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A TINY MALL in a tiny western Pennsylvania town holds what could be the clothing bargain of a lifetime.

This fully lined cowhide suede stadium jacket with hood is quite sexy, in a rugged sort of way. But what really is alluring about the Hunters Run, 3/4 length coat is its price tag: $159, a second mark down from its original price of $450.

Mark downs, which are becoming more and more common in this sluggish retail market, are a curious thing. Discovering a $300 discount like this one can be intoxicating to almost any shopper.

But it does tend to make one wonder what clothes really cost.

There are myriad costs built into the approximate $167.2 billion Americans spent on clothing last year, industry insiders report.

“Manufacturers and everyone along the distribution chain set prices based on the cost of materials and then add in operating costs such as the cost of labor and a percentage that is an acceptable level of profit,” says Larry Gresham, of the Center for Retailing Studies at Texas A University in College Station, Texas.

Costs plus operating expenses plus profit equals price, says Frank Riech, national sales manager for Santana Ltd., a New York City importer of young men’s sports tops.

Manufacturers set wholesale prices based on what it costs to buy finished garments or the raw materials to make the clothes from scratch.

If the company imports, it must factor in import duties, freight costs, warehousing costs and brokerage fees paid to those who clear the goods through customs, Riech says.

Therefore, a shirt that costs Santana Ltd. $7 to make or import, could be sold for $12 at the wholesale level and $25 at the retail level, Riech says.

Outside forces such as international and domestic market conditions and import restrictions also influence the price of clothes, market watchers say. A closer look at these areas illustrates how they affect clothing prices.

Domestically, the retail industry, like many others, has finally received the bill from that spending party called the 1980s.

Staring red eyed at the bill from leveraged buyouts and expansions, many national and local retail chains have been forced to shut down. They were not getting much help from shoppers who have cut spending to brace for a recession.

Retailers that are attempting to jump start the market are periodically cutting prices by between 20 percent and 70 percent, observers say.

On the other hand,
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trade restrictions that place limits on clothing, textiles and other imports, drive the cost of clothing right back up, say market observers.

The International Multi Fiber Agreement, in place since 1972, costs consumers an extra $250 each year, says Leslie H. Wexner, chairman of Limited, Inc., a retailer of women’s clothing.

This summer’s fuel price spike, initiated by violent rumbling in the Middle East, most likely has had some impact on prices. But analysts aren’t yet sure how much of an impact.

Inflated fuel prices could bump up the price of that fine suede jacket if it was shipped to Buffalo from the little Pennsylvania mall.

Buying the jacket in Western New York instead of western Pennsylvania tacks on an extra 8 percent in state and county sales taxes. Pennsylvania does not tax most clothing items.

Still, mark downs, especially in today’s market, clearly are having a huge impact on prices and profits.

“We’re in a consumer recession,” says Walter F. Loeb, a market analyst with Loeb Associates in New York City.

“At this point, retailers are cutting down inventory and looking more frequently to see what sells.”

Retailers mark up goods to cover expenses and make a profit but mark down to stimulate buying, says Joseph B. Siegel, vice president of merchandising for the National Retail Federation in New York City.

And mark ups vary among retailers.

Department stores mark items up to about 50 percent. High volume discounters mark up to about 15 percent, says Gresham of Texas A Boutiques tend to mark up at least 40 percent, he added.

These smaller stores with fewer customers tend to have higher mark ups because their mark downs are “horrendous,” Siegel says. Discounters have lower mark ups because they have high sales volumes and less service, amenities and expenses.

Heavy discounting has become popular among regular retailers. Although mark downs clear merchandise and stimulate buying, they also cut profits, which could lead to retailers leaving the market,
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Loeb says.