A brutal lesson in marketing: EarthKilt

[Alan H]

I've gotten a serious dose of reality over the past few days, and I think this is the end of the line for the EarthKilt. It's too bad, it was a cool idea, I even had a nifty slogan: A kilt for today, a planet for tomorrow.

Remember that I had three main goals for the project:

1. to help out a sewing cooperative "maquila" in El Salvador that my church has been connected with for a long time, and which has taken huge hits in their orders as the global economic slowdown has arrived. These people are hurting. There is no work.

2. to generate some income to give to causes I really believe in, primarily Rain forest habitat preservation, seeing as rain forests are a huge source of A.) carbon dioxide banking (global climate change) and B.) species diversity.... both are vital issues facing us, today

3. get an affordable, completely environmentally sustainable, contemporary kilt on the market

Interested in what goes into doing such a thing? Read on.

I got a call from the Hemp/recycled PET supplier yesterday, about the project. She turned me on to a lot of details I hadn't thought of yet....for example, you HAVE to have an RN number...meaning that the company importing the kilts must be registered with the Federal Trade Commission. Not that this is a big deal, but it has to be done, and you can't import or sell any stuff, without one. The problem is only a COMPANY can do this. That means I have to either form a company (which I promised the Luminous Joan that I would not do) or find another company to tag along with, to use their RN number.

The three outfits locally...non-profits involved with El Salvadorean issues are not interested in the kilts. I suppose I could contact the Rain Forest Alliance directly, but I have my doubts that they will be interested, it's too much risk/work for them for the likely very small dollars return. So this might kill the project right there.

The President of my fabric supplier also pointed out that you have to have labels and hang tags if you're going to sell a garment in any retail establishment. Now, per unit, 500 sewn labels isn't that expensive...$65 for printed ones, a single color of ink/thread. The killer is that those aren't "sustainable" they're printed on cheap acrylic or "pearlized polyester" or nylon taffeta and if I use them I can't in good conscience call the garment "100% sustainable". Sustainable hang tags and labels are available. The labels are organically grown cotton and the hang tags are recycled board printed with soy inks. But these things cost, almost TEN TIMES what the non-sustainable stuff costs. Per unit it's not much if you make a lot of them, but the minimums needed are really high, and the up-front costs for just the tags and the labels will be over $800. You can't get S/M/L/XL/XXL environmentally sustainable tags, and even the acrylic ones are $12/100, so that's $60 just for those silly little sizing tags that you have to stitch into every garment.

On top of this...and this blows me away....you can't buy sustainable thread. Nobody sells organic cotton thread, or bamboo thread or hemp thread or hemp/recycled polyester thread. You can get tiny little home-size spools of sustainable embroidery thread, but it's not available in commercial quantities. Plain old 40-weight polyester thread is cheap, it's like $15 for 3,000 yards, and that's what I'd have to use, and that compromises the whole thing.

I could live with the polyester thread and the stupid sizing labels if everything else were sustainable, I suppose.

My fabric supplier can't directly ship from China to El Salvador. They can only do that if I order over 2,000 yards. Riiiight...Patagonia and Columbia and REI order that kind of volume, I'd be ordering 50 - 200 yards. 50 yards makes about 22 - 24 kilts, so my first run would be 50 yards. 50 yards of the material is about $500, which is OK, I was prepared for that. What I WASN'T prepared for was the fact that it's going to cost $200 to ship it down to El Salvador, and when it gets there, there's a FORTY PERCENT tariff because the material is made in China. That's another $200.

So to ramp this up, to make the initial 22 kilts will cost me....

$800 for 1,000 hang tags and labels...unbelievable
$500 for the actual fabric
$200 in import tariffs on the fabric
$200 to ship the fabric to El Salvador
$264 in assembly labor in El Salvador ($12 per kilt)
$30 for two spools (two machines would be making the kilts) of thread
$60 for the stupid S/M/L/XL/XXL labels 100 of each.
$20 for 500 buttons, enough for 250 kilts

which totals up to $2074 and I haven't even figured out what it will cost to ship the completed product back up to the USA, yet. That will for sure be at least a couple hundred dollars. Let's say/pretend that it will cost $2,200 to make 22 kilts. That's a nice round number which is probably too low. That means that MY COST of getting 22 kilts up here is $100 per kilt. I could sell them for $108 each, make eight bucks per kilt, break even and reimburse myself for my expenses so far, which have been roughly $150. Mind you, I still haven't sent any money to the Rain Forest Alliance, yet.

Why would anybody buy my low-feature kilt when they can get a more fully-featured product, with pockets, etc. etc from AlphaKilts or AmeriKilts for $35 more?

If I did that, I would sell 22 kilts and be right back where I started, except that there'd be 978 hang tags and labels in a maquila in El Salvador, 96 (of each) S/M/L/XL/XXL tags also in that maquila along with a box with 450-odd buttons, and probably some thread left over.

No, every kilt I sell has to pay for the NEXT kilt that gets made as well, right? Well, I don't have to buy more hang tags and labels for a while, I have 1,000 of them. I don't have to buy more sizing labels or buttons I have tons of those for the next two or three runs. So how much more do I have to add on to the cost of a kilt to buy the NEXT run, which I would hope would be more like 40 - 50 kilts, not 20.

$1,000 for the fabric
$400 in tariffs
$300 to ship the material to El Salvador
$45 in thread (three spools, three machines in production)
$540 in assembly labor

that's $2285 to produce 45 more kilts, or $50.77 per kilt. I have to add that on to the price of producing the first run to keep the whole thing going, so now my overall cost TO ME...this isn't even a retail sales price....is right around $150 per kilt.

I can wholesale them for about 20% more than that, or $180, which means that any retail outlet will have to sell them for $300 and there's no way in hell that these things will sell for $300. If I forget wholesale and just sell them off a website or at Street Faires and RenFaires from a tent manned by volunteers (riiiiight ) I can sell them for $175, send $20 to the Rain Forest Alliance and pay the sales tax ASSUMING that I can find some company around here who will front me knowing that they'll get five bucks per kilt, which is diddly cash for their time/work/risk..

Oh, then there's sales tax.... who on earth is going to buy one of these kilts for $175? That's a lot more than an Amerikilt or an AlphaKilt, which have more features, and even more than some models of Utilikilt.

It just isn't going to work. It would be immensely cheaper to have them made in the USA by workers getting $10 an hour, but then I'm doing nothing for the sewing co-op in El Salvador, which was one of the primary goals of the whole project, to start with.

Unless some miracle happens, I'm afraid reality has put the kibosh on the EarthKilt concept.

[Alan H]

Lesson learned....

Volume cuts costs. If I were Patagonia or REI or Columbia, and ordering 5,000 units, and importing 10,000 yards of material, then the sheer volume results in a huge reduction in costs per unit. But for a small outfit doing a couple of hundred units, ordering a few hundred yards of fabric, it doesn't pay off.

[Alan H]

The OTHER lesson learned here is two-fold.

1.) Don't even THINK about complaining about how much a Freedom Kilt or an AlphaKilt or an R-Kilt or a Flamingo Kilt costs. They are ten times the labor to make, compared to a pair of pants, they have diddly-squat volume compared to a pair of Dockers pants, and like *DUH*, they're going to cost more.

2.) A pair of Dockers pants costs how much? How do you think they get those items to you for the price that they do? Huh, how do they do that? THINK about it.

[chasem]

Wonder how long Alan could keep this thread alive on his own?

But seriously, that sucks, and I hate to hear it. As you said, lessons learned. It's a shame it'd take so much to be worthwhile.

Lots of credit to you for trying, though.

[Alan H]

Wonder how long Alan could keep this thread alive on his own?

But seriously, that sucks, and I hate to hear it. As you said, lessons learned. It's a shame it'd take so much to be worthwhile.

Lots of credit to you for trying, though.

If you think about it, it would just be the "ramp up" runs that would cost so much. I mean, once you get up to the number of kilts/run that you want to do...which I figure is about 100 (I'd targeted 800 - 1,000 kilts sold/year), you can stop "paying ahead". There's no reason to have to pay for each kilt twice, eh? You don't have to both "buy it ahead" AND also sell it once you've got it in hand.

The principle of always having enough resources after "more or less" selling out one run to purchase the next production run remains, however. You can't just 'break even" after a production run, you must end the run with enough resources to finance the next one, unless you're going to take out loans to finance production runs, and I ain't going there.. Exactly how you amortise this over, say eight or nine production runs in a year is a bit beyond this caber throwers abilities to figure out. though I suppose if I REALLY sat down and scratched my head long enough I could work out a scenario that made sense.

OK, enough yakking on the topic. I learned a lot going through the process, and maybe, maybe I can get the prototypes up for sale here at X-Marks for those who want a ready-made X-kilt. One will be cotton/poly twill, the other will be the hemp/recycled PET. Both will be 34 inch waist/40-inch hips, 24 inch length, with a two-button closure. Perhaps I can get some of my $150 back. That'd be nice.

[BEEDEE]

Alan - from the FTC's own web site, it looks like you DO NOT need an RN number: A registered identification number or RN is a number issued by the Federal Trade Commission, upon request, to a business residing in the U.S. that is engaged in the manufacture, importing, distribution, or sale of textile, wool, or fur products. Such businesses are not required to have RNs. They may, however, use the RN in place of a name on the label or tag that is required to be affixed to these products.

Here's a link to organic cotton thread: http://www.nearseanaturals.com/browse.php?category=45

What about no tag inside? I notice many tee shirts now have silk screened size/laundry/material labels directly on the product. Silk screening is a relativly simple process one you have the screens and you should be able to find a screen maker in El Salvador. Use an eco freindly ink.

What about a chat with Jerry at Stillwater? He must have had many of the same problms when he started up and you really would not be competione.

This project seems to be too good to just let go!

Brian

[cessna152towser]

It really is awful how all the bureaucracy, taxation, insurance costs etc. stifle enterprise nowadays. I can empathise with you on this Alan, having given up my own business at the end of October before it began to become unprofitable.

[ForresterModern]

Alan, I think your calculations may be a bit off. If your first run of 24 kilts costs you about $100 a kilt, then your second run costs you $50 a kilt for 45 kilts (because you save on buttons labels and tags) your actual overall cost per kilt doesn't go up to $150 per kilt, but rather drops to about $65 per kilt for the whole lot of 70 or so kilts. The economies of scale in your case only work becasue you are saving money on the cost of buttons, labels, and tags, since it appears all your other costs are fixed on a per kilt (per yard of fabric, etc...). The economies of scale should really work better with each of the non-fixed costs---your fabric should be cheaper the more you buy, the shipping should be cheaper the more you ship at one time, tariffs you probably cannot do much about, labor may be a bit cheaper if you want to negotiate that with your El Salvadorans, and thread should be cheaper if you buy in bulk. But as you get bigger size orders your costs should go down on a per kilt basis, not up. Your decision, from a business plan standpoint, is where is your break even point and where is your profit point satisfactory enough to meet your desires to make donations to these worldly causes. Don't forget, you are also helping the world by buying earth friendly materials.

Unfortunately, your primary attempt is too small to make the whole thing worthwhile, but if your quadruple your initial investment and swing some more discounts on the volume you will be purchasing/shipping/manufacturing, etc.... your project might become viable---maybe even viable enough to pick up a sponsor or two to help you with it.

Also, think a bit out of the box. Why do you need labels? Why not simply stamp the product logo and size on the inside of the product somewhere visible using environmentally friendly inks? Most major underwear and t-shirt manufacturers have gone away from collar tags to imprints just below the back collar, so why can't you?
Same thing with hang tags----why not just stamp them with the same logo, or something similar, on plain (recycled) cardboard and have them sewn into the item somewhere visible---they can then be torn off after sale and thrown away, with any remainder coming out in the wash. Hit up a major manufacturuer for leftover buttons to meet your need---they often have serious overruns on things like this and are getting rid of them on the cheap at wholesalers. Try to work with an existing retailer to get them to help foot some of the costs up front in exchange for exclusively selling the items at their store---natural coops and other hemp clothing stores might be interested. You could offer your services to go to regional events to be the sales and display person, and they may even then get to sell some of their wares there at the same time.

I like your ideas to help the planet and the people who live here, but yeah, you need a little more help with putting the business plan together----outside the box help.

[Canuck]

You would also have to figure out the number of sizes you would carry, with the possibilty of being stuck with certain sizes for quite some time.
The cost of warehousing. Quality control. What is the market? Utilikilts have reported selling 1600 per month, but then look at how many people they have to support with that volume.
Banking fees alone can sometimes reach a mortgage payment (slight exaggeration)
If you want to sell a kilt for $100 then your labour , material, advertising, bookeeping etc. should be around the $50 mark. Paying someone minimum wage they have to be able to sew a kilt in under two hours for you to make any kind of profit.
Volume as you say will bring the price down, I would then think you would be in the 2000 units per month range to make that work.
hmmmm I think I may have to get out of this business
It's an interesting exercise
All the best Alan

[Panache]

Alan,

If nothing else you have given us even more appreciation for what goes into the making of a nice contemporary / modern kilt.

(I still think "Earth Kilt" was a grand name! Maybe you could offer Steve, Sydnie, Robert, Darron or one of the other X Marker Modern kilt makers that name for a "100% sustainable kilt" and in return they would offer a small part of the proceeds to preserving the rainforests?)

Cheers

Jamie