A CALL TO SUPPORT SMALL BRANDS AND INDEPENDENT CREATIVE BUSINESSES

... and a shamelessly frank summary of all the costs for visionaries who want to build an independent fashion label.

A comment under one of our social posts sparked this conversation:

While everything is getting more expensive, prices seem unjustifiably high for small independent brands like ours.

But are they really?

We are PAL OFFNER. We sell our designs to retailers and end customers worldwide. After 11 years, we will be closing our fashion label.

Not because we have run out of ideas, but because we no longer want to do it this way. If a business requires you to work under pressure 24/7 for a below-average salary, then there is either something wrong with the business model or there is a structural problem.

Our brand stands for authenticity, appreciation, transparency and new perspectives. That's why we also want to be transparent in this final step and provide a look behind the scenes of small brands and their prices. In the hope of creating understanding and appreciation for small labels and their products, so that even more small companies do not have to give up their valuable, creative work. Because do we really want to live in a world where only big chains remain?

Our designs don't follow mainstream tastes, but we are established within our niche and have made a name for ourselves worldwide over the years. Pal Offner is available in boutiques in New York, Toronto, Osaka, Shanghai, Auckland, Oslo etc. Our products attract a lot of interest. The product fits the market, only the price often does not.

This article is explicitly not about pointing fingers and chalking up "non-buyers". We are more than aware that many people do not have the financial means to buy clothing in our price segment. We are also aware that this lack of means and opportunities is a result of the very system that we have tried to change with our company.

The comments about how such high prices come about are a legitimate question.

We set up our company 11 years ago via the retail trade. This had the advantage that we only produced what established and experienced retailers could sell. On the one hand, this fitted in with our philosophy of not serving a mass market, and on the other, it reduced both the financial risk for us and the loan amount required to set up the label in the first place. High advertising costs were not necessary.

During Covid, we created our online store to cushion the impact of the slump in bricks-and-mortar retail. Since then, our business model has had two pillars with different margins: direct sales and sales to retailers.

It all depends on the quantity - and how and where you produce.

Small quantities mean all kinds of mark-ups and a redistribution of high development costs to a few parts.

The development of a pattern costs around EUR 360, the sewing of prototypes and sample pieces EUR 384. On average, we only produce around 30 pieces per design.

There is a surcharge of 30% on the price per meter of the outer fabric used. Together with fabric for pocket bags, fleece, sewing thread, buttons and zippers - also with a surcharge - we therefore end up with an average material cost of EUR 25.

Our garments are sewn in small, owner-managed production facilities in Europe. Because we are dealing with very small quantities, each piece requires many careful work steps. Automated machines or assembly line work are not an option here - each piece is made step by step by hand. And that takes time. Production, i.e. the sewing wage and any further processing steps such as dyeing, ironing and (handmade) finishing, therefore costs an average of EUR 34.

At this point, additional operating costs that cannot be directly attributed to the product are added: approximately EUR 355,000 per year.

• EUR 254,000 fixed costs for premises costs and personnel costs for a team of four and 1-2 interns, including employer's contribution.

  The personnel costs include the work for design development and creative services, material sourcing, production management, merchandise and warehouse management, photo shoot organization and implementation, sales at trade fairs, store management including sales, online store maintenance, customer support, packaging and shipping of online orders, marketing and social media content, as well as corporate management (from financial planning to strategic orientation).

  Salaries are therefore not in line with the market. This is not due to a lack of will or a lack of appreciation for the work, but because it simply doesn't add up.
• EUR 23,000 The minimum trade fair costs for distribution to relevant dealers worldwide. The costs include the exhibitor space in Düsseldorf and Paris as well as (economical) travel expenses. EUR 6,700 per collection for Paris and EUR 4,800 per collection for Düsseldorf with 2 collections per year.

• 4,200 EUR online store program incl. newsletter program
  
• 6,350 EUR Maintenance costs for our merchandise management system, which we use to control production, material and inventory as well as financial accounting (we previously purchased this for 48,000 EUR).
  
• 20,000 EUR bookkeeping and annual financial statements for our GmbH
  
• EUR 11,000 for photo shoots for each collection for the online store and our lookbook (our concept and vision are kindly supported by our long-standing photographer, graphic designer, make-up artist and our models. Creative people support each other here, in contrast to many other cost blocks that are non-negotiable. But this digression goes too far for this article ...)

• 36,000 EUR are added as further variable costs, such as licenses (e.g. to bring packaging material into circulation), ancillary costs of monetary transactions (we pay 2.5-4% for a credit card or PayPal payment), packaging material and gift inserts for our online orders (EUR 4.66/order), office supplies, customs duties, export documents, assumption of part of the shipping costs in online trading in order to remain competitive, necessary purchases in the company, investments in digitization and software to make the company fit for the future, insurance, etc.

So what is the bottom line?

The following chart is a snapshot from 2024, the amounts fluctuate depending on the development of the market and the associated production figures and costs.

The chart shows how much the actual profit varies depending on the sales channel and the discounts granted. In 2024, we even sold at a loss in the dealer business, which still accounts for the majority of our production volume, due to low order volumes.

The bottom line is this:

Actual product costs are high due to the nature of production and materials coupled with small quantities. Although operating costs are low overall, they have a significant impact on small quantities.

While we closed 2023 with a plus of EUR 40 thousand, in 2024 we were confronted with a loss for the first time since the company was founded due to the rapidly changing market, including the unexpected slump in the dealer business. In 2025, the trend is consolidating with no prospect of improvement. Inflation, rising production costs and political and economic uncertainty among retailers and end consumers are exacerbating the situation.

For six years, we managed all areas of the company in pairs. Then, for the first time, we took on a part-time position and, in the seventh year, a full-time position, shortly before we were both expecting our first child at the same time and no longer had 24/7 energy and time for our label.

In the end, we put our heart and soul into our company PAL OFFNER for a total of 11 years - as did our employees. Because we believe that clothing can make the diversity of exciting personalities in our world visible and at the same time prevent mountains of textile waste from being created. An idealistic claim without a pure focus on profit.

Our high-priced products do not mean that we are personally enriching ourselves - even if this is often assumed. Because the work and investment in a collection in terms of development, production and sales activities is the same whether you end up producing a total of 2,000 pieces in a collection or 20,000 pieces. We are proud to have managed all this with such a small team.

Are you wondering why we didn't produce the 20,000 pieces? Why we didn't "make it"?

Yes, our margin would be good in direct sales - as long as we sell the majority of the goods undiscounted.

However, in order to scale direct sales, a small company quickly reaches its liquidity limits: it requires a large upfront investment and a high level of risk in order to stock the necessary goods for two collections per year and to invest in advertising in order to reach enough customers quickly. There is no time for organic growth.

We recently asked ourselves the ethical and social question: do we even want to invest tens of thousands of euros in Meta & Co. to place advertisements and directly subsidize these companies?

And why do we want to produce so much? How do we deal with textiles globally? How much is thrown away? How much is produced and why? How is it marketed and who profits from it? Who benefits from the profits of huge corporations (be it fast fashion or luxury)? Why do the prices of fast fashion brands seem so self-evident to us? Once you understand how much manual labor and resources go into a piece of clothing, how can it be that a dress costs EUR 20? What does this mean for the raw materials, wages and circumstances of those involved in production and the resources used?

So the question that it all boils down to is: do we want to be part of this system or not?

With PAL OFFNER, we have decided to take a different path. It stands for values and a vision to change the fashion industry sustainably and to always start a conversation. That is why we are now entering into a dialog. Perhaps we can pave the way a little for other independent labels.

We hope that with our transparency, we can provide a different perspective on the challenges and prices of small, owner-managed brands. Regardless of the price segment in which they generally operate. If we can open up a new perspective for a small group of readers and the social relevance of small brands and retailers penetrates, then we will have achieved a great deal with the background to the closure of our company.

THANK YOU FOR BEING A PART OF OUR SHARED PAL OFFNER JOURNEY.

On November 21-23, we are celebrating our eleven-year journey together with a pop-up event in out home town Stuttgart. You can expect all our designs in the biggest archive sale, live music and drinks, walk-in tattoo and a fashion dance performance. Our archive is sold without the intention of making a profit - with the aim of giving every piece a new home. You can find the exact program and all information on Instagram and Facebook at @paloffner and by signing up for the newsletter: www.paloffner.de