How can (eBay) sellers actually make a profit on extremely low priced NWT items?

Discussion in 'Classic Menswear' started by CashmereLover, Feb 11, 2010.

  1. CashmereLover

    CashmereLover Senior member

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    I don't really get it. I know there are fakes out there, but let's stick to what we can assume to be legit clothes. For example, I wonder how a seller can make a profit on e.g. a retail $895 RLPL sweater, when the asking price is about $200? How come Ralph Lauren is willing to sell such a sweater for less than $200 to those eBay sellers?

    Recently I've seen the famous RLPL cable knit sweater end up on eBay, here's an example. I've seen it in orange for even less, it was below $200. Heck, when I saw it on ralphlauren.com last year they had it on sale for about $400 or so.

    Clearly I know nothing about retailing, so I'd appreciate some simple price reasoning here... of course though I do know the simple principle of asset and market.
     
  2. luciosilla

    luciosilla Active Member

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    I'd be curious to know myself. I bought a couple of Hermes ties from an eBay dealer for something like $60 each, and one of them struck me as being "off" - don't know whether it was because it was a fake or because it was defective. The thing looked legit (much more so than an Hermes fake I bought in Shanghai), but the interlining was significantly warped.
     
  3. aj_del

    aj_del Senior member

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    A Cucinelli cable knit sweater which is quite similar to the one in your ebay link is on sale for 295 in the B&S forum. I am sure that the retail of the Cucinelli would have been even higher than the RLPL one.

    Another example, a 4495/4695 USD RLPL cashmere SC on sale for 600 in the B & S forum.
     
  4. Mark Seitelman

    Mark Seitelman Senior member

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    I don't really get it. I know there are fakes out there, but let's stick to what we can assume to be legit clothes. For example, I wonder how a seller can make a profit on e.g. a retail $895 RLPL sweater, when the asking price is about $200? How come Ralph Lauren is willing to sell such a sweater for less than $200 to those eBay sellers?

    Recently I've seen the famous RLPL cable knit sweater end up on eBay, here's an example. I've seen it in orange for even less, it was below $200. Heck, when I saw it on ralphlauren.com last year they had it on sale for about $400 or so.

    Clearly I know nothing about retailing, so I'd appreciate some simple price reasoning here... of course though I do know the simple principle of asset and market.



    RL, and other manufacturers, sell thousands of goods to jobbers and other middlemen. RL sells such goods in lots at low prices.

    Essentially, the goods are sold for a low price because:

    1. RL needs to clear-out old inventory; this is a continual process for a large manufacturer;

    2. RL has only odd-lots and small numbers of this inventory;

    3. RL has either surplus inventory or orders which never shipped (e.g., RL's customer either failed to pay, its credit rating diminished, or it went out of business. Or RL's customer refused the orders due to either irregularities, late delivery, etc.);

    4. The goods are either seconds or irregulars; the irregularity either may be unnoticeable or glaring;

    5. The goods are made for the off-price market and are not of the same quality and workmanship; and

    6. The goods are unsellable (e.g., a purple cotton suit).
     
  5. entrero

    entrero Senior member

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    I always thought these sellers were an exotic breed living in outlets...
     
  6. holymadness

    holymadness Senior member

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    It's not surprising. I've seen 100% cashmere RLPL sport coats for €400 at the outlets. A subsequent visit to the actual RL boutique showed that the retail price was €2500.

    If there's anything that should shock you in all this, it's the insane markup brand names put on their products. The prices you're used to in B&S and on eBay are still at least 2x the cost of production, so that even if the item was sold for less than that, the company continues to turn a profit.
     
  7. Wicky

    Wicky Senior member

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    It's not surprising. I've seen 100% cashmere RLPL sport coats for €400 at the outlets. A subsequent visit to the actual RL boutique showed that the retail price was €2500.

    If there's anything that should shock you in all this, it's the insane markup brand names put on their products. The prices you're used to in B&S and on eBay are still at least 2x the cost of production, so that even if the item was sold for less than that, the company continues to turn a profit.


    +1 I was told on more then one occasion that in the high end stores the mark up is 2.5 or 3 times the cost price which the store pays. A USD 4,000 Attolini suit would thus for example have a cost price of USD 1K. Hence, they can afford to loose out now and then. Better to break even or loose out some money then nothing at all.
     
  8. CashmereLover

    CashmereLover Senior member

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    Very interesting replies, especially from Mark Seitelman. I guess my idea of production costs was (and still is) too vague. I tend to think; as e.g. RLPL and many Italian brands are actually made in Italy, it requires relatively high salaries for those who make the clothes (comparing to clothes made in e.g. China, India etc.), thus contributing to a relatively high production cost.

    The cable knit sweater was just an example, I'm equally surprised to see fine $4495 RLPL cashmere sportcoats where the seller is asking maybe $800.

    I also agree with holymadness, in some cases the insane markup is shocking. E.g. I bought a $650 RLPL long sleve polo shirt, paying $188, which still was a lot (although it's OK comparing to RL retail prices in Europe). I also think it's insane to pay $895 for thin, 1-ply cashmere sweaters.
     
  9. knittieguy

    knittieguy Senior member

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    An interesting aspect of the clothing business is that when a manufacturer assigns a retail price to a sweater of, say, $400, they might actually be hoping to get an average retail price for that garment of, say, $231. They anticipate that a certain number will sell at full price to people who don't care about price or those who want to be first or want a particular color or don't have time to shop around; and a certain number will sell to bargain hunters at a lower price on sale in the store; and a certain number will sell through the outlets at an even lower price; and a certain number will sell at break-even or even a loss to a bulk liquidator when the manufacturer needs to get rid of them to make way for next season's merchandise. They average out all of these sales prices going in to figure out the profit they expect to make on that piece of clothing coming out. So when you buy something at full retail, it is a bit like being a walk-up purchaser at an airline counter; you will pay a higher price than other passengers on the same airplane. The airline is trying to get the highest average per seat.
     
  10. SimonC

    SimonC Senior member

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    +1 I was told on more then one occasion that in the high end stores the mark up is 2.5 or 3 times the cost price which the store pays. A USD 4,000 Attolini suit would thus for example have a cost price of USD 1K.

    Absolutely, and as stated the manufacturer works on a similar multiple - hence the actual cost of production of an item could be as low as 5-10% of retail. For pure fashion items it's even higher (shops often pay 20% of retail) because they'll sell in low volumes, and at the end of the season are worth very little.

    I tend to think; as e.g. RLPL and many Italian brands are actually made in Italy, it requires relatively high salaries for those who make the clothes (comparing to clothes made in e.g. China, India etc.), thus contributing to a relatively high production cost.

    I think you'd be surprise how little the salaries for the employees who make this stuff is. A good example is a suit I purchased recently (full pictures / details to follow in another thread) which was machine-made but with 4 hours of hand labour in it. That's enough to do the buttonholes, pick stitching, canvassing etc, but would only be $40 at $10/hr on a $k suit.
     
  11. aj_del

    aj_del Senior member

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    That's enough to do the buttonholes, pick stitching, canvassing etc, but would only be $40 at $10/hr on a $k suit.

    A Saint Andrews made RLPL SC has only 40 USd worth of hand labour in it ? [​IMG]
     
  12. TwoStep

    TwoStep Senior member

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    Is it for the same reasons mentioned above that shopthefinest can offer such good prices?
     
  13. furo

    furo Senior member

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    Another example, a 4495/4695 USD RLPL cashmere SC on sale for 600 in the B & S forum.

    Wow, now that's what I call a good deal!

    (shameless, yes, I know)
     
  14. Wicky

    Wicky Senior member

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    A Saint Andrews made RLPL SC has only 40 USd worth of hand labour in it ? [​IMG]

    This I sincerely doubt.

    I just recently bought a Cesare Attolini suit in Rome, sleeves obviously unfinished. Store would take care of this after adjusting sleeve, pants etc. all at proper lenght. Buttonholes would be done by hand. I inquired what the costs of this would if I had other jackets that needed to be done and was told this actually is quite some work and the costs would be approximately EUR 25 per handmade buttonhole. So 4 functional buttons on each sleeve would be EUR 200!!
     
  15. aj_del

    aj_del Senior member

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    Wow, now that's what I call a good deal!

    (shameless, yes, I know)


    You should really offer me a discount for the free advertising [​IMG]
     

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