So, how much does it REALLY cost Nike™ to make a flash pair of Air Jordan XXXIs? Nike must be making big bucks on every pair of shoes they make, right? Why does it cost $185.00 to buy a basketball shoe? What is the real cost to make a pair of these high-end sneakers?
Cost to make Air Jordan XXXIs
I don’t have any inside information from the Nike costing department, I don’t know anybody from inside the factory that can pass off secret information, but we can work the price backwards and make a few guesses.
Let’s start with the US retail price of $185.00. The shoe store buys the shoe from Nike in bulk at the wholesale price, which is about 50% off retail. Thus, the wholesale price is around $90 to $92.50. If this is a big retailer, maybe they got a 3-5% discount or free freight to their stores. Because we are talking about Nike Air Jordan XXXIs, maybe Nike does not need to give any discounts to retailers? To the same point, the retailer may be looking for a better profit margin because this shoe is in such HIGH demand.
There it is! WHAM! The retail store just took 50% of the Air Jordan price right off the top. Why does the retail store get to make all that profit? Remember, the store must pay their employees, rent the store space, pay to keep the lights on and they may have borrowed the money to buy the shoe from Nike. So, the store collects 50% but has lots of expenses to cover. While the Air Jordan XXXI will sell out fast, the store will have other shoes they need to sell at a discount.
So how much does Nike get? Remember, Nike does not actually own the shoe factory. Of all the major shoe brands only New Balance owns a shoe factory. So, what did Nike pay the factory for that $185.00 shoe? They paid roughly $25.00 USD per pair.
How can Nike sell a $25.00 shoe for $92.50?
Once Nike buys the Air Jordan XXXI from the factory in China they need to ship it. Most shoes are shipped by ocean freight from China to the USA. An ocean container can cost $4000 to ship and will hold around 3000 pairs of a high top shoe. Shipping plus fees can cost about $1.50 per pair.
Once the Air Jordan XXXI arrives in the USA, it must be legally imported. In the case of a textile and leather sneaker, the US government requires an import duty of 20% of the F.O.B. price. So add $5.00 to the cost.
Now the shoe is in the warehouse: $25 + $1.50 + $5.00= $31.50
Now they need pay Michael his royalty for being the greatest basketball player that ever lived.
It’s hard to know exactly what that royalty amount is. The Jordan brand is selling about 2.6 billion dollars of product and Michael is paid about 100 million. To keep it simple we can figure he gets 5% of the wholesale price. Maybe $4.63 per pair, maybe more.
So, to make the Air Jordan XXXI, ship it, and pay Michael, the total comes to about $41.30.
The $92.50 wholesale price minus $41.30 leaves Nike a profit of $51.20 or about 55%.
This is pretty standard for shoes. Fashion shoes may be more, discount shoes a bit less.
Of course, from their $51.20, Nike brand has to pay the designers, product managers, developers, sales managers, marketing managers, administrators, floor sweepers, advertisers, quality control staff, athletes etc…
To learn more about the cost to make a basketball shoe and the rules for importing shoes check out Chapters 14 and 15 in the book
How Shoes are Made.
Learn more about making shoes:Do you want to learn how big brands make shoes? Now you can! How Shoes are Made will show you how modern shoes come to life! More than just a tour through a sneaker factory and more than your average shoe making book! From drawing shoe designs to sample development and footwear manufacturing, you will learn how it is all done. Written by veteran shoemaking pros, How Shoes are Made will give you a look inside the REAL world of shoe design, development, and mass production. 220 pages with over 400 color photos and drawings. 26 chapters explaining shoe design, footwear pattern making, sample development, footwear materials selection, upper stitching, outsole and tooling design, shoe lasts, shoe costing, quality inspections, starting you own shoe brand, and much more! A must read for young shoe designers, sneaker heads, or any footwear fanatic! Over 2500 copies sold! Read in 60 Countries! See Preview Video On YouTube
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Table of Contents:The Design Process, Shoe Development, Shoe Patterns, Shoe Specifications, Outsole Tooling, Development Process, Pre-Production, Material Preparation, Stitching Operations, Rubber Pressing, EVA Forming, The Assembly Line, The Shoe Last, Footwear Costing, Importing Shoes, Shoe Logo Design, Leather for Shoes, Textiles for Shoes ,Synthetics for Shoes, Foam for Shoes, Know Your Footbeds, Material Suppliers, Shoe Designers Tools, Jobs in the Shoe Trade ,Quality Control, Starting a Shoe Company, Life at a Shoe Factory, Shoe Making Dictionary
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