Cloth Nappies – Why are you paying more?!

There are a lot of articles and discussions going on regarding "China Cheapies" or Cheap Cloth Nappies. One such discussion was questioning the practises of "brands" and how they justify the price of their nappies. After all, if someone can sell a nappy on ebay for about $3, why do brands sell these for $10, $20, or even up to $50? I was told on a Facebook forum yesterday that buyers are obviously being ripped off by any nappy brand charging them more then $10 or so for a nappy. This blog is to help enlighten you of the costs of running a legitimate business.

So what are these costs? I've tried to break it down as simply as possible:

Product
Most brands have taken time to produce their own nappy design. This has involved design, user testing, re-designing, fabric sourcing etc. If the production of the nappy is outsourced then that takes time too.

I spend hours upon hours discussing with my supplier how best to create my product. I use specialised and unique fabrics made for me, which my supplier doesn't supply to others. This means extra costs as all fabrics are short runs in a particular colour. Yes, I could use the same fabric you see on many CC nappies if I wanted, and source it much more cheaply. But I choose to get a heavier weight and higher quality minky. In cheaper nappies, in addition to being lighter weight, the fabrics are also produced in huge quantities. You would notice how many companies have the same patterns on their nappies. This is because this material is cheap from being produced in massive bulk numbers.

Bamboo is also much heavier weight then the average nappy fabric. We use bamboo fleece which is a more expensive fabric then micro fibre  We use it because it's natural, more absorbent, and has great properties suited to nappies.

Using good quality elastic and a good lamination on the minky to ensure waterproofing is also costly. Some cheaper fabrics use very cheap and quick processes to laminate the fabrics and the lamination does not last. This means your nappies will start leaking soon after use.

Sourcing labour to make the nappies from fair and ethical factories also adds cost. Finding fabrics that are safe for use and properly manufactured also attracts a high cost. If a company sources labour in Australia, then they are paying a large premium for this.

As you can see, the sheer difference in the cost of producing the product alone will make a huge difference. A CC nappy can be bought for a couple of dollars off eBay, but these nappies usually come direct from China and it is usually uncertain how it has been made or what materials and chemicals were used in its manufacturing.

Warranty
Built into the cost of a product is the chance something might go wrong with it. No amount of effort can ensure a problem-free product. If snaps come off, stitching comes undone, elastics suffer problems, zippers come off bags – they need to be replaced. Add the cost of the product and the cost of postage and this is an expensive exercise for any warranty claim. Generally, the cost of faults in the products are borne by the importer. So they have to bare the expense of any replacements.

As a purchaser you may want to consider what a warranty is worth. If you pay for a $10 nappy that falls apart, by the time you replace it you could have received a better product with a replacement warranty!

In addition to this is the problem with lost parcels. It is very common for customers to say they never received a parcel. If a business owner agrees to resend a parcel, they do so at a cost to themselves. It has not been unusual in my business to lose a great deal of money resending lost articles. Australia Post takes no responsibility and it's important that customers walk away happy – after all we want our customers to be happy but we must also protect ourselves from poor reviews and feedback that are often received even if not the fault of the business.

Insurance
Insurance protects the seller and the buyer. But it comes at a huge cost. Product and Public Liability insurances are essential for a business. But many businesses operate without them. Just think if something went wrong with a product you purchased and someone in your family was sick or injured – you will hope the business is insured to ensure you have some recourse and that you do not bear the cost of happenings beyond your control.

Duty and GST
It costs a lot to import products into Australia (or even make purchases within Australia). Duty on nappies is 10%. Add another 10% for GST (whether the seller is registered for GST or not). Some sellers avoid paying these fees by bringing in small numbers of nappies (like a few hundred) and do not have to pay these fees. The greater the value of the nappy coming in, the greater the costs. For example, if I buy a $2 nappy and import it, I pay about 40¢ in duty and GST. I import an $8 nappy and I pay $1.60 in duty and GST.  But if I only import under $1000 worth of goods then I pay nothing at all!

Advertising
So once you have your product in the country you need to get people to buy it. How do you get your name out there? Even a very minimal advertising budget is costly. A click on Google ads is upwards of about $1. That's $1 just to have someone view your site. Ads in magazines, expo attendances, directory listings – these all add up. Running a giveaway costs the business owner money. There is no guarantee of any business from it. What's worse is when someone wins your product for free to go on to sell it at a discount and undercut you. All those hours of hard work and suddenly you are competing for a sale against someone you generously gave a prize to.

Shipping
Many companies absorb shipping costs. When you see that they have a flat rate of shipping it doesn't mean they pay less for shipping. It means they are willing to absorb shipping costs if the order goes over that. If you order more then about 3 nappies, you are looking at upwards of $12 to ship the parcel. Every additional cent of shipping charges is being absorbed.

Book keeping
Regulation requires you keep records of income and expenditure. This takes valuable time and money to complete.

Registering your business
Registration of business name, trademarks, designs, etc. come at a cost. A legitimate business will follow these. Many fail to register for their ABN or business name, and don't complete tax returns etc. Some claim they are only operating a hobby – these 'hobbyists' have an immediate advantage to others as they are avoiding paying tax and contributing to the community in valuable tax revenue.

Website
Setting up a website requires a lot of work. Paying for hosting fees, domain names, and web support all cost money. Updating that site with new products, sales, and information come at a cost too.

Other
Storage fees, petrol to deliver your goods to the post office, stationery, packaging, product photography, shipping products into the country (think port fees, customs and quarantine fees, etc.), sending samples overseas and paying for them to be made up and shipped back: the list goes on and on. Larger companies hire staff to do marketing, attend expos, answer emails, and pack orders. They also require office space and warehouses.

As you can see, there are many overheads for a business selling a unique product and operating legitimately.

Paying the Work at Home Mum Behind the Business
This is the last step. If anything is left after paying for everything else, the WAHM might get some pay for the hundreds of hours that she put into getting the product into your hands. From ordering it, to getting it shipped, storing it, photographing it, putting it on the website, and finally packing it into a bag and taking it to the post office. Many WAHMs work for much less then minimum wage – sometimes for nothing at all!

As a WAHM, I am on call all the time. I want to offer a quick response and good service in the hope that people have a good experience dealing with our business. I cannot risk bad reviews online if someone is unhappy. One bad review will have a much greater impact then 10 glowing ones.

Customers come back months after buying a nappy and ask for advice. Customers who aren't even purchasers ask questions requiring my time and attention. Answering emails, dealing with warranty claims, and ordering products all take up a huge portion of my time.

So what is the point of this blog?
I hope this helps you realise why businesses charge what they do for a legitimate product. Many "China Cheapy" resellers avoid a lot of these costs. Many sell on eBay or Facebook with practically no overheads. They claim it is a hobby, and they have no personal design or user testing to deal with. No insurance, no GST or duties, no advertising, no regulatory fees, no website. So before casting judgement about the nappy "brands" earning a fortune and overcharging I ask you to consider these issues and see that really a quality nappy at $20 is an absolute bargain for what has gone into it.

When you look at it like this, a $3 nappy doesn't even compare...