Does Nike ethically produce shoes?

shutterstock_94700911Does Nike ethically produce shoes?

The short answer is yes, they do.  The long answer is, it’s not easy.  There is some irony to Nike’s ethical production issue.  The irony is that Nike takes all the heat, while they have one of the best records.  In my personal experience making shoes in China, (not for Nike) we purposely look for shoe factories that have ongoing Nike production.

The Nike certified factories have better quality, better worker safety, Nike labor audits, etc..  I worry more about the quality of the non-branded or off-brand shoe factories.  Non-branded shoes are usually made by middleman or agents who just don’t care.  Now, I’m not saying the shoes you buy at WalMart are guaranteed to have come from a factory with ethical production problems, but I do know the Nike shoe will be from a better factory.

 

Shoe factory wages are based on local laws

Can we blame Nike for the wages paid to workers in their subcontract factories in foreign countries?  No.  Blame yourself.  As customers, we demand maximum value for our money. Nike would soon be out of business if they were not competitive in the market.  The wages paid in shoe factories are based on the local laws. Nike is more likely to demand better working conditions over higher wages and the best shoes are made by well paid, skilled workers, not minimum wage slaves!

How are Nike shoes Made? Cold Cement ConstructionIs slave labor used to make Nike shoes?  No.  You can’t make high-quality goods
in substandard, abusive factories.  It’s just not possible.

Is Nike making a huge profit from cheap labor?

Is Nike profiting off the backs of local workers? No.  I’ve seen some blog postings that claim Nike makes $164.00 in profit from a $220.00 shoe.  I’m sure they wish they did but in reality, the profit is closer to $60 before marketing, etc.

Estimating Nike’s profit calculation

If we work the profit calculation backward from the $220.00 Nike MSRP sale price to the end user this is what we get:
The store buys the sneaker from Nike at around $110-$120. Expect Nike’s margin from the $110 sale price to the store to be 55%. That’s approximately  $64 in margin dollars or profit from the sale.
The shoe has cost Nike approximately $2 to ship, 20% import duty, another 8% or so for R &D expenses. In the end, Nike paid roughly $35.00 to the factory to buy each pair of shoes.

Of the $35.00 Nike paid to the factory, the factory profit is less than 10%.  You can learn more about the profit margins, costing, duty calculations, etc. in our books How Shoes Are Made and How to Start Your Own Shoe Company.

Nike is a public company so we can look up their Net Margin and see it is about 14%. Nice, but not stunning.
http://www.stock-analysis-on.net/NYSE/Company/Nike-Inc/Ratios/Profitability

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