The existing price of jeans in George department of ASDA – at GBP 3/ – were already quite low and now they have reduced them further to GBP 5 for two pairs ie GBP 2.5/pair.. Its incredible how ASDA can sell jeans at these prices..It has previously faced criticism from the anti-poverty group over the working conditions of workers in Bangladesh. However, it has been able to fend them off..
If we look at the selling price of these jeans, it is very difficult to see how the costings can work out at these levels.Lets see a hypothetical breakdown
Freight cost : about 10 pence per jeans.
Profit (which I think is the minimum Asda must be keeping) – 20% on sales – 50 pence.
Storage and other costs : about 10 pence. Total 70 pence.These are the barebone expenses I am considering and the actuals will be higher.
So it would mean that the exporter from Bangladesh would be exporting at about GBP 1.80 which is about USD 2.50.. Normally a jeans uses a minimum of 1.2 meters of fabric and if we take the lowest current prices prevailing in the market in Bangladesh – about USD 1.40/m (for 13.75oz) then the cost of the fabric comes to about USD1.68.. So we have about USD 0.82 left for the Bangladesh garment factory to cover all its costs…
Anyway, its a good strategy by ASDA to get volume customers. Even if ASDA is not earning much on this product, it may be making up by more profits that come from sales of other products to the same customers.COOL….