One of the things emerging designers and small brands think about the least is actually one of the most important: margins. Their own and those of their main partners, specifically B2B buyers.

Let’s start with a truth that may bother some people, but there’s no point sugarcoating it: design and quality matter, but they are no longer the decisive factor. There are brands that are aesthetically questionable, with mediocre quality and designs ranging from boring to cringe, yet they outsell award-winning brands. Why? Not just because of marketing, but mainly because of one thing: margins.

The Real Reason Some Brands Explode and Others Don’t

Follow this reasoning: if you sell a made-in-Italy or made-in-France product to a retailer for €200, and the buyer applies a 2.5 markup, the product will land in-store at €500. If your direct competitor sells a similar product to the retailer at €150, which product do you think the buyer will be more inclined to push?

The answer is obvious: buyers want to earn, and in many segments, product origin does not influence sell-through.

But the next question is even more important: why can your competitor sell at €150 while you are forced to sell at €200?

That’s where the real game is played.

Where Margins Are Won (or Lost)

Your competitor likely worked on their margin structure more strategically: they outsourced production to India or China, where quality today is extremely high. This isn’t an opinion; it’s market reality.

Excellent products at much lower costs = huge margins for the brand and far more attractive margins for retailers. In our example, with a product sold at €150, a buyer can apply a markup of 3.0 or 3.3, sell at the same retail price as your product, and be far more incentivised to push it.

As many know, I am Italian and personally value made in Italy, sustainable production and short supply chains. But we must be objective: it depends on your business goal.

If your goal is to produce 1,000 pieces a year and stay ultra-niche, fine.

If your goal is to scale, increase revenue, grow in international retail and stay within the same price segment… then you must confront what the global market is doing, not what you wish it were doing.

The Scandinavian Case: A Response That Explains Everything

Some time ago, I spoke with a Scandinavian brand and asked:

“Why is there such a high percentage of made-in-China brands in Scandinavia? Trade agreements? Reduced import duties?”

The answer was simple, surprising, and exactly what I expected:

“No. Simply, for our target, China has better quality, better factories, and technologies Europe can’t match. They also produce small quantities at extremely low costs. This lets us generate high revenues and excellent margins… which we reinvest in staff, offices, marketing.”

And this is where long-term competitiveness is decided — and where, unfortunately, there is no competition.

Margins Are Oxygen. Without Them, You Don’t Grow.

If your production cost is more than 25% of your wholesale price, you have a structural problem. And you see it clearly at the end of the year when you realize:

• you have no marketing budget

• you can’t hire

• you can’t invest

• your brand is not growing

If your cost is higher than 25–30% and you still survive, it’s usually because:

• you own your factory (lower fixed costs)

• you produce for third parties (so your brand isn’t your only revenue source)

But the balance has to tip somewhere.

The Market Today: Segmented, Cynical, Mathematical

Today the fashion market is segmented strictly by target price. As soon as they see your price, buyers position you in a category. No matter what your storytelling says.

And here’s an important example: there are Indian, Chinese and South American brands with far lower labour costs than Europe… yet they sell at the same retail price as an Italian brand.

Do you know why?

Because European brands set the premium–luxury price range, and other regions now follow that price while producing equal or better quality, leaving far more margin to the buyer.

A European brand offering a keystone of 2.5 or 2.8 is not competitive. A brand from Asia with lower production costs can leave the buyer a margin of 3.0, 3.2, 3.5, becoming inevitably more appealing.

And that, like it or not, always wins in the long run.

Frequently Asked Questions (FAQ)

What is the ideal margin for an emerging brand and small brands in fashion wholesale?
On average, a healthy brand should keep production costs between 18% and 25% of the wholesale price.

Why are Asian brands more competitive in international retail?
Because they have lower production costs, very high quality and can offer buyers much larger margins, making themselves more attractive at the same retail price.

Why do many European emerging brands and small brands struggle to grow in wholesale?
Because their costs are too high, their production volumes are small, their structures are heavy or inefficient and margins get squeezed. The problem isn’t the market: it’s the cost model.

Conclusion: Margins Matter More Than Design (Today)

It’s not romantic, but it’s true: margins are what keep your brand alive.

They allow you to:

• invest in marketing

• hire staff

• open new markets

• run events

• create sampling

• support buyers properly

• grow

Without margins, everything becomes harder, and often impossible.

Before thinking about design, awards, visibility or the made-in… ask yourself one simple question:

“Am I leaving enough margin for a buyer to choose me over my competitor?”

If the answer is no, the problem isn’t the market. It’s the strategy.