When it comes to the prices of Bangladeshi RMG products, the gap between manufacturing and retail end prices is astounding. Foreign buyers make as much as 600% profit on a single item at the retail end; in other words, a consumer may end up paying Tk7 for a product that only cost Tk1 to make.
The retail price tags of a couple of foreign brands collected by the Dhaka Tribune show hefty profit margins on RMG products.
One of the tags, taken from a polo shirt of a US retailer, shows a retail price of $42 (Tk3,475) even though the item cost only around $3.30 (Tk273) from its manufacturer in Bangladesh, according to the sourcing voucher collected by the Dhaka Tribune.
A French buyer sourced two different types of women’s tops at $3.55 (Tk294) and $5.10 (Tk422) apiece from their manufacturer in Bangladesh, and sold them in France at €14.99 (Tk1,354) and €22.99 (Tk2,076), respectively.
Similarly, the buyer bought two kinds of jeans from Bangladesh for $5.13 (Tk424) and $6.10 (Tk505) apiece before selling them to customers at €19.99 (Tk1,805) and €25.99 (Tk2,347), respectively.
Industry insiders, who source RMG products for foreign buyers, said there is no reason for this mammoth price gap as the cost of local transportation and all overheads account for about 60% of the manufacturing price.
“At the retail end, the (final cost) price of a piece of RMG product worth $3.1 will be $5 at best,” says one representative of a retailer, requesting anonymity. “That includes shipping, storage and transportation costs at the retailer end.”
Sometimes, the retailers must also pay the import duty in countries where Bangladesh is not allowed duty-free imports.
“Foreign buyers must bear the cost of unsold products, transportation and shipment along with the import duty in the US market,” says KI Hossain, president of Bangladesh Garment Buying House Association.
“It is a common practice for buyers to charge double or triple of what they pay for an item to the manufacturer,” he says.
An employee of a buying house, seeking anonymity, admits that despite securing a huge mark-up, foreign buyers fight tooth-and-nail with local manufacturers to keep the prices low. They succeed in these negotiations, exploiting the manufacturers because they need the orders to survive in an extremely competitive market.
To this end, the cost prices for RMG products exported to the US declined by almost 41% between 2000 and 2014, according to a 2015 study by Mark Anner, associate professor of labour and employment relations at Pennsylvania State University.