Off the Cuff: Pricing Practices in Contract Embroidery

A review of online embroidery prices may help you determine whether your prices are too low, too high or just right.
May 12, 2008

By Mark L. Venit, MBA

Wouldn't it be nice to know what contract embroidery companies around the country are charging for their services to the trade so that you can determine whether your prices are competitive? Well, it's easy to find out by simply investing a few minutes on Google, as I did in researching this column. To say the least, the scope of trade pricing is rather broad.


Price Wars
What I did was investigate about 30 Web sites, using break points at 48, 72, 144, 288, and 576 units for 7,000 stitches done on one location of a standard garment (mainly tees and polos). While there are likely other vendors not disclosing their pricing on the Internet and who have rates below or above the pack, some general ranges emerged:
•    The lowest pricing I found, from a contract embroiderer in Texas, was $1.75/M across the board in the above quantities from four dozen to four gross — or $0.25/M.
•    Excluding rates well above the grouping, pricing to-the-trade in the four dozen range runs from $2.37 ($0.34/M) up to $5.00 ($0.71/M), with most of the pricing falling into a standard deviation of $2.40 to $3.50 ($0.34/M to $0.50/M).
•    At the six dozen range, pricing tightens to between $2.10 and $2.89 for most vendors ($0.30/M to $0.41/M).
•    At a gross, there is, as you'd expect, further tightening and slightly reduced fares — between $2.05 and $2.59 ($0.30/M to $0.37/M).
•    At two gross, prices trim down by another penny and yet another penny at four gross on the high and low ends of the group.

While these findings don't qualify as a rigorously determined, empirical study, the numbers do hold up under the lens of my personal observation and experience in the field. So, as a general rule, buyers can expect to pay between $0.30/M to $0.40/M for contract embroidery in most quantities from four dozen and up. As for contract pricing for less than four dozen units within the trade, they expect to pay another five to ten cents per thousand stitches.

Because you don't know your competitor's cost structure, there's a danger, of course, to setting prices solely on the competition, but here's an example of a company that's got a good handle on embroidery pricing and whose practices might be used as a barometer to gauge your own approach.

Case Study
Great Wall Emblem, a division of Northwest Embroidery (NWE), with production operations in both the United States and China, sells contract embroidery to the trade and end users as well, but with separate pricing for the trade and retail. (End users who bring in their goods to NWE in Milton, Wash., for contract work pay about twice the trade price and are subject to handling charges). If you're looking for a national average, though, NWE, in its just-released contract pricing catalog level, is about where I think most contract operations should be pricing their work, though I'd characterize NWE's pricing at about 10% above the pack's mean levels.

That "should be" issue is summed up by CEO Jim Mickelson, who founded the company in 1977, as, "It's where we — and most of our competitors — need to be if we're going to be profitable. Most of us have been charging what we were charging 10 years ago or longer. But when I studied our numbers, I raised our prices by about three to five cents per thousand, and that's just to keep up with what it's costing us right now, which might not be enough in six months."

A quick profile of NWE, in a state with the nation's highest mandated minimum wage — $8.07/hour — shows it runs a hundred heads and that its primary business is full-service sales of embroidered garments, not contract work. "But," explains Mickelson, "we still attract work from the trade, particularly from other embroiderers, screen printers and, of course, ASI-type distributors, who account for more than half of our contract work."

This scenario may seem familiar, but Mickelson is paying his embroidery operators $11-12/hour on average along with good health benefits. With little employee turnover and its embroidery heads busy year-round, Mickelson says, "Yeah, we're a little high, but we meet our deadlines, and we don't play games when [trade buyers] start telling us they can get it (contract work) a nickel or dime [per thousand] cheaper. When we hear that, I ask why they're looking for a new vendor."

The responses, notes Mickelson, are all predictable: Delivery and quality issues top the list, followed by personality issues with the vendor staff or the owner. "So, we can charge a little higher, a) to make money and b), to maintain good turnaround" (usually a week or less).

I know of contract embroiderers here in Maryland, and in New York, New Jersey, Florida and elsewhere, who routinely charge $0.15-$0.17/M, but whose customer list will lose and gain 50% of their accounts each year. If contract work, whether full- or part-time, is a vital part of the services you offer, Mickelson might be telling you what you need to hear.

He hopes everyone will raise prices to at least what he's charging these days. But he's a realist who knows competition is good for everyone, and as he strongly states, "I need the low-ballers. They're my best marketing tool. I know after they've given someone bad service — or shall we say 'disappointing service' — or bad work, the [trade] customers who come to us as a direct result of it are happy to pay more, and we're happy to serve them! Profitably serve them, that is."

PS. Among the low-end prices I found online were those posted by Utah Correctional Industries: $0.26/M at four and six dozen, $0.24/M for one gross and two gross, and $0.23/M at four gross. I'm aware of other penitentiary programs that train prisoners in screen printing and embroidery and provide contract services primary to state agencies, and this arrangement doesn't bother me until these operations creep into the commercial marketplace and compete with private industry — YOU! If I were a Utah businessperson paying taxes, I'd give the state legislature there a piece of my mind about that practice.

Mark L. Venit, MBA, is president of Apparel Graphics Institute Ltd., Ocean Pines, Md., which provides management and marketing consulting and proprietary research to apparel graphics companies throughout the Americas and Europe. He is also the chairman of ShopWorks Software LLC, a provider of industry-specific business software. Venit teaches pricing, strategic marketing, salesmanship and other business management topics at the Imprinted Sportswear Shows. He will be teaching a new all-day workshop, "Getting to the Next Level: Surviving and Thriving in Good Times and Bad," at ISS New England, Schaumburg and Fort Worth. You can reach him at markvenit@cs.com.

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