Until recently, premium linens have largely been sold in retail stores and are often offshoots of fashion labels (such as Calvin Klein) that license their names to home products. Layers of licensing fees, distributors, and retail markups help boost the price to consumers. A set of sheets that cost less than $100 to make may carry a retail price of $450 or more.

Boll & Branch luxury linens, which claim to be of the highest-grade long-staple organic cotton, cost $250, delivered directly to your door. It arrives in a gift box and nestled in bags of sheeting fabric and layers of tissue paper. You can't buy them in a store, and there are limited choices for patterns, colors, and packages. All sheets are sold in sets that include pillowcases.

It costs Boll & Branch about $68.46 to make a set of its sheets, before shipping, packaging, and warehousing. That includes fees to the mill and the raw materials. The company buys cotton raw, seeds and all, in India. While "made in Italy" is a typical luxury boast, Boll & Branch notes its organic cotton is fair trade, as is its factory in India.

The founders had misgivings about workers' treatment in the textile industries which led them to research sources of raw cotton and working conditions in factories. They rejected a number of European factories because they couldn't verify the cotton sources. They donate $5 of each sheet set sold, (or about 10% of actual profits) to Not For Sale, an anti-human-trafficking group.

In this activity, you will be asked to evaluate the value chain for Boll & Branch, a maker of luxury linens and bedding sold directly to consumers online. Review the information on value chain in Chapter 4.

Review the information in Illustration Capsule 4.1 (also included below) concerning Boll & Branch’s average costs of producing and selling a king-size set of sheets, and compare this with the representative value chain depicted in Figure 4.3. Then answer the following questions.