FOB Pricing (Full Package / Free on Board)
A manufacturing pricing model where the factory sources all materials and handles production end-to-end, with the buyer only paying a per-unit price for finished goods delivered at the port.
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What is FOB Pricing (Full Package / Free on Board)?
FOB (Free on Board) is a trade term indicating that the seller/manufacturer is responsible for all costs and risks up to the point the goods are loaded onto the shipping vessel at the origin port. In fashion manufacturing, FOB pricing typically means the factory handles everything: fabric sourcing, trim procurement, cutting, making, finishing, packing, and delivery to port.
What FOB price includes:
- All raw materials (fabric, trims, labels, packaging)
- Cutting, sewing, and finishing
- Quality control at factory
- Export packing
- Inland transport to origin port
- Port handling and loading charges
What is NOT included in FOB:
- Ocean freight
- Destination customs duties and taxes
- Last-mile delivery in the destination country
- Buyer's quality inspection before shipment
FOB vs other trade terms:
- EXW (Ex-Works): Buyer responsible from factory gate
- FOB: Seller responsible until goods on ship
- CIF (Cost, Insurance, Freight): Seller covers ocean freight + insurance
- DDP (Delivered Duty Paid): Seller handles everything including customs
FOB vs CMT for fashion brands:
- FOB: Factory handles sourcing + production — simpler for buyer
- CMT: Brand provides materials, factory only does making — more control for brand
Why This Matters for Fashion Entrepreneurs
FOB pricing is the dominant model for export orders and larger domestic wholesale. Understanding it is essential for international fashion business.
When to use FOB:
- Export orders (virtually always quoted FOB)
- Domestic wholesale when you want simplicity
- When the factory has better material sourcing capabilities
- When MOQs on materials are too high for you to handle separately
When to avoid FOB:
- When you need specific, unique fabrics the factory cannot source
- When you need tighter quality control on materials
- When you want to avoid factory markup on materials (typically 15–25%)
- When building brand-specific supply chain relationships
Negotiating FOB prices:
- Request itemised costing (fabric, CMT, overhead, profit margin)
- Compare FOB quotes across multiple factories
- Negotiate lower FOB for repeat orders and higher volumes
Sourcing Guide
FOB pricing in practice:
How to evaluate an FOB quote:
- Request a cost breakdown (material + CMT + overhead + margin)
- Check fabric spec is what you specified (factories sometimes downgrade)
- Request counter-samples before approving FOB production
- Confirm all trim and label specs in writing
Red flags in FOB quotes:
- Unusually low prices (often means material substitution)
- Vague material descriptions in the quote
- No sample offered before bulk
- Payment terms heavily weighted upfront
Standard payment terms:
- 30% advance, 70% before shipment (small/new brands)
- 30% advance, 70% against bill of lading (established relationships)
- Letter of Credit for large export orders
Pricing & Costs
FOB pricing benchmarks (India, 2026):
Basic garments (FOB India):
- T-shirt (cotton jersey): $3–6
- Casual shirt (cotton): $5–10
- Basic dress: $8–15
- Cotton trousers: $8–14
Mid-range garments:
- Formal shirt: $10–20
- Blazer: $25–60
- Denim jeans: $12–25
- Embroidered kurta: $15–40
Premium/embellished:
- Zardozi work garment: $30–150+
- Bridal lehenga: $100–1,000+
- Heavy embroidery pieces: Variable
Markup from FOB to retail:
- Typical 3–5× FOB for domestic retail
- 4–8× FOB for international DTC brands
Frequently Asked Questions
International trade traditionally uses USD as a common currency to eliminate exchange rate confusion between buyer and seller countries. FOB India prices are quoted in USD even for domestic exporters because export contracts follow international norms. For domestic B2B trade within India, prices are quoted in INR and the FOB term is used more loosely to mean all-inclusive pricing.
In fashion industry usage, these terms are often used interchangeably to mean the factory handles everything (fabric to finished product). Technically, FOB is a shipping/trade term about responsibility transfer at the port, while "full package" refers to the manufacturing model. A factory can offer full package production with CMT pricing or full package with FOB pricing depending on the agreement.
Always compare on identical specifications: same fabric GSM and composition, same trims and labels, same stitch count and construction. Ask each factory for a cost breakdown. The lowest FOB isn't always the best — factor in quality, reliability, lead time, and communication. Request PP samples from your top 2–3 contenders before making a final decision.
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