The massive markup on athletic shoes

Surely this applies to all shoes and probably all products as well but the other day I was in the market for a new pair of cross-trainers and I was at a number of stores and it seemed that no matter which of the major brands I was willing to buy I was looking at needing to pay $70 or more for a pair of shoes. I think this is just the standard starting point for shoes these days.

Sure you can go to a place like Shoe Carnival and get discounted shoes that I presume the manufacturers have determine they cannot sell elsewhere but the standard starting price for shoes at a name-brand shoe store or Foot Locker seems to be $70+.

I had always though that shoes were overpriced and had heard stories about sweatshops in South East Asia and China where people are paid a couple of dollars a day and started digging a bit deeper as to how much it is that a pair of shoes cost to make.

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Let's keep the human abuse situation out of this for a minute and for the sake of not being political assume that the people who have these jobs do so willingly and that their wages reflect the cost of living and the laws that exist inside of their individual countries. We've all heard the stories of companies like Nike and Adidas "taking advantage" of the labor forces in other countries but there is a little thing called economies of scale and this is a factor that we have to consider. If these companies are paying competitive wages for the country that they are in then they aren't, in fact, taking advantage of those populations. One only need to look at how much a person can expect to pay for literally anything in NYC, L.A, or Chicago as opposed to Oklahoma to understand that geographical location determines what things cost, and how much someone is paid even in my own country, let alone the world.

Now back to the cost of manufacturing. From sources I could find a pair of shoes that are sold for $70 in a retail environment cost around $15 in labor and raw materials at the source. These shoes then have to be shipped and this process normally takes place on massive shipping containers by sea at which point they arrive on the West Coast of the United States. While a shipping container is quite expensive for an individual, they have methods of packing the hell out of these things and it ends up costing the importer around 50 cents per pair of shoes.

Then, since the shoes are being imported the importer has to pay an import tax and customs fee which from what I can find, ends up costing around $1.75 per pair of shoes. So if you are paying attention, we are now up to $16.75 at this point.

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This simply lands the shoes in a warehouse and all the major manufacturers have MASSIVE ones in several locations around the country. There is going to be some level of shipping cost in moving these sneakers around but since they do it in bulk this cost is probably minimal and I can't find an accurate representation of what that might be. Seeing as how it was 50 cents to get it all the way across the Pacific ocean, let's be generous and suggest that it costs around the same to get it to the various warehouses. Now we are up to $17.25.

One the wholesaler makes a deal with a retail outlet the standard price for a pair of shoes would be somewhere in the neighborhood of $35 per pair. Obviously this varies depending on the amount of shoes purchased and the relationship that the various representatives have with one another.

At this point the retailer puts a 100% markup on the shoes, sometimes more depending on how new and popular the shoes happen to be. For example: When the new Air Jordans hit stores every year, these shoes will routinely go for more than $200 a pair and I believe this is done intentionally by creating the impression of scarcity. Nike is more than capable of making a lot more of these shoes than are demanded but they don't do so on purpose. This is the reason why I have never owned a pair of Air Jordans... and never will.

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Does the retail outlet deserve $35 for a pair of shoes sold? Well, it is easy to suggest that they do not but retail space is expensive and with the rising cost of personnel I suppose the ends do justify the means. After all, these are not charities, they are businesses that are there to make money.

We also have to consider the immense cost that goes into design and marketing and also the relatively massive amounts of money that these various companies pay to their representatives such as Michael Jordan, Lebron James, and many others.

For me, I have never bought the "latest and greatest" shoes and am not affected by marketing because I haven't noticed much difference between the various brands over the years. I suppose there could be some difference but for the most part I think it is a bunch of advertising hokum.

But there you have it! Your $70 shoes originally cost $15 to produce! Now I wonder how much it costs to make an iPhone that retails for $1200.