.
By improving your AOV and becoming more profitable, you have more advertising spend to acquire more customers, which results in you needing more materials to service those additional customers… which gives you more purchasing power from your suppliers.
So keep improving AOV.
