Economies of scope: why personalised hoodies no longer cost a premium to make

Economies of scope are dragging the price of custom hoodies down, and the reason is simple; they're printed on demand rather than made in advance. The global custom t-shirt printing market was worth USD5.16 billion in 2024, and the hoodie is being carried along by the same economics. A single blank garment is no longer tied to one design but can hold a thousand, each one printed to order

The history of providing more variety in clothing lines has been expensive, as a traditional clothing manufacturer would have had to invest in very lengthy production runs, with large amounts of stock of each colour and each slogan, anticipating that they would sell. Men's, women's, and children's shirts were printed as separate items and thus produced a much larger backlog of printed garment inventory, incurring more risk as well as increased working capital. The introduction of digital printing will give the manufacturer of a single design the ability to produce the next design at the same initial set-up cost that it used for the previous design, allowing the manufacturer to produce just one single design (or run) just as efficiently as it could produce one hundred designs (or runs).

With the introduction of digital printing, the same production line can now support many thousands of different designs all manufactured simultaneously. The movement from traditional methods of manufacturing to the growth of digital printing is referred to by manufacturing economists as mass customisation. This method allows the provider of blank personalised hoodies to make the same, or slightly fewer, numbers of base garments but to create a final product with the name, logo or design printed on it. Because these expensive parts (the garment, machinery, and fulfilment networks) make up a large percentage of the total cost for every order, the additional costs associated with printing an additional unique design are virtually zero, essentially making the cost of printing one extra unique design negligible.

As noted in a report by Grand View Research, the Custom T-Shirt Printing Market was valued at USD 5.16 billion in 2024, primarily due to the increase in online demand for self-designed apparel. The same supply chain as t-shirts exists for hoodies due to the use of the same presses, the same platforms, and the same customers who are seeking products not available from any high-street retailer.

When looking at how much it costs to print t-shirts using on-demand printing equipment, it is important to note that economies of scope are not the same as economies of scale.

The distinction is important because economies of scale are derived from producing larger quantities of the same item, whereas economies of scope are derived from producing different items with the same resources. In general, on-demand printing manufacturers do not usually achieve high levels of scale because they may only produce a few pieces of each design; however, they achieve their success through the ability to provide an almost unlimited selection of products by using one piece of equipment and one fulfilment process.

Scale provides benefits for producing identical items; scope provides benefits for producing a wide variety of items.

With the decline of cost-based competition, product differentiation will become increasingly prevalent as it is now possible to produce a high level of variation for minimal cost. The focus has shifted from producing the cheapest item to providing a distinct piece of art; a customised hoodie will not be viewed as a commodity because it has a custom design that will only be seen by a specific individual or group; thus, the price for that customised hoodie will be greater than the price of a blank hoodie.

This is also why the marketplace has become increasingly fragmented into thousands of micro-brand concepts; when an artist can create a custom art piece without requiring the purchase of large quantities of stock, the barrier to entry for this market segment has largely been removed – as it was previously far too expensive to produce high levels of variety, an individual seller can achieve profitability serving a niche of a couple of hundred customers, which was not feasible under the previous make-to-forecast model.

The current economic environment incentivises the producer to sell a variety of items rather than the same items multiple times; to win in business, the focus should not be on printing the same design one million times but rather printing one million designs once each at a very low cost; personalisation is no longer a luxury but rather the defining aspect of how the world operates.