Let's find out how much it costs to make a pair of sports shoes!

Sneakers are a popular product with a high value. Ever wonder how much money the factory costs to make a pair of shoes? Or how much money do Nike and Adidas make from a pair of shoes sold? Let's find out with Mr. Lot.

Let's find out how much it costs to make a pair of sports shoes!

Sneakers are a popular product with a high value. Ever wonder how much money the factory costs to make a pair of shoes? Or how much money do Nike and Adidas make from a pair of shoes sold? Let's find out with Mr. Lot.

If you are a regular internet user, you've probably heard sentences like:

- ‘Nike makes a pair of shoes for just 20 bucks. '
- ‘Like Adidas shoes another brand sells for only 200 bucks, Adidas must've made a few hundred bucks a pair '
- ‘On Black Friday I bought these pairs for only 50 dollars, they must still have a lot of profit at this price. '

The following article will give you a detailed look at the costs and profits that a shoe brings to the participants. As you will understand, production value accounts for only a small portion of the retail price of a product.

The figures presented below will be based on FOB and retail prices in the US, collected and analyzed by Solereview website, which evaluates popular shoe models.

Solereview extracted import figures from January to May 2016 from published US import data sources. And here are two comparison tables between the FOB and retail prices of some popular Adidas and Nike shoes.

At a glance, this must be what you think right?

“A pair of 140-dollar shoes are only available FOB $ 32 !? So the profit is over 100 bucks a pair !! Nike and Adidas are in super profitable businesses! "

But Nike and Adidas 2015 financial reports show that these two companies only bring in 4.1% and 10.7% of wholesale profits, which means that a 100-dollar shoe makes Nike $ 4.1 and Adidas only makes $ 4.1. brought in 10.7 dollars.

So, where is the rest of the profit? Let's take a look at a pair of shoes that retail at $ 100.

1. Shipping, Insurance and Customs Costs

Since the FOB cost is only a fee in the country of origin (eg, China), in order to reach the buyer, the shoes need to be shipped, insured and made to be customs clearance. This cost estimate will increase the production value of a shoe by up to 20% (from $ 20 to $ 24.3).

2. Wholesale cost

When you buy a sports shoe, you don't usually go directly to a Nike or Adidas store to buy it, right?

Often you will visit genuine distribution shoe shops, or go to online stores to buy, because they always have discounts.

And normally Nike or Adidas will sell directly to these retail channels, with a discount of about 50%.

So, the Gross margin for Adidas and Nike now will be $ 50 - $ 24.3 = $ 25.7.

3. Other expenses, taxes and profits

Until now, $ 25.7 for a $ 100 shoe is still a pretty good number, right?

However, Nike and Adidas also have to pay staff salaries, distribution costs, marketing costs, depreciation, income taxes and other business operating expenses ...

Fortunately for us these metrics come out in great detail each year.

4. How much will Nike and Adidas actually make for a $ 100 shoe?

So you understand the cost of a shoe is not just its production cost, right.

Assuming a shoe is marketed for $ 100, based on Nike's 2015 financial report, a cost breakdown is as follows:

FOB price: $ 22
Shipping, Insurance and Customs Cost: $ 5
Marketing cost: $ 5
Other expenses: $ 11
Tax: $ 2
Profit: $ 5
Wholesale cost: $ 50

As for Adidas, we have the following analysis:

FOB price: $ 21
Shipping, Insurance and Customs Cost: $ 5
Marketing cost: $ 8
Other expenses: $ 13
Tax: $ 1
Profit: $ 2
Wholesale cost: $ 50

5. If Nike and Adidas only make a profit of $ 5 and $ 2, the retail stores probably make a lot of profit, because they don't have to pay the production cost but still have 50% of the cost?

If you really understand the model above, then you can also imagine that retail stores are not really "profitable" as you think.

In fact, stores always have to maintain an average discount of 24% (big promotions like Black Friday, Christmas ...)

In addition, the cost of maintaining a store including land rent, labor, decoration, inventory and distribution risk… ants a retail store that costs at least $ 17 per pair of sneakers.

Subtracting the tax, the retailer also makes a profit of about $ 6 a pair.