What a product really costs
Why the factory's price is not the cost, and how the pieces between the quote and your warehouse add up.
The price is not the cost
A factory quotes you a unit price. That price is not what the product costs you. Treating it as though it were is the most common way a range looks profitable on a spreadsheet and loses money in the accounts.
Between the quote and a sellable unit on your shelf there is freight, duty, packaging, and whatever else the route adds. The figure that matters is what arrives after all of it — the landed cost.
pimbo works it out the same way everywhere: landed = unit price + freight + duty on the unit price + packaging + other. Margin is then measured against retail excluding sales tax, because the tax was never yours.
What the quote is quoting
Two factories can send you numbers that look comparable but are not. They are pricing different things.
Always ask which one you have been given. Comparing an FOB price with a CMT price is not a negotiation, it is an arithmetic error.
- FOB covers the goods and getting them onto the ship. Freight, duty and delivery from there are yours.
- CMT covers the factory's labour only — cutting, making, trimming — because you are supplying the fabric and trims. It looks far cheaper than an FOB price. It is not, because your materials are not in it yet.
- Delivered or landed quotes include the freight. These look expensive beside an FOB price and often are not.
Where the surprises come from
The parts that catch brands out are rarely the unit price, because that is the number everyone checks.
- Duty depends on what the product is made of , not on what it is called. A change of fabric part-way through development can move the duty rate.
- Freight is per shipment, not per unit — so the cost per unit depends entirely on how much you order, and a small reorder can cost more per unit to land than the original run.
- Minimums are often per colourway or per fabric , not per style. Adding a third colour can add a whole fabric minimum.
- Sampling is not free , and a product that needs four rounds has spent real money before a single sellable unit exists.
A quote is only true against the specification it was priced from. This is why pimbo locks the spec when costing is signed off: a price agreed against a specification that then changes was never a price for this product.
What to do about it
Work the margin out on landed cost, at the quantity you will actually order, against the retail price you will actually charge.
If that number does not work, nothing later will rescue it. Sourcing the same product from a cheaper factory usually moves it a little; changing what the product is made of moves it a lot.
More documents
- What's in a tech pack The document a factory builds and quotes from, section by section — and what goes wrong when a section is missing.
- Glossary Every word the trade uses, in plain English.