Margin in Clothing Business
Profit Margin in
Clothing Business is 30% to 60%. But, for international and eco-friendly
brands, the margin rate is usually even higher than this.
Not to mention that
if your clothing business idea is unique and has low production costs, you can
easily keep your profit margin starting from 50%.
Overview of Clothing Business in
India
- Investment:
Rs. 10 Lacs (minimum)
- Area
Required: 500 sq ft. to 800 sq ft. (minimum)
- Human
Resource: 10 - 15 skilled people (initially)
- Clothing
Business Profit Margin: 30% - 60%
- Estimated
Earnings: Rs. 7 Lacs to Rs. 8 Lacs (initially)
The profit margin
in the clothing business varies depending on the company's size, production
costs, and pricing strategies.
For example, a
small manufacturer might have a profit margin of 10% -15% while an established
brand might have a profit margin of 50%.
Types of Clothing Businesses and
their Profit Margin
There are many
types of clothing businesses. Some of the business types include:
- Retail
Clothing Stores
- Manufacturers
- Fashion
Designers
- Wholesalers
- Apparel
Distributors
- Importers
and Exporters
Retail Clothing
Stores
Profit Margin - 40%
- 45%
A retail clothing
store is a store where you can buy clothing, accessories and personal items.
These stores carry all types of clothing from many different brands.
Manufacturers
Profit Margin - 10%
- 20%
A manufacturer is a
firm that designs, manufactures and markets its products. It usually makes the
goods or goods for other companies such as retailers or manufacturers. The
goods manufactured might be in their brand name or on contract for other
brands.
Fashion
Designers
Profit Margin - 40%
- 60%
Fashion designers
create and design clothes for the fashion market. They may also work with
production companies and manufacturers to get garments made. The world of
clothing manufacturing is a very large one, but some of the key players
involved include.
Apparel
Distributors
Profit Margin - 25%
- 30%
Apparel
Distributors are distributors that sell to retailers, wholesalers and
manufacturers through their network and supply chain.
Importers and
Exporters
Profit Margin - 15%
- 20%
Importers are firms
that buy products from exporters in other countries. The exporter is the term
used for a firm or individual who exports goods. A company can also be an
importer when it buys a product from other countries like Japan.
Expected Gross Profit in Clothing
Business
Gross profit is an
important metric for businesses because it is one of the most important
predictors of future profitability.
A company that has
a low gross margin may have trouble competing in its industry.
The gross profit of
a clothing business is the difference between the selling price and the cost
of goods sold.
It is calculated by
subtracting the cost of goods sold from the selling price.
The cost of
goods sold is a measure of how much it costs to make and sell a product. It
includes materials, labor, and other costs necessary to produce a product.
For example, if you
sell an item for $100 and spend $50 to manufacture it, your gross profit is
50%. If you sell that same item for $100 and spend $30 to manufacture it, your
gross profit is 66%.
For example, if you
sell an item for Rs.500 and spend Rs.300 to manufacture it, your gross
profit is 40%.
But if you sell
that same item for Rs.500 and spend Rs. 250 to manufacture it, your gross
profit is 50%.
Investment
The minimum
investment required to start a clothing business is
- Rs.
5 Lacs for small retail store
- Rs.
10 Lacs for medium size retail store
- Rs.
15 - 20 Lacs for showroom
- Rs.
20 - 30 Lacs for manufacturing
- Rs.
10 - 15 Lacs for Import-Export
The investment
required for a clothing business depends on factors like:
- Type
of clothes
- Location
- Kind
of products
The estimated
investment can be figured out by looking at various aspects like rent, employee
costs, raw material costs and marketing costs.
Investment in raw
materials includes the cost of fabric, buttons, zippers, thread etc., while
labour costs include the cost of tailors, seamstresses and pattern cutters.
Moreover, one needs
to invest in designing the product as well.
The design of the
product is an important factor that determines if it will sell or not.
The next thing is
investing in legal registrations. Most people take it lightly and then face the
consequences soon.
Thus, do not make
this mistake and get the important legal registrations and licenses before
starting your operations.
Here is a list of
mandatory registrations for clothing businesses:
- Business
Registration
(You can apply for
any of the following depending on your requirements - Private Limited Company Registration Online, One Person
Company, Sole Proprietorship, Limited Liability Partnership, Partnership Firm)
- GST
Registration
- Shop
and Establishment Act
- IEC
Code (Importer-Exporter Code for trading globally)
- Trademark
Registration (for establishing a brand name)
The total
investment in legal registrations for the clothing business will be around Rs.
10,000 - Rs. 25,000.
Get in touch with
our experts to make the legalities easier for you.
The initial
investment required to start a clothing business is high because you need to
buy the raw material and machinery and rent a place for your factory.
There are also
other regular expenses such as electricity bills, transportation etc.
After that, there
are the ongoing costs which depend on the size of your factory, number of staff
etc.
When we are talking
about investment, here are some sources of funds that can be of help:
- Bank
Loan
- Venture
Capital
- Angel
Investors
- Partnership
Funding
- Borrowing
from friends or family
- Self-Funding
- Loan
on Property
- Government
Funding
Area
The minimum area
required for the clothing business is 500 sq ft - 1000 sq ft depending
on the type of business.
For example, a
factory requires more space than a boutique.
The two main
factors that affect the area required for a clothing business are:
- Number
of people who will be working in the office
- Type
of work that will be done in the office
- Size
of Machines
- Inventory
Storage
Keep in mind that a
clothing store needs a lot of space to display all the clothes and accessories.
Additionally,
choosing the right location for a clothing business is crucial in determining
the success of your business.
The following are
some factors to consider:
- Is
the area accessible?
- Is
it near a transportation hub or public transit?
- Will
customers have access to parking?
- How
much foot traffic will there be in this area?
- What
kind of competition does this area have?
- How
much rent does this location cost?
Human Resource
The people you hire
need to be able to handle all the different aspects of the business.
It includes working
with clients, managing inventory, and processing orders.
In fact, these
tasks are not easy and they require a lot of time and effort.
Hence, it is
important to have well-trained and experienced employees in these positions.
Human resources
required for the clothing business can be categorized into two groups: -
- The
people who design and make the clothes.
- The
people who sell the clothes.
With this in mind,
you will need the following people for a clothing business: -
- Designers
- Marketing
managers
- Accountants
- Salespersons
- Merchandisers
- Warehouse
staffs
- Security
Clothing businesses
are known for their high demands for human resources.
For example, a
designer will need at least a few assistants in order to produce quality
designs at scale and make sure that they keep up with the latest trends in
fashion.
On the other hand,
a small, home-based clothing business will require only a few people.
Comments
Post a Comment