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The straightforward answer is that it's probably higher than you think. Understanding where the number on a price tag comes from requires tallying every step of production fabric, labor, shipping, packaging and adding a profit margin. Let's assume a designer is using quality materials and paying its garment workers an above-average wage; the materials and labor will arguably be the highest costs. The industry standard for a profit margin is between a 2.2 and 2.5x markup, meaning a dress that cost a designer $100 to produce might be sold to a retailer for $220. That retailer has to mark it up by 2.2x again to make its own profit, bringing the final price up to $484. (You can see how the math for that $5 tee becomes nearly impossible.) The average shopper doesn't know any of that; she might assume the price is an arbitrary number the brand came up with to maximize its profits. She doesn't know where the profits are going, either; maybe they're covering overhead costs, like office space, employees, legal fees, and taxes, or they'll be reinvested in future collections.
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