How Much Money Do Your Favorite Shoes Cost To Make?

In 2006, the basketball shoe industry saw a new competitor enter the market when Stephon Marbury introduced the Starbury, a low-cost athletic sneaker. However, its affordable price tag couldn’t get customers to stop paying $200 or more for Nike shoes because they weren’t aesthetically pleasing.

The since retired NBA star has announced the resurrection of the shoe line but this time he’s marketing it differently. He is letting you know what it costs to make the shoes.

According to Marbury, his $15 shoes are made in a Chinese factory for only $5.

Marbury’s comments come amid conversation and criticism regarding the trend of skyrocketing shoe prices. Let’s use Nike as an example.

According to Bloomberg:

“[In 2014] Nike said it pushed the average selling price for its namesake brand up 5 percent in the past year. For every $100 pair of sneakers Nike sells these days, it pockets $46.60. Another $34.50 of that goes to paying executives, Uncle Sam, and LeBron James, but it’s still a towering gross margin.”

So lets break this down.

• It costs Nike $18.90 to make a $100 shoe.
• Nike retails the shoe for $100, a 429% markup.
• When a shoe is sold the company pays out $34.50.
• The company receives $46.60 from each pair of sneakers made.
• The final profit per $100 pair of shoes is 147%.

So now that we have all these numbers what do they actually mean? And why is Nike different from Starbury?

Nike is able to market their shoes to almost any extent and still see a large volume of sales because according to Forbes they possess a 59% share of the American shoe market.

Also, Nike’s ability to toy with price with little effect is because consumers look to make a statement with their footwear and become fashionable, something you can’t put a price on apparently. In this case money is of no concern. In fact during 2013 consumers spent $6.46 billion on shoes. Yes, billions.

According to Marbury, his shoes are made in the same factories that Nike and Air Jordan are made in. So, what’s stopping consumers from buying $15 sneakers vs. $200 sneakers?

The answer is simple, marketing.

Nike can keep the money flowing by writing checks for millions of dollars for ad campaigns. These campaigns have put them at the forefront of the industry because Nike has invested so much in advertising that when you look left, right, sideways, backwards, up, and down or whatever way you can think of, you see one thing…. Nike shoes.

Nike has kept true to funneling money into advertising. Take this analysis done by Matt Powell

In the end there isn’t much to be said other than, “Wow, that’s a lot of money.” To all of you, I give you a challenge. Do your research next time you buy new shoes. Analyze the shoe from every point except colorful aesthetics. You won’t find much difference because every shoe has the same basic form. The only difference is the amount of money you have to pay to get each brand.