What does that $14 shirt really cost?

From the archives: Bangladesh disaster raises tough questions about cheap clothes

Photo illustration by Lauren Cattermole. Markup based on selling price.

Photo illustration by Lauren Cattermole. Markup based on selling price.

Thursday marks the one-year anniversary of the Bangladesh factory collapse that left more than 1,100 people dead. The following story on the real price of low-cost apparel was originally published May 1, 2013:

Before last week, Loblaw’s Joe Fresh was known mostly as a hot spot for cheap, stylish clothing. Few customers likely cared how the clothes were made. That all changed with the deadly collapse of an eight-storey factory complex used by the retailer in Bangladesh. Hundreds of people are dead, and the owners of the complex—and the factories within it—that was reportedly built without proper permits, have been arrested on charges of negligence. Bangladesh’s government has vowed to inspect every manufacturer in the country.

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The worst industrial accident in Bangladesh’s history offers an uncomfortable glimpse into the fast-growing garment industry there, and the treatment of its workers. According to a 2011 report by the consulting firm O’Rourke Group Partners, a generic $14 polo shirt sold in Canada and made in Bangladesh actually costs a retailer only $5.67. To get prices that low, workers see just 12 cents a shirt, or two per cent of the wholesale cost. That’s one of the lowest rates in the world—about half of what a worker in a Chinese factory might make—and a major reason for the explosion of Bangladesh’s garment industry, worth $19 billion last year, up from $380 million in 1985. The country’s 5,400 factories employ four million people, mostly women, who cut and stitch shirts and pants that make up 80 per cent of the country’s total exports.

For that $14 shirt, the factory owners can expect to earn 58 cents, almost five times a worker’s wage. Agents who help retailers find factories to make their wares also get a cut, and it costs about $1 per shirt to cover shipping and duties. Fabric and trimmings make up the largest costs—65 per cent of the wholesale price. Toronto-based labour rights activist Kevin Thomas says wages ultimately get squeezed most because businesses can easily control them, unlike the price of cotton or shipping.

A cost breakdown only partly explains the maze of relationships in the garment-supply chain. The retailer H&M, which had no connection to the collapsed building, works with 166 different factories in Bangladesh. It has published its supply chain, listing every factory around the world that makes H&M clothing in an effort to prove what most major stores claim: that it knows where its clothes come from. But according to observers, many don’t. Though most brands have a regular stable of factories, they may contract hundreds more for short stints. “It would be a very high risk to have a limited number of suppliers,” says Adriana Villaseñor, a senior adviser with the global retail consulting firm, J.C. Williams Group. Smaller factories often take on more than they can produce, Thomas says, and then subcontract later on—without the retailer’s knowledge. This week, Wal-Mart said it had “no authorized production in [the collapsed] facility,” but added that if unauthorized production were discovered, it would take “appropriate action.”

Amid mounting protests, both in Bangladesh and abroad, and calls for boycotts, retailers have pledged to improve working conditions. Primark, a U.K. chain that made goods in the ruined factory, and Loblaw Companies Ltd., have said they will compensate victims’ families. But Bangladesh is just one country in a vast supply chain. H&M, for instance, uses hundreds of other factories, including 262 in China. In Vietnam, workers make only slightly more than in Bangladesh: 14 cents per shirt. Real reform will mean paying a lot more than $14 for a shirt.




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What does that $14 shirt really cost?

  1. I would buy the same shirt for $20 (or more) over the $14 shirt if I knew the $6 difference was going to labour. I wish I had this choice when I purchase clothes – what the breakdown is, and how much goes to labour.

    • So each time you buy a $14 shirt, cut a cheque for $6.00 to a charity in the country that the shirt comes from.

      • Always a simple solution to a complex question from the right and the corporate apologists. The bad thing about these simple solutions is that they are invariably wrong.
        Cutting that cheque would not improve the lot of the slaves who work for that industry. Just as with the so-called “war on drugs” as long as there is a demand there will be a criminal element who will supply.

        The problem could be solved quite quickly if those who actually funded and supported this cruelty just stopped feeding their addiction. As the corporate robots like to keep reminding us let the market decide; anyone who buys stuff at from these producers should be exposed and ostracised as an enabler of greedy murdering parasites. If one can be accused of being a terrorist simply by asking a question about pipelines, or enabling the pornographers by questioning a government motion; then surely it is perfectly okay to accuse people who actually buy cheap shirts of enabling murder as well as facilitating unemployment in this country?

        • I doubt those people were forced to work there. Obviously it must have been better than their other choices or they wouldn’t have done it.

          • Another simple approach from someone who hasn’t a clue. I’ll bet you think all those sex workers are doing what they do because it’s better than their other choices too?
            Choice doesn’t come into it if the alternative is death.

          • May I recommend the book “Half the Sky” by Nicholas Kristof and Sheryl WuDunn.

      • Charity is not as effective to reducing poverty as increasing wages is.

    • You do have a choice – buy Made in Canada/US/Europe then.

      • so the workers in Bangladesh starve to death instead Why not improve their working conditions by telling the owners of the factories improve the working conditions or no contract

  2. “Shopping For Sweat”
    ‘The human cost of a two-dollar T-shirt’
    by Ken Silverstein : Harpers Magazine January, 2010
    Great article. Reveals what garment workers have to endure in order to survive.

  3. Before last week, Loblaw’s Joe Fresh was known mostly as a hot spot for
    cheap, stylish clothing. Few customers likely cared how the clothes were
    made. That all changed with the deadly collapse of an eight-storey
    factory complex used by the retailer in Bangladesh

    ***

    This passage contains several glaring errors. For starters, the words stylish and changed are misused.

  4. This article is contradictory. “Real reform will mean paying a lot more than $14 for a shirt.”
    Why? You’ve clearly shown that labour costs could double or even go up by eight times and still be under $1. The only thing that’s preventing this is greed.

  5. I don’t math for a living, so please correct me if I’m wrong…. but that appear to be a +146% markup, not +60%, no?

    • 60% is percentage of total retail cost (approximately) that was added by the retailer; the $5.67 wholesale cost is 40.5% of the retail cost. It’s not “profit” though, as retailers have their own overhead costs, which are not shown here.
      Technically, your use and understanding of the term “markup” is more correct; the usage here is a(n incorrect) colloquialism.

    • Thanks for the feedback, Shauner – the markup here was calculated based on the selling price. This was indicated in the print issue but got accidentally overlooked in the digital version – I’ve added it now.

      • Last time I checked that was called profit margin, not markup.

        • “Gross Profit” to be exact; and it certainly is not a mark-up as others have pointed out! Would be nice if reporters could get their words right, as it mitigates the outrageous situation in the retailers favour! YIKES.

  6. Now do the same for a $ 40.00 shirt made with a .24 labour cost (China) and you’ll see that the markup is closer to 80 % !

    Bottom line is the consumer goes where the lowest prices are, destroying Canadian jobs in the process.

  7. No, real reform will mean paying the same, but ensuring that labour are rewarded fairly & the rest of the supply chain (including retail management) is squeezed a little bit more.
    the Bangladesh Government should also be threatened with sanctions unless the spoils of this exploitation are spread more evenly!

  8. Thanks for the story. . Bangladeshi garments are booming with the cheap labor and interesting is the workers who are giving there labor 10 to 12 hours everyday is getting nothing. they are mostly woman and 95 percent of the garments workers are suffering from malnutrition. the world knows the workers were jobless and they cloud be the burden for the country and the world as well. now they making cloths at a cheapest price but they never have any Chance to wear a good cloth .

    i think leaving Bangladesh would not be a good solution for the developed countries . making a good environment inside the factories is a challenge but you educated and rich people take the challenge to save the lives of the poor workers .

  9. We have a similar problem with a company in the UK called Primark. People see cheap stylish clothes and don’t question why the items are so cheap. A lot of people don’t actually know the horror that is behind their bargains. But then there’s the loophole of people not being able to afford more expensive clothes, and I am guilty of this. If I see a dress I love for £50 and see a similar dress in Primark that is £10 I have often plumped for the £10.
    __________________________________
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  10. Is everybody forgetting that the factory owner in Bangladesh had an illegal building? It was only supposed to be 5 stories, but it was actually 8 stories. Which means the engineering was woefully inadequate. How on earth does Loblaw’s have responsibility for THAT??? Loblaw’s did not own the building, and only contracted the building’s owner (he wasn’t on Loblaw’s payroll). So, besides being guilty of hiring a fraudster as a contractor, what is the real guilt of Loblaw’s?

    As for the rest of this media hype over wages and such, somebody please translate the 2c Cdn per shirt (guesstimate) into whatever currency Bangladesh uses. And then compare that to the average Bangladesh wages. Are they REALLY getting ripped off?

    I have many Filippino friends, and the exchange is about 42:1 — $1 Cdn = 42 pesos Fil. The average wage in the Philippines is about $5k pesos/mo. Which means that Filippinos here in Canada can send $100 Cdn/mo back home (negligible, to us) hugely bolster their families’ incomes.

    So, what’s the exchange rate to Bangladesh?

    Thus, why the self-righteous condemnation? The practices themselves aren’t necessarily immoral; it’s the practices of the building owner that are illegal and immoral! Should Loblaw’s have done a bit more research prior to contracting this shyster? Probably. Does this shyster’s actions reflect on Loblaw’s? Yep. Is Loblaw’s responsible for this shyster’s actions? Not likely!

    As far as cheap labor goes, does nobody remember Canada being an exporter of goods when our dollar was devalued? Why did that happen? Because others could get stuff from us cheaper than from their home country(ies). How is this any different?

    • Finally someone who’s using his head.

  11. their bottom line is that better working standrds would cost US more. how about cutting a small slice of that HUGE proffit margin the retailers have, the diffrerence between 14$ and 5.67$…?

  12. I prefer quality over quantity and many years ago when most of our cloth was made in Canada I was happy. Now I find it is cheap, thin cotton wear for the most part, made anywhere else but Canada. I think “layering” is a a fashion driven scam and I don’t believe this is purely consumer driven. International distributors are making a bundle. In the long wrong everyone could afford good quality t-shirts if workers were paid appropriately to make it in Canada in the first place.

  13. What does that moral indignation really cost?

    Forty years ago India was on the verge of starvation on a massive scale. Twenty years ago, Thai families had found a solution to their little girls’ grim future: they sent the girls to the cities for prostitution.

    Bangladesh is not a totalitarian country. If people are working in those factories it is because the factory is better than the other choices available. “Some choice,” you say, “to work in a sweat shop.” If they had a better alternative, they would take it.

    It is a shocking, possibly disillusioning truth but it is a truth that comes with hope. Here, as everywhere, the natural progression is to improvement. Once the workers learn how to show up on time, follow a set of instructions, strive for a quality product and other factory skills, they will be more valuable. Wages and conditions will improve. (Or a competing factory will start nearby.) They always do.

    Meanwhile, by all means, do those little things that help as long as your attention span lasts. Shame the Bangladeshi government into better or less corrupt law enforcement. Give to organizations like the MCC or World Vision that will improve the local alternatives and help the locals adapt to the modern world. There is a lot of good that can be done in the short term.

    In the long term, know that things are already improving and will improve as long as we don’t “DO SOMETHING” like boycott Joe Fresh and ask them to shut down the opportunity for progress.

  14. This is such a cute but misleading story. You forget the retailers receive several thousand pieces (hence the low cost) at one location, then distribute (employees, shipping, wharehouse, containers), their retail stores receive (employee), display and store (employee) and sell. Then there is theft allowance, and the make-up for unsold merchandise, other overheads and finally some profit. Stop simplifying reality to write a point of view justifying story!

    • You aren’t wrong, but EVERYTHING will usually subdivide further and the info is still probably worthwhile.

  15. Thank you for clarity HS…its hardly profit when you subtract one from the other Tudor, retailers have costs to their operations.

  16. Before we get too excited it would be interesting to see the breakdown for a $20 or $50 shirt made in Canada. Materials would probably be higher, given better quality; shipping might be less, and so on. I’d like to know what percentage of the overall price of the shirt is labour. $0.12 of $5.67 is slightly over 2% of the selliing price. Do Canadian workers get a bigger percentage of the selling price of a Canadian-produced shirt?

  17. Are these guys not the same as those folks let into Canada by Harper and the conservatives because they have money and are entrepreneur so they can buy slum property and run down malls that fall down and kill hard working Canadians?

  18. Canadian media has covered a breakdown of the costs of a polo shirt. They have shown that a 14 dollar polo shirt costs USD 5.67/ per piece at a Bangladesh factory. I have no idea about the weight of the polo shirt. Therefore I am unable to share an open cost breakdown with the readers. But I am more than happy to share a cost of a denim shirt made in Bangladesh.

    A shirt requires fabric. At an average, 1.90 yards is needed for a long sleeve shirt with pockets, based on the US and Canadian sizes. The fabric price for denim is approximately USD 2.15/yd. This brings the fabric costs to USD 4.09/pc. The accessories for most of the brands are nominated and therefore per piece accessories costs would come to approximately USD 0.85-USD 1.00/pc. On top of this, the denim shirt would have to be washed. That would add another USD 0.10/pc-.15/pc depending on the required washing effect. After that, last but not the least, the CM (cutting and making) would come to around USD 0.90/pc. This would bring the FOB (freight on board) cost to USD 6.14/pc.

    Let’s suppose the order is of 80000 pieces and is placed to a factory, which can only produce 80000 pieces. The factory would have to have at least four lines with 500 workers and it would also have to work for at least 10 hours a day for 26 days in a month. That factory would, most possibly produce around 770 pieces of shirts per line per day bringing the end of the day total to 3077 pieces. The factory costs of these 500 workers would be around USD 30000. That would bring the average salary to USD 60.00 at an average with overtime. Per piece cost of labor would then stand at USD 0.38/pc. The owner would be left with USD 0.52/piece. From this, the owner would probably take PC (packing credit) against which 1.0% from the FOB would be deducted. He/she would have to pay the utilities bill, rent, head office, marketing expenses. While the utilities and rent would come around USD 8750.00, which would mean another USD 0.11/piece, the head office costs and marketing costs would come to around another USD 8750.00 (USD 0.11/piece). From that USD 0.52/Piece that the owners retain, or rather that half a cent that we get from the buyer, we end up having USD 0.27/piece in reality. This too goes towards funding the next letters of credit (LCs), the next shipment and that too, if the manufacturer does not incur any discount or airfreight.

    Therefore, economists like Jagdish Bhagwati who think that it’s only a localized issue and the margins are not even in discussion, would have to rethink the problem.

    http://www.thefinancialexpress-bd.com/index.php?ref=MjBfMDVfMDVfMTNfMV8xXzE2ODQyNw%3D%3D

  19. City Of Toronto imposed a plastic bag tax why couldn’t they impose a tax, let’s make it a flat $5 on all clothing made in third world countries and those tax $$$ would go directly to welfare programs in the city. On a monthly basis companies like Joe Fresh would send a cheque to a local charitable orgs like OCRAP, et al eliminating the possibility of the politicos and beauracracy at silly hall getting their hands on it.

  20. Perhaps Loblaws should be required to rename their line Joe Flesh. That just might serve to remind us all of our social responsibilities. Or would that qualify as unreasonable recompense? I doubt the folks in Bangladesh would think so.

  21. That last sentence was completely useless. How about “Real reform means giving workers rights like they have in Canada.” Or “real reform means telling our government to create “Workers rights checklists for all importers.”

  22. It is incredibly unidimensional to draw conclusions on working conditions within a country using the price of a t-shirt. There is no proven correlation between the price one pays for a good and the wage or labour dynamics in the manufacturing country. Vice versa is also true- a $5 t-shirt may be produced in a reasonably ethical setting. By focusing on price as a determinant of ethical production, the true agencies behind these despicable inequities are ignored. The capitalist pillar of ever-growing consumption (regardless of price) remains unexamined – is it necessary to buy a new t-shirt in the first place? The drive for development from the global South, as spurred by subjugation from the global North and its demands, is contributing to the proliferation of social injustice in the name of growth. The institutional settings that make it difficult and near impossible for women to compete in the workforce (education, cultural restrictions, wage discrepancies) force them into hazardous and unreasonable work.

    Buying a more expensive t-shirt will in no way guarantee labour standards. The focus on price in this article severely diminishes the larger framework contributing to ethical injustice in the garment industry and promotes “solutions” that promise to perpetuate paradigms of never-ending physical consumption and economic growth.

  23. It’s the basic right of a consumer to have a fair price when
    he goes for shopping. And in order to have the best of all, a consumer should
    rectify the price tag. There are many companies in the world which are fooling their
    consumers by selling expensive things which are made in third world countries
    on a very cheap labor.

  24. If you wish to change your way of consuming goods which better socially and environmentally our world but struggle to get the info you might be interested in having a loo at http://www.positiveluxury.com and look out for our Trust Mark which support ethical and transparent brands

  25. Compensating the families of the victims is not the answer as the businesses will just consider it a cost of doing business. Public shaming of the businesses who support such working conditions would have a greater impact.

  26. If we agreed to pay thirty times the wage cost, and produce the shirt in que or ont, we could actally give the retailer a 60 % markup…the markup in this report is rerroneously reported, and is actually about 150%…which has something to do with the greed of the retailer and the weak awareness of the consumer.

  27. Fantastic article! Well done! You see, we all know the maths, the equations, the problems and also the solutions! Why don’t people, who can make real change do something! Where is the catch! How can we bring about a change, so that the weakest in the fashion industries; the workers are not made poorer by the people who can ‘really’ do something about it? We all know the answers. If workers in rich countries can be paid more for the same work, why not pay more to the workers in developing countries! Still, the cost of production is going to be lot less in Asian countries; namely Bangladesh than in Canada or any other rich and developed countries. People in power, wake up please.

  28. Wow where did they get these estimates? I know for a fact that these prices are complete nonsense.
    H&M pays a lot less for the clothing they retail at $14,00. $3.70 for materials and finishing? I buy clothes in Europe and I can get the material, finishing and labor for that price and I buy only a fraction of a fraction of a fraction of that H&M and similar companies buy.
    Shipping? You got to be kidding me. Shipping from China to Europe by container for small quantities goes around $0.30 a piece and again, my quantities are a miniscule drop in the ocean of what big companies import. They get them for around (I’m guessing) $0.10 each to their home country and the + $0.10 for inland transportation.

    I would say for a $14.00 tshirt. Materials around $2.00 for materials and work. $0.20 for shipments. Agents I don’t know but let’s say that the article got that right so $0.18
    Costs: $2.38 is the real cost.
    That doesn’t mean that the companies make a $11,62 profit though
    I find it ridiculous that the article doesn’t think to add into calculations the VAT, rents, labor costs, marketing costs, shopfitting costs, taxes etc. etc. etc. which are a bit more difficult to guess.

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