Italian prosecutors say the manufacturing costs of high-end Dior and Armani purses are $57-$99. So what? A mark-up is not illegal. It’s not even immoral. The actual value of an item, as long it’s not a forgery, is whatever people will pay for it. Marketing and brand recognition are monetizable. No big deal.
Dior handbags can be manufactured for $57, minus the raw materials of leather. These bags typically retail for $2,780 — a markup of 4,800%.
For Armani, the manufacturing cost is $99 per bag. These bags retail for over $1,900 — a markup of 1,800%.
The real issue is not the profit margin, at all. That truly is no big deal if people are willing to pay that price for brand recognition. Goodwill, inclusive of brand and name recognition, is a line item entry on the Balance Sheet of an Acquired company. It’s not nothing. It’s just taken a hit, however, for these Parisian and Italian companies.
The Italian investigation revealed that the low manufacturing costs were achieved through questionable labor practices, such as exploiting workers, many of whom were unauthorized immigrants from China, and disabling safety features on machinery to increase production speed.
OK. Now we have a problem.
In addition to exploitation of human workers, this also is disadvantaging businesses that comply with labor regulations.
Italian authorities have placed both Dior and Armani under judicial administration for a year.
Maybe this is just a slap on the wrist, but at least it’s a spotlight and awareness that high-end branding does not justify exploitation of workers. Not for any reason. No matter the name-brand.
https://lnkd.in/e5nSNaPU
A good heads-up, Alvin.
