5 Tips To Increase the Gross Profit Margin of Your Brand?

By Maria Pesin | Fashion

Sep 20

First let me tell you what a gross profit margin is.  A gross profit margin is the difference between COGS ( costs of goods sold) and the net sales of your product.  This is an important metric for your business as this will have a direct impact on your bottom line profitability.  That is why it is so important to constantly work on improving your margins.  The following are the 5 tips you should try to increase your profitably:

  1. Economy of scale – As we all know the larger the volume of orders you place the better the price you will get from your factories.  In the first few weeks of selling your line you should start to see certain styles outperforming others.  Then you can direct all of your accounts to buy into these pieces, thus, increasing your cutting tickets and lowering your make costs.
  2. Make sure production is on time – I always pad the deliveries I quote to customers.  I like to give an extra two weeks to the production cycle so that I am on time.  Many times stores ask for an additional discount when you are late on deliveries. So don’t be late. By being later you lesson the time an account has to sell merchandise.  If they don’t sell as well as they should have you could be facing markdown requests.
  3. Wherever you produce your product (from China to the US) you have to contend with shipping from the factory to the warehouse.  This is a place where you might be able to reduce costs. You can decide to boat rather than air. You can have an account with certain truckers where they will give you a better price if you do all your trafficking with them.  Study and research your best options.
  4. You can decrease the duties on your product if you design your products with this in mind.  For example when you design a jacket with different fabrics.  Make sure the chief component to the item has the least amount of duty.  This can reduce your cost dramatically.
  5. Watch your inventory levels.  It is very easy to give away your gains by having leftover inventory from the season and having to sell at a deep discount to get rid of it.  You may want to cut-to-order so that there is minimal stock left after you ship your orders . Even if you do have to place orders with inventory for reorders or new orders try to be as conservative as possible.  You will find you have a healthier business.

There are even other things that will help your margin…choosing fabrics that are in your price range, designing based on what you buyers want, learning what sells and making more styles that are salable.  You want to have a carefully directed margin plan in order to keep margins as high as possible. Good margins and salability go hand in hand.

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About the Author

Maria Pesin knows fashion, especially the business side of the fashion industry. Do you know how Manolo Blahnik got his start in the industry? How he leveraged a paltry 3 grand into one of the world’s most famous luxury brands? While she doesn’t take credit for Manolo’s success, Maria has walked a similar path on numerous occasions. The world of fashion is not silicon valley, and it has nothing to do with Madison Avenue marketing. In this industry there is ALWAYS room for something new and exciting, but you have to have your ducks in a row. If that’s what you need, believe me, Maria is the General Patton of fashion ducks!

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