Why Is It Important to Calculate the Landed Cost of Your Fabrics?
Seasoned designers know that fabric is one of the most expensive sections on a garment’s costing sheet. True fabric cost is more than the dollar amount per yard. For accurate costing, you must know the landed cost of your fabric.
- Landed Cost- The total price of a product or shipment once it has arrived at the buyer’s doorstep. It includes original price of the product, transportation fees (both inland and ocean), customs, duties, taxes, tariffs, insurance, currency conversion, crating, handling and payment fees.
Being Unaware of Total Landed Cost Will Kill Your Profit
It’s important to note that even if you’re dealing with a domestic supplier, most fabrics are not made in the US. Most likely the fabric is produced overseas and imported here.
The cost of freight and duty depends on which country the fabric is coming from. If you decide on a fabric without knowing the total landed cost, you will underestimate the true amount on your costing sheet.
For example, if you calculate 100 yards of fabric priced at $7.00 per yard without knowing that transportation costs will cost $450, you’ll set your sales price too low and generate less profit than you projected – if you make any at all.
When sourcing, new designers must comprehend the “fabric supplier lingo” to establish correct sales prices BEFORE production and prevent unexpected transportation costs from killing their profit.
Breaking Down the Fabric Sourcing Lingo
LDP (Landed Duty Paid)
This rate includes the original cost of fabric plus delivery to sea/airport, uploading to ship/aircraft, shipping fees, shipping insurance, import licenses/duties, off-loading from boat/aircraft, customs border inspection, and taxes paid.
The fabric supplier’s responsibility ends when after the fabric makes its way through customs- meaning you’ll still be responsible for transportation from customs to your studio or warehouse.
This is the preferred method when you’re getting a price from either a manufacturer or a fabric mill. Most fabric mills won’t quote you LDP – they will either quote you CIF or FOB’s, so keep that in mind. But if and when possible, get the LDP price.
CIF (Cost Insurance and Freight)
This rate includes the original cost of fabric plus delivery to the sea/airport, uploading to ship/aircraft, shipping fees,
The fabric supplier’s responsibility ends when the boat/aircraft arrives at the country of import.
F.O.B (Free on Board or Freight on Board)
This rate includes the original cost of fabric plus, delivery to sea/airport, and uploading to ship/aircraft.
The fabric supplier’s responsibility ends when the fabric is on board the boat/aircraft.
After knowing the terms of your fabric price, you can find out how much you’ll need for the transportation costs that weren’t included.
For more fabric sourcing insight, download our Free Fabric Sourcing Guide here. You’ll learn how to effectively source fabrics and what questions to ask suppliers at the trade shows!
And for weekly fashion biz insights, visit our Fearless Fashionpreneur Facebook Page here!
Like this post?
Sign up to get more like it