Why an H&M T-Shirt costs only 4,95 Euro?Posted: December 19, 2010
Wolfgang Uchatius asks in this week’s DIE ZEIT, how an H&M T-Shirt can cost only 4,95 Euro (the exact same price as 10 years ago). In his long and well-researched article he follows the path of an H&M T-Shirt – a little bit like Rivoli’s “Travels of a T-Shirt”, but only on 3 pages. Uchatius discovers at least 7 secrets of the cheap H&M T-Shirt:
1. Cheap cotton: In the past years, the 400 g of cotton that you need for one T-Shirt cost around 0,40 Euro. US cotton is cheap, because the cotton stripping machines yield as much cotton a day as 300 workers, and because US-American taxpayers subsidize it by 40 Cents a shirt. Hence, machines and US taxpayers make our H&M T-Shirt cheap. However, Uchatius explains that the cotton price has been rising to 1 Euro for 400 g, because there is too little cotton in the world market at the moment.
2. Indecent working conditions: The ability of the workers in Bangladesh to hold back their need to go to the toilet during working hours (he explains the living and working conditions of workers in Bangladesh in some detail). Garment workes in Bangladesh drink little during working hours (in factories that are around 30-40 degrees hot!), because otherwise they need to go to toilet and then they do not manage the strict targets set by the factory management to achieve the low prices H&M pays.
3. Very low wages: Uchatius portrays a worker in Bangladesh, who cuts the loose ends of the H&M T-Shirts. She earns 1,18 Euro a day and finishes more than 2000 T-Shirts. She basically adds less than 0,001 Euro per T-Shirt (but she is also not the only one working on a shirt).
4. Low production costs in Bangladesh: The manager of the company in Bangladesh argues that they sell the T-Shirt for 1,35 Euro, a consultant says that it costs no more than 1,40 Euro (H&M did not confirm these prices, but they seem rather expensive to me – three years ago large companies in Dhaka told me they buy one shirt for 0,80$). This price, however, might rise, because the minium wages were increased.
5. Keeping the workers silent: A factory manager in Bangladesh says that he separates working processes into different factories in order to reduce the risk that worker protests spread easily.
6. Low shipping costs: The shipping of the T-Shirt is very cheap, due to containers and huge ships. H&M pays about 0,06 Euro to ship one T-Shirt.
7. Mass consumption: Of the 4,95 about 2,76 Euro stay with H&M (without T-Shirt costs, shipping, taxes). A consultant suggests in the article that H&M has around 2 Euro overheads (transport in Germany, rent of their shops etc.). About 0,60 Euro are H&M’s net benefits per T-Shirt. And if enough people buy such a cheap T-Shirt, a company like H&M can live quite well from it.
Uchatius raises the following dilemma of H&M: One the one hand, the cotton prices and the labour costs in Bangladesh have been rising. On the other hand, 5 Euro is a “magical” price barrier. If prices increase and if we need to pay more to give workers a decent life: Who pays these costs? He suggests that consumers should consider, whether they really need a T-Shirt that costs only little more than a coffee. He encourages the consumers to ask, whether they would also pay three coffees for a T-Shirt. If I look at the commentaries to the article, many consumers seem to pose very few questions…