Christan Wear Jeans Market and Value Chain
The apparel industry is a large industry in many first world countries, with consumers wanting the newest and most unique items on the market. The United States alone imports about 73.92 billion dollars a year in just clothing. Although there is tremendous variety in the apparel industry for a simple product, there is quite a complex value chain for apparel. Since a majority of the apparel industry utilizes a buyer-drive value chain, it is relatively easy for clothing companies to enter the market as well as a diverse range of garment exporters in third world countries. In the apparel industry, there is growing market for jeans and Christian wear with prices ranging from $30 to $500 for each pair of jeans. There aren’t many Christian jeans in the market right now, but it’s important, whetherChristian wearor non-Christian wear, for one to really understand the value chain of jeans in general. Non-designer jeans average about $50 for each pair depending on the quality of cotton, design, and brand. A pair of jeans’ journey starting from a couple yards of cotton can attest to the global value chain and its effect on how entrepreneurs should approach the apparel industry today.
There are five main parts in every apparel value chain. These parts include: (1) raw material supply, including natural and synthetic fibers; (2) provision of components, such as the yarns and fabrics manufactured by textile companies; (3) production networks made up of garment factories, including their domestic and overseas subcontractors; (4) export channels established by trade intermediaries; and (5) marketing networks at the retail level. A pair of jeans starts with the raw cotton in China. Standard men’s denim is made of 1.5 yards of cotton; each yard of cotton is about $2.50, with a total of $3.75 per pair of jeans. After purchasing cotton for $3.75 per unit, a textile mill will produce cloth; add buttons, zippers, and patterns that total to $.75 per unit, a 20% increase in value added. After the fabric is put together, an exporter ships it to the United States which adds $1.35 a unit, a value increase of 30%. The garment is then brought to garment factories, where each jean manufacturer contracts their own design and style. Although garment factories can also be located abroad, this pair of jeans will ultimately visit a US garment factory. For more premium brands of jeans, the garment factories contract other departments to cut, sew, wash, tag and package each pair of jeans. Sewing adds $1.50 a unit, a 26.72% increase. Washing adds $2 per unit, this is a 27.21% increase. Tagging and labeling is $1.50 per unit, a 16.04% increase. Finally, contracted packaging is an additional $1.80 each unit, with a value added increase of 16.59%. The total value increase for the garment factories is $12.65 per unit, which is a 116.41% value increase. After each pair of jeans is finally made, it goes through export channels which include overseas buying offices and trading companies that distribute each pair to the retail outlets. The distributer buys each pair of jeans for $12.65 a unit and by the time it reaches the retailer, the distributer adds a 100% markup, a selling price of $25.30. Most retailers then add a 90-100% markup on their jeans, with a total of $49.99 that the consumer pays for.Retailers can include department stores, factory outlets, and specialty stores that add value through service, relationships and marketing. Finally, each pair of designer jeans ends up in the hands of consumers.
After analyzing the value chain of a pair of jeans, the advantages of having a global value chain are very clear. Looking at each value added, the percent increase did not pass 100% until it reached the United States market. However, the advantage of not outsourcing the steps in creating each pair of jeans is the greater control one has over the product as well as the quality of each pair of jeans. Although Gary Gereffi, author of Global Production Systems and Third World Development, believes that “Profitability is greatest in the concentrated parts of global value chains that have high entry barriers for new firms”, some steps in the value chain need to be done in the United States for quality control purposes. Understanding the apparel value chain, even if it is just for one type of garment, can help one gain better awareness of places where one can cut costs or look for an alternative chain of value. From the value of chain of jeans, one can see that there is greater entrepreneurial opportunity by finding a garment factory abroad if one were to makeChristian wear jeans. By utilizing the global value chain more, one can decrease the cost to the retailer and the customer.
Sources:
Abecassis-Moedas, Celine. Integrating design and retail in the clothing value chain. International Journal of Operations and Production Management. 2006. ABI/INFORM Global p.412
Gereffi, Gary, “Global production systems and third world development”, in B. Stallings (ed.), Global Change, Regional Response: The New International Context of Development (New York, Cambridge University Press, 1995), pp. 100-142.
There are five main parts in every apparel value chain. These parts include: (1) raw material supply, including natural and synthetic fibers; (2) provision of components, such as the yarns and fabrics manufactured by textile companies; (3) production networks made up of garment factories, including their domestic and overseas subcontractors; (4) export channels established by trade intermediaries; and (5) marketing networks at the retail level. A pair of jeans starts with the raw cotton in China. Standard men’s denim is made of 1.5 yards of cotton; each yard of cotton is about $2.50, with a total of $3.75 per pair of jeans. After purchasing cotton for $3.75 per unit, a textile mill will produce cloth; add buttons, zippers, and patterns that total to $.75 per unit, a 20% increase in value added. After the fabric is put together, an exporter ships it to the United States which adds $1.35 a unit, a value increase of 30%. The garment is then brought to garment factories, where each jean manufacturer contracts their own design and style. Although garment factories can also be located abroad, this pair of jeans will ultimately visit a US garment factory. For more premium brands of jeans, the garment factories contract other departments to cut, sew, wash, tag and package each pair of jeans. Sewing adds $1.50 a unit, a 26.72% increase. Washing adds $2 per unit, this is a 27.21% increase. Tagging and labeling is $1.50 per unit, a 16.04% increase. Finally, contracted packaging is an additional $1.80 each unit, with a value added increase of 16.59%. The total value increase for the garment factories is $12.65 per unit, which is a 116.41% value increase. After each pair of jeans is finally made, it goes through export channels which include overseas buying offices and trading companies that distribute each pair to the retail outlets. The distributer buys each pair of jeans for $12.65 a unit and by the time it reaches the retailer, the distributer adds a 100% markup, a selling price of $25.30. Most retailers then add a 90-100% markup on their jeans, with a total of $49.99 that the consumer pays for.Retailers can include department stores, factory outlets, and specialty stores that add value through service, relationships and marketing. Finally, each pair of designer jeans ends up in the hands of consumers.
After analyzing the value chain of a pair of jeans, the advantages of having a global value chain are very clear. Looking at each value added, the percent increase did not pass 100% until it reached the United States market. However, the advantage of not outsourcing the steps in creating each pair of jeans is the greater control one has over the product as well as the quality of each pair of jeans. Although Gary Gereffi, author of Global Production Systems and Third World Development, believes that “Profitability is greatest in the concentrated parts of global value chains that have high entry barriers for new firms”, some steps in the value chain need to be done in the United States for quality control purposes. Understanding the apparel value chain, even if it is just for one type of garment, can help one gain better awareness of places where one can cut costs or look for an alternative chain of value. From the value of chain of jeans, one can see that there is greater entrepreneurial opportunity by finding a garment factory abroad if one were to makeChristian wear jeans. By utilizing the global value chain more, one can decrease the cost to the retailer and the customer.
Sources:
Abecassis-Moedas, Celine. Integrating design and retail in the clothing value chain. International Journal of Operations and Production Management. 2006. ABI/INFORM Global p.412
Gereffi, Gary, “Global production systems and third world development”, in B. Stallings (ed.), Global Change, Regional Response: The New International Context of Development (New York, Cambridge University Press, 1995), pp. 100-142.
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