In case you missed it, Quartz had a good piece on the garment cost structure of U.S.. fashion label Elizabeth Suzann. It’s well worth a read to understand the elements of the garment value chain.

Some excerpts:

Pape’s story offers a justification of her company’s pricing, of course, and not every business making expensive clothes operates like hers. But comparing her breakdown of her clothing’s costs to some of the standard practices in the fashion industry, including those of fast-fashion labels, can offer valuable perspective on how brands set the prices you shell out for.

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Brands that “cut out the middleman” and sell directly to consumers, including Everlane and Warby Parker—and also Gap and H&M, which produce and sell their own clothes—don’t need to include that last retail markup. That can save money for the consumer and may give the brand more room for profit, though brands with their own brick-and-mortar stores do need to account for rent, staffing, and other costs.

It’s worth noting, though, that the markup retailers charge is what allows them to be in business and pay employees. The new crop of digital-only, direct-to-consumer brands may “cut out the middleman,” but they also cut out the jobs and economic development in towns and cities that retailers have historically provided.

By itself, price doesn’t guarantee an item is made ethically, or that it’s high-quality. It does, however, reflect all the decisions brands have to make, and for that reason it can be useful to know how a company comes up with the amount it asks shoppers to pay.

“Really, when we’re choosing to buy something, what should matter is how much value it will have in our lives and how much we’re willing and able to spend,” Pape writes. “The cost to make it—or how good of a deal it was given that cost—is pretty irrelevant in practice. You won’t get any more enjoyment out of it, and simply knowing the cost won’t make it last any longer or serve you any better.”

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Posted by Carlos Alvarenga

Carlos Alvarenga is the Executive Director of World 50 ThinkLabs and an Adjunct Professor at the University of Maryland's Smith School of Business.

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