> The only reason to charge that same ~4x markup on the additional labor cost is to keep gross margins (as a percentage) unchanged, but that would actually incr

> The only reason to charge that same ~4x markup on the additional labor cost is to keep gross margins (as a percentage) unchanged, but that would actually increase profit (as a dollar amount). If _you_ just want to keep the same profit you'd get from offshoring, _you_ can probably increase the price by much less - $13 if demand were perfectly inelastic, somewhat more in practice. I emphasized the _"you"_ in the above quote to show that your explanation inadvertently combines separate business entities into one. The following are separate independent businesses in the chain with their own profit markups: - manufacturer e.g. Wolverine Worldwide makes and sells shoe for $25 - distributor (importer wholesale buyer) (e.g. Bonvita Aps[1]): add 100% markup or ~2x price which increases to $50 - retailer (e.g. H&M clothing retailer): buys for $50 from distributor and adds another 100% markup or ~2x price which increases it to $100 So the counterintuitive ~4x markup math happens because the separate businesses don't add a fixed flat margin but instead, a ~100% percentage margin. This multiplier effect (2x times 2x) across layers of middlemen causes the ~4x increased price difference the consumer sees. So it's not just labor cost but any component cost by the manufacturer can be multiplied by the chain. If a raw material like polyurethane goes up +50 cents, the final cost to the consumer can be increased ~4x to ~$2. This is what Wolverine Worldwide's Mike Jeppesen means in his quote "that cost quadruples after wholesale and retail markups,. This is a great example where journalism on financial topics would actually easier and clearer with spreadsheets so readers can easily see the cause & effect of input costs to final costs. Using a narrative structure and isolated quotes from vice presidents just confuses readers because it seems like "4x" got invented out of thin air. Btw, your explanation that assumes a flat fixed profit margin would be more realistic in a direct-to-consumer model. It looks like Wolverwine Worldwide does run some direct customer websites to sell Keds shoes but most retailer contract agreements require that the manufacturer never undersell the retailer. Therefore, you'd still have the ~4x increase in price but in the D2C channel, the manufacturer captures more of the profit instead of middlemen. [1] https://www.wolverine.com/US/en/international-distributors/ https://www.wolverine.com/US/en/international-distributors/