32 ms·

How much do you think it costs to make a pair of Nike shoes in Asia?

• sharemywin 2y ago
  bottom line there's very actual margin for the companies to play with on tariffs.
  • SV_BubbleTime 2y ago
    Best to avoid the tariffs then? Is there a reason that Nike can not make shoes in the US?
    • goatlover 2y ago
      They will be more expensive to make in the US and will likely sell less shoes as a result. This will be the case for most things that are cheaper to make overseas. Or with things that are difficult to grow here at scale.
• Clubber 2y ago
  >The second thing we see is that Asian manufacturing in Asia produces US jobs. You go to Footlocker to buy a pair of $100 shoes because you can afford them. This creates jobs for the Footlocker employees, Nike designers, marketing teams, and other US people throughout this chain. In all fairness, most of those jobs would still exist if manufacturing was brought onshore. The fact that they were manufactured in Asia makes no difference here, except for perhaps the longshoremen that was included in "other US people."
  • ravelantunes 2y ago
    The author’s point is that the lower cost of goods coming from Asia results in increased demand, which then generates more jobs in the post-manufacturing part of the chain.
    • xienze 2y ago
      That completely discounts the strategic value of self-sufficiency. I mean, why not outsource ALL manufacturing and agriculture if someone else can do it cheaper? Surely that wouldn't come back to bite us, right?
      • ElevenLathe 2y ago
        Yes, the goal is for everyone to be doing the thing they can do most cheaply and then trading with everyone else. Karl Marx and Ludwig von Mises would agree on this point. The idea that the Westphalian state should get in the middle of this is the aberation. The only reason national security is a consideration is because of the nations. I don't care if my shoes are made in Asia, though I suspect they wouldn't be if we paid Asian shoemakers an honest, globally-clearing wage.
      • basisword 2y ago
        Self-sufficiency is irrelevant to the discussion above. If prices go up, Americans can buy less, and the number of non-manufacturing jobs at these companies will go down.
      • coffeebeqn 2y ago
        Are cheap sneakers a strategic asset now?
        • wegfawefgawefg 2y ago
          Learning piano makes me better at music. Learning the violin is then easier.
        • xienze 2y ago
          Are you intentionally being obtuse and thinking I was only talking about sneakers? Obviously I’m talking about trying to keep a wide range of vital goods manufactured within the US. Food, weapons, chip fabs, electrical components, pharmaceuticals, medical supplies, etc. are all things we should try to have robust domestic production of.
      • 2y ago
  • 4ndrewl 2y ago
    Incorrect. The price of manufacturing, because of the cost of living differences, would result in a far more expensive product. Free-trade brings into being products that previously would not have existed (Nike trainers for the masses).
  • jasonlotito 2y ago
    > In all fairness, most of those jobs would still exist if manufacturing was brought onshore. Yes, if you waved a magic wand. But considering bringing manufacturing onshore to replace Asian manufacturing will take at best years if not decades, no, those jobs will not still exist.
  • doctorpangloss 2y ago
    The reason you’re buying Nike and not GLRMNTXH brand knockoffs manufactured in the same factory and half the cost is because of stuff the US employees are doing.
  • arbitrary_name 2y ago
    If those shoes cost $200 because of higher labor costs, then a lot less people are buying them. They will buy worse imports at $180. The consumer loses.
  • onlyrealcuzzo 2y ago
    The point is - there isn't a market for $400 crappy basketball shoes. There is a market for $120 ones...
• JSR_FDED 2y ago
  It’s like people excited about the new datacenter being built in their town, think of all the jobs that will bring they cry. Nobody realizes it takes 6 people to run a datacenter. Bringing “manufacturing back to the US” is a fool’s errand. The future of manufacturing is automation, not jobs.
  • netsharc 2y ago
    I saw a video today on Instagram (from Tiktok), AI generated of course, where rows and rows of people sit at sewing machines sewing shirts, but instead of the typical Asians one commonly expects to see, they're all overweight American-looking people...
    • tekla 2y ago
      Apparently China propaganda making fun of the US.
      • basisword 2y ago
        I'd say this is more satire than propaganda.
        • some_random 2y ago
          Political satire usually is propaganda.
          • hdjjhhvvhga 2y ago
            Not always and I'm not sure if usually, but in this particular case it's both.
          • keybored 2y ago
            Yeah. And people need to stop thinking that things that they can label as funny or whatever else is not propaganda. Everything with an agenda is propaganda. “Wholesome Biden & Obama memes” are probably propaganda. And videos about “fat Americans” being marched into factories sounds like something the Chinese could make.
• greatgib 2y ago
  All around the "developed world", the shop/retailer/supermarket/distribution part of the price of a product is around 50%. Whatever the product or its price. I'm wondering if part of our issue with crazy inflated prices despite low margin for industry and manufacturing actors is not because of this abused margin for retailers. That have also a huge power as it is difficult to negotiate when you depend on your product to be buyable in the market. To me, that explain a big difference with asian world, where you notice, even for asian shops in western countries that prices are still quite cheap. Something parallel to that that I have noticed is that decades ago we were used to buy from small individual shops, but now a few retailers and chains have almost a monopoly on the market. I see the same pattern for movie theaters. They used to be independent mostly with affordable prices. Now 2 or 3 big chains bought them all, and it is very rare to still encounter independent movie theater. And once they got a good monopoly, ticket prices skyrocketed to insane levels.
  • netsharc 2y ago
    Isn't what you're describing the effect of hedge funds moving into everything in order to "maximize returns"?
  • bryanlarsen 2y ago
    > retailer part of the price of a product is around 50% Not according to the article. The retail price is $100 for a shoe they buy from the manufacturer for $50, but $24 of that $100 is "discounts". Therefore the average price sold at is $76, making the retail part of the price 1/3.
  • potato3732842 2y ago
    While retail gross margins are not atypically on the order of 100% (less for more expensive goods, much more for cheaper ones) actual net margins are typically single digits. It costs money to retail goods.
  • DoneWithAllThat 2y ago
    You’re essentially just claiming price gouging without saying as much because otherwise the economies of scale would not exist (which anyone with any knowledge of how the economy works knows does in fact exist). “Smaller number of larger players with greater buying leverage as well as lower marginal costs leads to higher prices for consumers” is just using a lot of words to say “evil corporations are price gouging”, which is not true.
• megaman821 2y ago
  For me this glosses over on why would see the same 100% markup on the customs duties as they rise. A 100% at a low tariff rate is just pricing in the increased paperwork and accounting, but at a super-high tarrif rate this become pretty unjustifiable. Why is not more likely customs becomes mostly a passthrough cost?
  • Cerium 2y ago
    It is a passthrough cost because of the business models. In this example the importer (Nike) is paying the cost, and then retailers are buying the product from them at a price that includes the tariff. The retailers don't care why the shoe is $75 or $50. A retailer is concerned that there are customers willing to pay a price which enables them to make a profit. For most retail businesses that price needs to be about 2x cost of goods. Until you get to extremely high-end goods this multiplier system works fairly well to accommodate the various costs the business has. It is an assumption that there are many business costs that scale linearly with sale price. In reality not all do, but there are many: insurance, return costs, loss, and customer service expectations all scale with dollar values. Edit: if we switched from an import tariff to a foreign goods sales tax we could avoid this particular problem.
    • SoftTalker 2y ago
      > if we switched from an import tariff to a foreign goods sales tax we could avoid this particular problem. How are these materially different in terms of what the end consumer pays?
      • _diyar 2y ago
        Because tariffs are calculated based on the value of the good at the time of import, while sales-taxes would be calculated at the end. The article explains the tariff scenario. In the tax scenario, Nike can operate like in the pre-tariff world, while the retailer would have to charge the tax.
        • 2y ago
• rayiner 2y ago
  Americans need to get over their view of “Asia” as being about making shoes. When I was working in engineering in the early aughts, we mocked the Chinese as being able only to copy American technology. Today, China is competitive with or ahead of America in key technology areas, including nuclear power, AI, EVs, and batteries. We need to anticipate a future where China is equal to America on a per capita basis, but four times bigger. Is that a world where “Designed by Apple in California, Made in China” still makes sense? What will be America’s competitive edge in that scenario? What seems most likely to me in the future is that the US will find itself in the same position the UK is in now. Dominating finance and services won’t mean anything when both the IP and the physical products are being produced somewhere else.
  • sandworm101 2y ago
    >> future where China is equal to America on a per capita basis, but four times bigger That is an environmental apocalypse best avoided as early as possible.
  • bpt3 2y ago
    Their population is declining, and they are a long way away from parity with the west on a per-capita basis. I think China missed their opportunity. Also, the UK hasn't dominated finance for a century and has never been dominant in services, so it doesn't seem like an apt comparison.
    • bryanlarsen 2y ago
      > Their population is declining Not where it matters. China has a much larger under-employed population base than the US has. They still have a few hundred million peasant farmers whose children can and are getting educated and moving to the city. Their pool of labour is growing while the US's is stagnant. Not that it needs to grow -- over the last decade or so China's factory employment has been relatively constant while output has surged dramatically. Their factories are rapidly automating.
      • giardini 2y ago
• ersiees 2y ago
  So, 100$ Nike shoes will soon be 125$.
  • darknavi 2y ago
    The specific (fictitious) example they gave was $100 -> $150 due to a ~$23 tariff. > But if we bump the cost of freight, insurance, and customs from $5 to, say, $28, then they wholesale the shoes to Footlocker for about $75. And if Footlocker purchases Nike shoes for $75, then they retail them for $150. Everyone needs to fixed percentages to avoid losses. The point being that many parts of the supply chain don't operate on fixed costs and instead percentages.
    • Symbiote 2y ago
      > The point being that many parts of the supply chain don't operate on fixed costs and instead percentages. That's how it was working in most wealthy countries, where tariffs were generally low or very low. I don't see why it must continue to work that way in the USA with 50% or 100% or more tariffs. If Footlocker wish to charge double the post-tariff price, that leaves room for a competitor to change double the pre-tariff price. (Or double the pre-tariff plus a tiny bit, to account for the increased cost of insurance, theft etc.)
  • kjkjadksj 2y ago
    Still $25 when they hit the burlington or ross in 6 months then back to $75 when people resell those ross shoes on ebay.
• tmaly 2y ago
  I think the one thing I am not seeing much discussion on is, will the end consumer pay for these $150 sneakers or will they simply switch to lower cost alternative brands?
  • bryanlarsen 2y ago
    The assumption in the modelling is that sales will decline proportional to the price increase. IOW, they'll sell 2/3 as many shoes at 150% of the price. Probably not a great model, but it's simple and a reasonable guess. Remember all the competitors will have price increases too.
  • gorfian_robot 2y ago
    fun fact: sneakers are already $150. went shoe shopping at a "sketchers warehouse" and found a pair that fit well and noped them back on the shelf when I checked the price.
    • giardini 2y ago
      My sneakers have been $200* for the past 5 years but then they're made in the USA. It's time to buy a new pair. * - I have a large foot and believe I'm paying primarily for the materials in my shoes, which easily weigh twice what my friends' shoe do!
      • thfuran 2y ago
        Unless you're getting goretex or leather (and even then, shoes are small), there's not really anything in a shoe besides a bit of rubber, some EVA foam, and probably some plastic mesh. The materials cost is very low.
    • tmaly 2y ago
      yes, I know we already have $150 sneakers, but you can get sneakers for $30 at Costco still.
• gorfian_robot 2y ago
  Nike doesn't sell shoes. Those are a loss leader. They sell you brand and lifestyle bullshit at a very high markup.
  • reed1234 2y ago
    "In fiscal 2024, footwear accounted for 68 percent of Nike's total revenues." https://www.statista.com/statistics/412760/nike-global-revenue-share-by-product/ https://www.statista.com/statistics/412760/nike-global-reven...
    • echoangle 2y ago
      Revenue doesn't really show they are not loss leaders. Profit would be more useful.
  • crazygringo 2y ago
    That's a bold claim. Do you have a source for that?
    • gorfian_robot 2y ago
      subtlety is lost. I am saying they aren't selling you $200+ shoes. They are selling you a shoe that maybe costs them $10 and $190+ of "brand".
      • echoangle 2y ago
        So how are they loss leaders? I understood the comment as "Nike makes a loss on shoes and actual profits come from the other branded stuff they sell".
      • hmmm-i-wonder 2y ago
        I would also say Nike WANTS to be a lifestyle brand, but in public perception they haven't been able to move out of an athletic shoe brand.
      • 2y ago
• hx8 2y ago
  > But if we bump the cost of freight, insurance, and customs from $5 to, say, $28, then they wholesale the shoes to Footlocker for about $75. And if Footlocker purchases Nike shoes for $75, then they retail them for $150. Everyone needs to fixed percentages to avoid losses. I don't understand this paragraph. If Footlocker was okay with $50 profit/shoe, why do they need to claim $75 profit/shoe in their costs per shoe go up? The costs of handling the shoes, retail space, advertising, and labor are all fixed.
  • ty6853 2y ago
    Because the market recognized value add is the capital investment and returns, including the credit basis on which inventories flow. These people are operating on a per $ basis, not a per shoe basis. If the margins % lower then the capital will flow to something else more profitable and then prices rise until the margins are relatively flat across similar productive investments.
    • pfortuny 2y ago
      Gains and losses are measured in % not in quantity because a dollar (or ant currency) has no fixed value. Sorry: I intended to reply to the grandparent.
    • pfannkuchen 2y ago
      That doesn’t really make sense to me. The market cares about dollar returned vs dollar invested. If some piece in the middle of the chain goes up and end customer prices go up as well, that doesn’t directly affect investors at all. The way it could and likely will affect investors is if people start buying fewer shoes, but that is a different process than what you are describing. If I’m off base can you help me understand what you are saying?
      • hamburglar 2y ago
        Surely you can see that putting in $75 to make $150 for a $75 profit is significantly different than putting in $10075 to make $10150 for the same $75 profit, yes?
• aimor 2y ago
  Trying to summarize the summary for myself From a $100 shoe that sells for $76: - $24 goes overseas (22 cost, 2 freight) - $8 goes to the US gov't (3 import, 2 Nike tax, 3 Footlocker tax) - $33 goes to US employees or businesses (5 Nike marketing, 11 Nike expenses, 17 Footlocker expenses) - $5 goes to Nike (11% return) - $6 goes to Footlocker (8% return) But now with 100% tariffs, it's a $100 shoe that sells for $100 (or a $132 shoe that sells for $100) and: - $24 goes overseas (22 cost, 2 freight) - $29 goes to the US gov't (22 import, 3 Nike tax, 4 Footlocker tax) - $33 goes to US employees or businesses (5 Nike marketing, 11 Nike expenses, 17 Footlocker expenses) - $7 goes to Nike (11% return, 7.15 exactly) - $7 goes to Footlocker (8% return, 7.45 exactly) And if a US shoemaker wanted to undercut the import, a Made in USA shoe that sells for $100: - $7+ goes to the US gov't (? shoemaker tax, 3 Nike tax, 4 Footlocker tax) - $79 goes to US employees or businesses (46 to shoemaker, 5 Nike marketing, 11 Nike expenses, 17 Footlocker expenses) - $7 goes to Nike (11% return, 7.15 exactly) - $7 goes to Footlocker (8% return, 7.45 exactly)
  • milesskorpen 2y ago
    The piece to add there is that all this money is getting paid by the consumer. The overseas piece doesn't change, same number of US dollars going to the other country. The $24 increase in cost is paid by the US consumer.
    • slg 2y ago
      It's just a sales tax. I don't know why people opposing tariffs never talk about them in this manner because sales taxes are something people innately understand if they have spent any time in the US and "tariffs" clearly aren't as well understood.
      • ajmurmann 2y ago
        It's worse than a sales tax. Tariffs have a few market-distorting effects that a sales tax doesn't. * Domestic consumers and companies are incentivized to potentially go for the 2nd best product. This over time can impact productivity as the tooling will decline over time as inferior solutions are bought. * Reduced competition. We've seen this with the 25% "chicken tax" on pickup trucks. Arguably one culprit in US automakers falling behind is that they had a protected market around pickup trucks where it was hard to impossible for foreign competition to keep them on their toes. So US automakers retreated more and more into this safe haven. * Destruction of economies of scale: If everyone wants the entire supply chain to be replicated in their country, we obviously loose economies of scale and thus efficiency. This sounds like it would be small but having multiple Shenzhen's is just not viable and we'll have to deal with higher prices and less product choice. * Galapagos island syndrome: Over time separation of markets can lead to incompatible technologies which amplifies all other points.
• SoftTalker 2y ago
  > As the US has switched to a post-industrial economy, a lot of the wage growth has been in knowledge intensive services—medicine, law, engineering. I.e. bullshit jobs.
  • hackeraccount 2y ago
    Hey! There's no need to make fun of my job!
  • Gothmog69 2y ago
    I mean only one of those is a bullshit job.
• ck2 2y ago
  I was going to link the excellent solereview article but it looks like that's exactly what the post is about. I used to be able to buy good running shoes on clearance every year at $30-$50 Even through 2020-2021 or so But not anymore, now even on "clearance" they almost never drop below $100 and never ever to $50
• yapyap 2y ago
  This derekguy guy always has the best posts clothing related afaik. Also > Again, it's a popular misconception that all overseas production is sweatshops. Production can be done ethically abroad and still be relatively cheap because the cost of living is not the same everywhere. I encourage you to note assume that every Asian worker is a slave No not necessarily slave slaves but I do assume they’re wage slaves, at least the line workers, the higher ups will be compensated a bit better I’m sure.
• xpe 2y ago
  Are comfortable and repairable shoes possible and sensible from an economic point of view? Any recommendations?
  • crazygringo 2y ago
    Classic leather dress shoes can last decades and can be resoled many times. But most people don't consider them comfortable. More the opposite. But no, the foam and rubber modern "comfortable" shoes are made of are not repairable. Fundamentally, the foam or other sole material simply breaks down. The rubber wears away. And the woven and plastic materials the upper are made of fray, lose padding, and otherwise break down as well.
  • codazoda 2y ago
    I don't think they are right now. I have very wide feet, so much so that I've seriously considered manufacturing my own shoes (possibly with a 3D printer). Shoe makers and repair shops do exist but they are becoming quite rare. My understanding is that a good quality repairable shoe is about $500 or about 5x the price of the $100 shoe we're talking about. Repairing it is labor intensive and adds even more to that cost. So, I can buy at least 5 pairs of $100 shoes for the price of a good quality and repairable shoe and that doesn't consider the repair costs.
  • singron 2y ago
    I've used shoe goo to get more life out of shoes. It's marketed as an adhesive, but you can apply it to the bottom of the sole to rebuild thickness to the tread. A single tube could be used for dozens of repairs. After that for me, usually the textiles in the upper fray from the inside out, and I just ignore it until it becomes externally visible or uncomfortable. I don't think more extensive repairs are economical, and you are better off wearing shoes you like until they disintegrate. There is a bit of mythology about buying expensive boots and repairing them in the hope that it's more economical, but it's really not: https://mastodon.social/@danluu/111068432320682422 https://mastodon.social/@danluu/111068432320682422
  • TrackerFF 2y ago
    I've had a couple of leather shoes (goodyear welted oxfords) repaired, and the last pair cost me around $100 to get re-soled. It was a local cobbler that has a very, very small shop. I mean if you pay $300 and up for a pair of shoes, it could make sense. If you pay $100 for a pair, you might as well just purchase a new pair. In my case I re-sole the shoes because my shoes fit me well, and they're more on the high-end and thus I've paid a bit for them at the time of purchase. Makes sense for me to re-sole a pair of $1k shoes, rather than purchase a new pair. To get the prices down, you'd need a lot more cobblers though. And there just aren't many going to trade school for that. It is very much a "artisanal" craft today, akin to tailoring.
• paxcoder 2y ago
  [dead]
• sitkack 2y ago
  Article has absolutely nothing to do with the actual cost of shoes. Just the simple cost of model of manufacture -> distributor -> retailer. Nothingburger.
• asdefghyk 2y ago
  my guess, less than $5
  • chrisco255 2y ago
    This is closer to correct than the article's claims. You can buy sneakers for $3 on Alibaba, as an individual: https://www.alibaba.com/product-detail/Cheap-New-Trendy-Leather-Shoes-Versatile_1601212411426.html?spm=a2700.galleryofferlist.normal_offer.d_image.487413a06PocvO&selectedCarrierCode=SEMI_MANAGED_STANDARD@@STANDARD https://www.alibaba.com/product-detail/Cheap-New-Trendy-Leat...
    • e44858 2y ago
      Or $0.80 if you make a big order of 100k.
• crmi 2y ago
  Interesting article but fails to mention about Nike big pivot to DTC around covid times. So will likely be taking home a lot more than 9% (or _were_ up til last year)
  • amotinga 2y ago
    what is DTC?
    • asadotzler 2y ago
      probably direct to consumer, website sales and the like.
    • crmi 2y ago
      Yes, direct to consumer
    • hed 2y ago
      Direct To Consumer. Selling directly to their customers on Nike.com disintermediating Foot Locker or another distributor/retailer network.
• jimt1234 2y ago
  Sorta related: Those Crocs/clogs shoes have been extremely popular for a few years now. ... I've always wondered how much it costs to make that type of shoes (Crocs/clogs) - it can't cost more than $1 to make most of them; they're just injection-molded, right?
  • josefresco 2y ago
    You can buy Croc knockoffs at the "Dollar Store" yet Crocs still exists. Why? Is it purely first-mover advantage/brand or is there an engineering edge?
    • mkipper 2y ago
      There are _some_ differences in quality, but I think they're pretty minor. I recently visited the Philippines and a friend bought some knockoff Crocs at a market. The little rivet thing holding the strap to the shoe had the logo printed right on the exposed plastic, and after a few days, the logo was mostly scratched off. But my wife's Crocs that she bought a decade ago still look fine because there's some sort of sealant on top of the logo. Is that worth an 800% markup? Probably not. But the knockoffs do cut some corners that the genuine articles don't.
      • thfuran 2y ago
        Do Crocs bought today match up to those old ones?
    • lolinder 2y ago
      I had a pair of knockoffs that were passable for limited purposes but certainly didn't pass muster as my primary shoe. I thought that the style just wasn't my thing. Then I got a pair of real Crocs and they very quickly became my go to for most purposes. I don't know enough about shoes to explain why, but the difference in comfort level was huge.
    • swah 2y ago
      I don't know about Crocs but brazilian flip-flops "Havaianas" never lost market share even though it feels so trivial to clone it. The only two modes of failure of this sandal is "drying up" after a couple years and broken thong straps (yes, 3rd parties sell those as replacements..) I guess they make sure they have cheap offerings and are always investing in design and marketing so no one can enter this market..
• skirge 2y ago
  cost != value and value != price. and consider alternative cost - highly trained workforce making shoes is a waste of resources.
• logifail 2y ago
  According to https://news.ycombinator.com/item?id=41283368 https://news.ycombinator.com/item?id=41283368 we should be linking to the primary source. Q: Is there a specific reason* that this thread links to threadreaderapp? * other than politics, which we try Really Hard not to bring into HN...
  • devb 2y ago
    One great reason is that you need an account on X to read the thread. I deleted my account many months ago, along with many, many other people.
    • logifail 2y ago
      I've just opened https://x.com/dieworkwear https://x.com/dieworkwear in a private browsing window and - from here at least - I don't appear to need an account.
      • gdown 2y ago
        From what I can tell you need an x account to read replies, so I can only see the first tiny bit of the thread without an unroller. (For this thread: https://x.com/dieworkwear/status/1909741170953273353 https://x.com/dieworkwear/status/1909741170953273353)
    • ForOldHack 2y ago
      Thank you.
  • octernion 2y ago
    afaik you still need an account to read more than the first post in a thread, and many of us don't have twitter accounts any longer
• axegon_ 2y ago
  There was an interview with the local marketing managers for Coca Cola and Pepsi when I was a kid. I vaguely remember it (and also the idea was somewhat foreign to me since the world had just started opening for eastern Europe and it was the first time many of us heard the names such as Coca Cola, McDonald's, etc). The one thing that stood out was the Pepsi manager raging about campaigns, failed products and whatnot. The Coca Cola manager calmy looked at him and said: "Sir... Look at our product... Who in their right mind would pay for a rusty-colored liquid as a beverage? Absolutely no one. It's all about the advertisement". Same story here - would you buy a pair of shoes from anyone, seeing the horrible conditions they work in, sleep deprivation and poverty if you knew they'd still get close to nothing? Probably not. You see a fancy store (or website these days), you see a product you like and you're invited to open up your wallet for a fancy pair of shoes. Deep down you still know they came from the people working in horrible conditions but, you know, out of sight, out of mind. And thus, you are willing to pay the extra price.
• sys32768 2y ago
  I prefer leather shoes that last five years or more, and will happily spend $200+ for them.
  • _diyar 2y ago
    How is this relevant to the article?
  • int_19h 2y ago
    That is great for those who can afford $200+ shoes, not so much for those who're already struggling to make ends meet. Sure, in principle, they will save more long term. But it'll take time for those savings to realize, and they need shoes now (to wear them to work, for one).
• raincom 2y ago
  I worked in the retail; it is the shittiest job I ever had. I was given an abnormal schedule: two days closing, one day opening, one mid shift (and I should work either Saturday or Sunday). The churn is really high: people leave even if they find a better yet shitty job. Which jobs do you want to create in US? Retail jobs or manufacturing jobs?
  • chrisco255 2y ago
    Both!
  • const_cast 2y ago
    Given the manufacturing is currently being done by people making much less than US minimum wage, I’d have to say retail! People forget why manufacturing was moved out of the US. Manufacturing jobs sucked major ass. Then they sucked less ass, when unions started gaining power. Then the companies saw their employees had prosperity, said “fuck you”, and left. We’ve crippled unions to such an absurd degree that the reality is that, if manufacturing came back, the quality of life for average Americans would go down significantly. It’s not 1955 - you’re out of your goddamn mind if you think a factory worker can maintain the quality of life now, let alone afford a suburban home on one income like in the past.
    • beeflet 2y ago
      Because of tarrifs, demand for local manufacturing increases and manufacturing wages will be greater than they are currently abroad due to newly constrained supply. Okay, then we'll have unions then. I don't see what the issue is here. I have heard this reasoning several times, even in person, it seems to misunderstand the action of protectionism in the first place. You can't have an industrial economy if workers don't have any leverage to demand sufficient wages or if unions have so much power that they bring the balance of labor negotiations to unprofitability. I don't think manufacturing jobs suck ass. They probably aren't great for your physical health, but it is better for society spiritually in the long term to have the majority of society focused on producing something real rather than just having an endless network of fake jobs as a means of wealth distribution. The factory worker of today can't afford anything because they are competing with third world wageslaves to outsource manufacturing to our geopolitical rivals.
• phkahler 2y ago
  I've always wondered why the supply chain has exponential price increase at each step. The example given (guessed at) is the factory produces the shoe for $12.5 and sells it to Nike for $25. Nike then sells it to Footlocker for $50 and they then sell to a customer for $100. Everyone expects to mark up their costs by about 100 percent. Why is that the case? Even if we say the markup isn't 100 percent, why is it a percentage of cost at all? If the shoe factory can make $12 then why can't Nike and Footlocker both make $12 and retail the shoe for $50? I'm not saying things should be different, just wondering why it is the way it is. If Footlocker was also selling some cheapo shoe for $50 presumably they do the same amount of work to bring that to the store. Are they only paying $25 for those? Why does it cost half for them to handle a cheaper shoe?
  • sandermvanvliet 2y ago
    Isn’t this simply taking advantage of what the market is willing to pay?
  • gnfedhjmm2 2y ago
    Because then one unit of thing is theoretically one standard deviation from being profitable. So you can have a break even price.
    • phkahler 2y ago
      Can you clarify that? It sounds like there may be theory behind it, or are you trolling?
  • yibg 2y ago
    The numbers at each step is only considering the marginal cost. There are various overheads that are fixed, some described in the article. And of the day the actual profit at each step isn’t necessarily very high.
  • audunw 2y ago
    On thing you have to consider is the scale at which these shoes are sold at each step. From the factory they're processed and shipped in giant containers. The overhead of handling each shoe is fairly small at that stage. When it comes to the retailer, there's a huge increase in the amount of work and overhead for each shoe sold. And the labor cost for that work is much higher than on the Asian side of the supply chain. That's also where you get potential waste from returns and discarded inventory and such. The retailer also have their own marketing costs. I don't find it strange at all that the retailer expects a 100% markup.
• hnburnsy 2y ago
  The thread was kind of hand wavy over the "$24* discount" for Footlocker? From the linked article... >Footlocker’s purchase price (read footnote #3) for every sale of $100 shows up as $66 in their financial reports, and not $50. In plain terms, Footlocker sells its merchandise for a 24% discount on the average. So $100 was never the sale price, just some made up, hoped for number that only appears on the shoe box, and not on anyone's financial statements. Really this should be Footlocker makes $6 on selling a $66 sneaker, for a margin of ~9%. BTW, both Footlocker and Dick's have gross margins ~30% but Dick's has an operating margin around 12% while FL is 1-2%. Clearly FL is an inferior retailer. And the linked article does cover Nike selling directly... >And what happens if brands skip the retailers and operate their own stores? adidas and Nike already have their own shops, but direct-to-customer retail comes with its set of challenges. Brands will incur costs otherwise absent in the wholesale business model; spends like leasing+manpower+operational costs, store set-up and periodic re-modelling cost, the entire risk of inventory, and costs associated with warehousing and distribution. That’s only at the store level, there will be additional off-site resources needed in the back-end to support retail operations. The brands will make some extra margin selling out of their own stores, but the best case scenario will be an additional 10%, which is slightly above what a highly evolved retailer like Footlocker makes annually after taxes. I would argue that a great deal of selling today is direct, no stores involved at all.
  • timothyduong 2y ago
    “ I would argue that a great deal of selling today is direct, no stores involved at all.” That assumption burnt the previous Nike CEO post COVID.
    • Spivak 2y ago
      Yep, direct from the manufacturer— no. Direct from the retailer without touching a physical store— yes.
      • jay_kyburz 2y ago
        You can buy shoes directly from Nike here in Australia. Is that not the same in the states?
• AtlasBarfed 2y ago
  "Everyone needs a fixed percentage to make money" I get they WANT to, and it's what a shoe retail strives for, but this isn't accurate. Cars for example aren't 100% marked up. That would be insanity.
  • bluedino 2y ago
    Shoe dealerships don't sell used shoes and have service/parts departments where they make most of their money
  • anomaly_ 2y ago
    Because cars are a high $ item vs. shoes. A business's overheads don't scale linearly with item price, so it's possible for a car mfg to achieve a similar net profit margin to a shoe mfg but with substantially lower gross profit margins.
• bluedino 2y ago
  What about the $25 shoes at Walmart?
• markus_zhang 2y ago
  I hope the elites of US are not thinking about moving shoe-making back to the US because it doesn't make sense. I'm sure (I hope, actually) that some policymakers, or some researchers, have done some conclusive researches about -- give X years into the future, and let's see we do not want to disrupt the current social-economic reality too much (no revolution, no major wealth re-distribution, no world wars, etc.), which industries can we bring back, and into which state, and sell its products into which countries, realistically.
  • bloppe 2y ago
    The opinions of "elites" simply don't matter. There's only one guy who matters when it comes to policy now. And he's not known for his thinking abilities
    • markus_zhang 2y ago
      If the elites don't disagree with him I'd say they probably "in average" agree with him. Trump is just one man.
      • bloppe 2y ago
        Depends what you mean by "elite". Obviously a ton of people disagree with him. I'm just saying, that doesn't matter. There's not a single Republican in government that's willing to publicly contradict Trump on anything.
    • booleandilemma 2y ago
      You don't actually think he's making these decisions himself do you? He has advisors for these things.
      • doctorpangloss 2y ago
        Yes, his advisor, ChatGPT, account name donjr3@yahoo.com.
      • 2y ago
• 2muchcoffeeman 2y ago
  Once I was in the US and bought a pair of New Balance that were made in USA. I had the exact same model made in Vietnam or Indonesia. The Asian made shoe of the same model out lasted the US shoe by a couple years. The US made started falling apart less than a year in.
• christkv 2y ago
  Relatively easy stuff like shoes can be made in a bunch of countries and that production will just move to whoever has the best tariff deal at the end of all of this. More interesting will be stuff like electronic components. Most of the cheap versions are all made in China. More expensive versions can be sourced in Japan, Taiwan and Korea (likely to do tariff deals). I think we might be looking at the end of very cheap electronics for awhile.
• ForOldHack 2y ago
  "I encourage you to note assume that every Asian worker is a slave." I do NOTE, that I was on Korea for 18 months, and saw over 20 factories, and knew a few people that worked there. They were making 1/10 of the minimum wage in America at the time, $0.75 vs $7.50, Today they are making $6.94, so I would assume that They are making few shoes in Korea. "While it's difficult to pinpoint exactly which country pays the absolute least for shoe manufacturing, countries like Vietnam and Cambodia are known for having lower labor costs and are major footwear exporters, making them likely to be at the lower end of the wage scale for shoe production." In Cambodia, they pay $208 per month, which is assuming a 160 hour work month, which I guarantee is the bare minimum which gives them $1.30 in wages per hour. "In Vietnam, shoe manufacturing workers typically earn wages that are significantly below a living wage, though some companies affiliated with the Fair Labor Association (FLA) pay double the minimum wage." In Vietnam they pay $68/ month, which is $0.42 and 1/2 cents an hour. The premise of the article, and the statistics they use are all based on preported manufactures claims, not the reality that exists in that country. I would dismiss this article as pure fantasy.
  • JackYoustra 2y ago
    I mean, unless you think it's forced labor it's better than the alternative
  • doctorpangloss 2y ago
    It is pure fantasy. Pray tell, if they aren’t slaves, are they free to leave, and where to? What an asshole.
  • decimalenough 2y ago
    > I would dismiss this article as pure fantasy. Why? The article starts from the point where Nike pays $25 per shoe boarded into a container on a boat, where that number covers all expenses until that point. Yes, this includes the shoe workers' wages, but it also has the factory construction and maintenance, manufacturing equipment, the inputs that go into the shoe, transport to get the shoes packed into a container and to the port, etc etc.
    • 2y ago
• le-mark 2y ago
  Clearly shoes and textiles in general are extremely difficult to automate, but you only have to build one shoe building robot, and copy it. Why hasn’t this been done? Expecting a “too hard” answer honestly, but is it really?
  • FredPret 2y ago
    Manufacturing machines are hard to invent, and harder to keep running right, and even harder to network together into an effective factory. You need skilled operators, technicians, and engineers to design and run a factory. You also need to put down a big whack of capital upfront and will see a return years down the line, hopefully. With low enough wages, it could easily be financially better to rent a big building in the third world and staff it with actual people.
• dbacar 2y ago
  "I encourage you to note assume that every Asian worker is a slave. " The tone of this sentence, I dont know, a bit disturbing.
• 486sx33 2y ago
  Now they’ll just have to make shoes for $11 or new balance will have to come back to North American manufacturing and make shoes for $40 wholesale Shipping , customs , duty , port fees , transportation , packaging that can survive across the ocean should all be things that make the product unrealistic to make outside North America, not to mention environmental tariffs that should be applied to products made in Asia.
• cryptoegorophy 2y ago
  I recently bought shoes while in Thailand on lazada $1.5 with shipping. Of course the quality was terrible and all, but I just don’t get it how they could cost less than $1. My guess is labor camps.
• stevage 2y ago
  > First, adding $26 tariff at the port doesn't just add $26 to the final price. Everything here works off of percentages. This doesn't have to be the case though, right? It seems very weird that when you jack up tariffs, some middleman in America is seeing their profit jump.
• dcow 2y ago
  I wish the discussion included the margins the fashion industry makes. In the labor sector, 10%-20% margin is respectable. But in the fashion and consumer goods sector at least 30% margins are expected. 80% margins are normal for “luxury” goods, which I’m sure is the bracket Nike falls into. I wish margins were included in the thread. It’s only true that everything increases in cost if you also have to keep the same margins.
  • hyperpape 2y ago
    There are profit margins in the thread. They’re a lot lower than what you described.
    • anomaly_ 2y ago
      OP will be talking about gross profit not net, and also totally ignoring the substantial overhead investments in brand marketing, customer service, stores, etc, that luxury goods brands have to make.
• numitus 2y ago
  This shows how non-automated retail is. on the production line, workers assemble the crosses in 5 minutes. And when selling, the courier will spend 15 minutes looking for your house to give it to you. It is reason why production is 1/4 of the price
• subsubzero 2y ago
  A few things to unpack here: Lets say a nike shoe costs $120 or so today(searching air jordans in google lists a huge number of shoes at that price point), in my mind this is quite cheap as I wanted a pair of Air Jordans in 1990 and they were the same price, $120 for kids shoes roughly 35 years ago. Adjusted for inflation thats roughly $303 USD in 2025 dollars. So basically through outsourcing manufacturing to China and supply chain efficiencies Nike has brought down their product price by roughly 1/3. Another thing to think about is the insane amount of money offered to athletes in sponsorship deals, I believe Jordan was one of the first athletes to command big money from a company(they made a movie about it a few years ago). This cost paying hundreds of athletes millions a year is a huge cost on Nikes bottom line. In addition to the sponsorships some athletes have profit sharing (Jordan for sure) so a percentage of sales go to said athlete. Throw in marketing and you have another huge cost. Would I rather see manufacturing jobs come back to the US and Nike curtail sponsorship money and profit sharing, hell yes. This is easy money to get back and would bring tens of thousands of jobs back to this country, if people were snapping up air jordans for the equivalent of $300 a pair back in the 90's they will do the same in this day and age. And if don't want to cut back sponsorship money, just raise the shoe prices, things are really really cheap compared to what they cost 30 years ago and Nike would still make a hefty profit. Fun fact - I always buy new balance shoes that are made in usa, they sell both outsourced and domestic production and would rather have my money go to a US worker. At the very least I hope to see other companies do this so I have a choice, most give no choice and force consumers to buy Chinese made products.
  • hattmall 2y ago
    I mean Nike didn't work to lower the price, the demand for Jordans is just different and most people buying Jordans today also bought them in the 90s and are comfortable at $120. If Nike could move them at $300 they would. Jordans remain popular but the reasoning is partially their price points, they don't at all have the power they did in the 90s when every kid wanted "to be like Mike".
• trhway 2y ago
  It is better to distribute or sell shoes than to make them. It is even better to finance/own the making of shoes or even better - the selling/distribution of them. That is Economy 101, originally known as Das Kapital. The people who read those rules wrong call themselves marxists and insist on everyone producing a lot of the same standard shoes, and selling them to people at cost, $25. The people who read those rules right try to find how and where to make a factory, distribution center or retail store, or at least where to get a share of it :)
• xivzgrev 2y ago
  The old adage that distributors mark up 100%, and then retailers another 100%, rings true here Nike is the distributor in this case
• tonetheman 2y ago
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• mannyv 2y ago
  Assuming it's not a new material, the cost of shoes are more like $3-$5, not $22.
• neonate 2y ago
  https://threadreaderapp.com/thread/1909741170953273353.html https://threadreaderapp.com/thread/1909741170953273353.html
• hy4000days 2y ago
  Just the other day, I got a pair of shoes at Walmart for TREE FITTY. The most comfortable pair of shoes I own are also from Walmart and they cost less than twenty bucks. How do my $3.50 shoes from Walmart fit into this picture that justifies why Nikes are $100? This article fails the smell test. Or maybe it’s Nike’s business model that is failing the smell test, I’m unsure. Also, anybody commenting who claims they “need” a pair of Nikes for their special feet should try being desperately unemployed and borderline homeless for a while. You don’t “need” anything.
• zw123456 2y ago
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  • madmask 2y ago
    I still don’t understand what’s the goal of this shitstorm alienating allies and destroying the economy with crazy uncertainty. But fake money will not save the country from ww3. A superpower needs to have an independent manufacturing base to be taken seriously, nukes deterrent is eroding.
    • zw123456 2y ago
      [flagged]
  • imgabe 2y ago
    Do you not realize that one country learns how to make useful things like blouses, computers, phones, shoes, and the other country only knows how to make fake money? What happens when the country that makes everything else realizes they can also make up fake money just as easily as anyone else?
    • zw123456 2y ago
      [flagged]
  • roncesvalles 2y ago
    Why do you keep saying "fake money"? China can use that fake money to buy real things from anyone in the world. It's improbable that Trump has Klinefelters because people with Klinefelters tend to be infertile. It's more likely that he got forged results from a shady clinic. Countries with excess USD buy T-bills because it beats holding it in a bank account, and converting it to CNY would be bad for exports. But some other countries also put it to more creative uses like sovereign PE funds.
    • zw123456 2y ago
      [flagged]
• zw123456 2y ago
  [dupe]
  • rayiner 2y ago
    > I give you this fake money in exchange for actual real things. And then you loan me money back. That is how the trade deficit works. You’re presenting this analogy as if it’s describing a situation that is good rather than a four alarm fire, and you’re calling other people stupid?
    • zw123456 2y ago
      [flagged]
  • zer8k 2y ago
    XXY was not on his card. It was YXX. Some idiot on a rumor mill website speculated it was due to this that he must have the disease. It’s debunked. Further he would be an incredible case study given his stature and appearance. For calling MAGA people dummies, it appears you can’t even read.
    • zw123456 2y ago
      [flagged]
• zw123456 2y ago
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• marenkay 2y ago
  This makes a good argument against centralized production and knowledge. It would economically be much more reasonable if any good could be produced anywhere at any time. Smaller production facilities for localized sourcing. Would IMHO also be much more in line with a free market. Everyone would be free to source goods in any country or location of their choice. Coupled with open knowledge this could be a truly free market. But will never happen because currently free market means one business is free to dominate and control a market.
  • ta8645 2y ago
    It sounds like you're advocating for a centrally planned market that allocates resources according to a grand, rational vision. A free market will by definition be messy, sometimes inefficient, adhoc, and defy any notion of a grand vision. You have to trust the free market to produce the best results in the long run, and to be the most responsive to change (opportunity).
    • marenkay 2y ago
      Not really. The opposite. The current market is centralized a lot more than people want to see or admit. I had trust in the free market for a long time but it has not really materialized the best results. As can be seen by the current state of affairs. Everyone fighting over who gets to have money and production is not freedom, it's a war without guns. Just to make this clear, a truly free market would be desirable but I don't see it materialize on this world.
      • TulliusCicero 2y ago
        > The current market is centralized a lot more than people want to see or admit. You completely misread their comment. They said central planning, as in, a command economy.
        • marenkay 2y ago
          Considering I talked about a truly free market, central planning then seems to be a weird reaction. Why would that be related? It's not like I suggested a Chinese system, I advocated for one which is free from monopoly and focusses on local production and diversity for sourcing goods.
• pipeline_peak 2y ago
  Depends how small the child’s fingers are.
• danwills 2y ago
  Thanks for that threadreaderapp link neonate! For some reason there's no reply-link to your post, but this is the first time in a very long time I've even read a twitter thread because of how much more pleasant it was at threadreaderapp! Very interesting analysis/breakdown of the various layers of costs as well!
• 11mariom 2y ago
  For me it just proves how ineffective big companies are…
  • mock-possum 2y ago
    And how much of a sucker consumers who care about the social clout of brands are
• kqr 2y ago
  Damn! I tried to answer the question without looking at the thread and arrived at a unit cost of 28 % of the retail price, after deducting reasonable guesses at VAT, store margin, shipping, etc. Fairly close to the quoted 25 %. Fermi estimation is awesome and if you're one of today's lucky 10,000 who haven't heard of it, this is your day!
• ineedaj0b 2y ago
  i've seen certain groups defend war (really cannot imagine this) and now i'm hearing from the same group i'm a part of, well it's okay to off-shore all this because the president doesn't like offshoring? for years fashion forums have bemoaned the offshoring of american clothing. if the president said he supported communism, would certain groups suddenly become free market capitalists? have people always been like this? was this 'anything but agree' position common back in the 70s and 80s? is this an american thing or christian society thing?
• ookblah 2y ago
  good luck getting the average person to even get past the 2nd slide with basic calculations lol. he's preaching to the choir.
• ivandenysov 2y ago
  What are the challenges that prevent humanity from further automating clothes production? We don’t weave fabrics by hand anymore, but we still sew pieces of it together by hand. Why is that?
  • MrGreenTea 2y ago
    Because weaving is simpler and more repetitive than sewing. Sewing is both a pretty precise job and also lots of different movements, angles and very few straight lines. All of these make it less efficient to automate. If you're interested in the history: it took quite long after during the industrialization to invent a working sewing machine. There are quite a few interesting Youtube videos for example on the history and workings of the sewing machine.
• ungreased0675 2y ago
  While the hypothetical shoes from Asia retail for $100 and US made shoes are $220ish, in real life the Asian made shoes cost $190 and the US made shoes cost $220. It’s insane how much a little bit of fabric and foam gets marked up as it works through the value chain.
• DeathArrow 2y ago
  >From this model, you can see a few things. First, adding $26 tariff at the port doesn't just add $26 to the final price. Everything here works off of percentages. In this simple model, we say Nike has a landed cost of $25, sells it to Footlocker for $50, and they retail at $100 Not sure I agree that everything works on percentages. Shipping has a fixed cost, etc.
• ZeroGravitas 2y ago
  Reminded me of the folk-comedy duo Flight of the Concords' song "Issues (Think about it)”: > They're turning kids into slaves just to make cheaper sneakers. > But what's the real cost? > 'Cause the sneakers don't seem that much cheaper. > Why are we still paying so much for sneakers > When you got them made by little slave kids > What are your overheads? https://youtu.be/GimzSBVQUDo https://youtu.be/GimzSBVQUDo
• hotfreqz 2y ago
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• ZiiS 2y ago
  Interesting article and substantively correct about the direct impact of tariffs. But is using a bit of a straw-man as a hook. It is very easy to buy decent quality sneakers for $2 wholesale, and Nike do sell a lot of $150 sneakers. No one assumes that they are just taking that as profit; it is mostly spent on advertising (sports sponsorships etc.) supporting retail etc. Fundamentally, they can and will choose to change the percentage they spend on raw materials and complex manufacturing techniques if that is what the marketplace demands.
• littlestymaar 2y ago
  Trump's tarifs are indeed absolutely idiotic, but so are all those people claiming that free trade is entirely positive and ignore all the problems that arise from the West being unable to run industries anymore.
• scotty79 2y ago
  "Retailers mark up the shoes 100% to recoup various costs and generate a profit." Whenever I enter any physical store it always boggles my mind how insanely inefficient the whole endeavor is for all involved. But that retail basically swallows half of the price is just unbelievable.
• curtisszmania 2y ago
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• TrapLord_Rhodo 2y ago
  The problem i have with this article is they use a "Hypothetical shoe" that retails for $100, but then directly quote a $220 shoe for the "American Made" side. Then use this as the entire justification for the price disperity. People absolutely pay $220 for "Chinese made" shoes too. It's all about branding... Rockwell is price competitive with both kuka and fanuc. If you want to talk about 'Difference in manufacturing cost', why don't we start there?
  • pc86 2y ago
    Derek writes a lot of great fashion threads but he is a dyed-in-the-wool partisan and it comes through any time he touches on things remotely political. This doesn't mean he's wrong and it isn't even necessarily a bad thing, but it's important to keep that in mind and just remember that when he says something political he likely arrived at that political opinion first and is picking examples/hypotheticals to support it, and not vice versa.
• ctrlp 2y ago
  I regularly pay in excess of $100 for my shoes and would be a bit suspect of the longevity shoes that didn't cost significantly more than that. I wonder how these costs break out when thinking more about "being shod" than "buying shoes." I have ~$200 shoes that last me over 2500 miles (about a year of walking for me). I doubt a pair of Nikes could manage that but I haven't tried. On long trails, sneakers are usually worn out and trashed after 500 miles. Yes, different terrain but it's not just the soles that give out. Eventually, all soles wear out but the uppers are still good. I've had a cobbler repair some shoes and it's felt very worth the cost.
  • nicbou 2y ago
    I upgraded to Red Wings and Adidas Sambas. I'm astounded by the durability of both. Shoes used to be something I changed every season. It was indeed worth the cost.
    • ctrlp 2y ago
      Sambas for walking or running or sports? I've had good luck with Ecco shoes with Vibram soles for walking but my favorites were discontinued. Luckily, I bought a bunch of extras. As I've gotten older I've learned that if you find some shoe or clothing you really like, buy backups. So many great products are discontinued at some point.
      • nicbou 2y ago
        As everyday shoes. I like how they look, they're decently comfortable, and they lasted through the summer plus a hike or two without issues. Agreed about backups. I already miss that Uniqlo shirt that apparently isn't sold in Europe.