Local Vs Overseas Manufacturing: Is the UK more profitable?
I constantly have people telling me, “I can get X made much cheaper overseas than in the UK.”
Yes, that might be true, and the allure of a lower cost-price from overseas can seem tempting initially.
However, for small businesses, when you purchase from an overseas manufacturer with much higher MOQs (minimum order quantities), the maths doesn’t always add up.
Let me show you why…
Local vs Overseas: Let’s Dive into the Numbers
Made locally in the UK
- Your MOQ (minimum order quantity) is just 100 T-Shirts.
- Say each one costs you £10 to produce, leading to an investment of £1,000 in stock.
- Selling them at £30 each means a total revenue of £3,000. After deducting the cost, you’ve made a £2,000 profit.
- Here you MOQ jumps to 500 T-Shirts.
- Each Tee comes at a cheaper £5, making your investment £2,500 in stock.
- You set a retail price of £25 each. However, after selling the initial 100, you haven’t seen a penny of profit. The remainder is just sitting there waiting to be sold.
You spend £2,500 for 500 pieces. After selling the first 100 you’ve still not made any profit. The rest is still sitting there waiting to be sold.
Can you see how it is better to buy less and not have all your cash tied up in unsold stock?
OK you might argue that the cheaper selling price for the overseas-made tees will boost sales. But think about it: as a small business, where are you going to find a load of extra customers to sell to?
More customers often means more marketing and advertising expenses. Plus there’s the risk that you’ll commit to a large order, only to discover it’s not what your customers are after.
Going overseas might seem tempting with its low costs, but don’t forget, it comes with potential pitfalls: the risk of biting off more that you can chew, the gamble of inconsistent quality, and the logistical nightmares of shipping.
On the other hand, producing in the UK might come with a slightly higher price tag upfront, but it rewards you with consistency, a sense of familiarity, fewer headaches, and crucially, less money trapped in unsold stock.