At Hula Global, margins are calculated using a structured approach designed to balance profitability with scalability for larger orders. We follow what can be described as a reverse Lehman scale, where the margin starts at a standard percentage for smaller order slabs and reduces progressively as the order value increases. This ensures that our pricing remains competitive while still covering our operational costs and providing a sustainable profit for the factory.
Understanding the Margin Slabs
Margins are calculated based on the total order value, rather than individual unit costs. This approach allows us to account for fixed costs, economies of scale, and production efficiencies as order volumes increase. Our minimum order value (MOV) is $25,000 USD, which is the starting point for margin calculations. Orders below this threshold are not generally accepted, as they would not cover overhead costs and would make the production economically unviable.
The margin structure is divided into slabs, each with a specific percentage applied to a corresponding range of order values. Here’s a simplified view of our margin slab system:
10% margin for order values between $25,000 and $50,000
8% margin for order values between $50,000 and $100,000
6% margin for order values between $100,000 and $200,000
5% margin for order values between $200,000 and $300,000
4% margin for order values between $300,000 and $400,000
3% margin for order values between $400,000 and $500,000
2% margin for order values between $500,000 and $1,000,000
1% margin for order values above $1,000,000
This tiered approach ensures that smaller orders contribute proportionally more to covering operational costs, while larger orders benefit from economies of scale, allowing us to offer competitive pricing for higher-volume brands.
Example of Margin Calculation
Let’s consider an example to illustrate how margins are applied. Suppose a brand places an order valued at $140,000 USD. The margin calculation would work as follows:
1. First slab: 10% is applied to the first $50,000 of the order.
10% of $50,000 = $5,000
2. Second slab: 8% is applied to the remaining $90,000 of the order.
8% of $90,000 = $7,200
Total Gross Margin = $5,000 + $7,200 = $12,200 USD
This $12,200 represents the gross margin for the order. It is important to note that the gross margin is calculated before deducting operational expenses, such as staff salaries, building maintenance, travel, utilities, and other overhead costs. The net margin is what remains after accounting for all these expenses, ensuring the factory maintains a sustainable business while providing quality production services.
Why Use a Reverse Lehman Scale?
The reverse Lehman scale allows us to maintain profitability while offering better pricing for larger orders. As the order value increases, the margin percentage reduces because larger orders naturally spread fixed costs across more units. This approach ensures fairness for brands placing smaller orders while providing a price incentive for brands scaling their production volumes.
For example, a smaller brand placing a $50,000 order contributes a higher margin percentage to cover overhead costs. Meanwhile, a large retailer placing a $500,000 or $1,000,000 order benefits from reduced margin percentages, which makes high-volume production more affordable while still keeping the factory profitable.
Practical Implications for Brands
Understanding our margin structure helps brands plan their orders strategically. Smaller or new brands should be aware that lower-volume orders will inherently have a higher margin applied, which impacts per-unit costs. Conversely, brands scaling their operations or placing large-volume orders can benefit from economies of scale and a progressively lower margin, helping reduce costs per unit while maintaining the same quality and production standards.
The margin system also emphasizes the importance of minimum order values. By setting a $25,000 USD MOV, we ensure that every order contributes adequately to covering fixed costs and operational expenses, preventing financial strain on the factory. Brands are encouraged to plan orders thoughtfully to balance production needs, budget constraints, and profitability.
Summary
Hula Global calculates margins using a reverse Lehman scale based on order value slabs.
Margins start at 10% for the smallest qualifying orders ($25k–$50k) and progressively reduce for higher-order volumes.
Gross margins are calculated before operational expenses; net margins are what remains after all costs.
The system balances profitability for the factory with affordability and competitiveness for brands.
Understanding margins and minimum order values helps brands plan orders strategically, whether they are small startups or high-volume retailers.
By providing this transparent margin system, Hula Global ensures that both the factory and brands can operate sustainably, make informed decisions, and maintain consistent quality throughout production.
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