Many misinformed sneakerheads may give you the impression that the cost breakdown for a $100 Nike shoe is simple. For example, they’ll spout off some uneducated comment like this:
“It costs $3 to make a pair of Nikes. They’re ripping us off!”
The real answer for the cost breakdown of an average shoe is much more complicated. Long time shoe industry insider, Matthew Kish of the Portland Business Journal, provided WearTesters with detailed costing information that gives a better picture of what a shoe typically costs.
Where Does the Money Go?
As you can see in the graphic, the manufacturer (in this case, Nike) pockets a relatively small portion of the total profit. Retailers (Finish Line, Foot Locker, etc.) get the biggest piece of the pie. Retailers getting 50% of the final retail price is common practice in the footwear industry.
A rule of thumb for athletic apparel and sporting goods companies such as Nike is to give retailers a 50% discount on suggested retail prices. The numbers provided by Matthew Kish line up with that rule. Also, note that not every $100 shoe will sell for full retail price. Often, eventual markdowns can take a chunk out of retailer profits. Or unsold inventory may force the retailer to send the shoes back to Nike (depending on the retailer’s agreement).
Retailers taking a big chunk of profits is a big reason why Nike drives more purchases to SNKRS and Nike.com. It makes a huge difference in terms of profit margin. Consequently, it’s best for Nike if you buy direct from Nike.
Cost Breakdown for a $100 Nike Shoe
The actual cost breakdown totals $28.50. This means Nike makes a profit of $21.50 on a $100 sneaker. Subsequently, after taxes and administrative expenses (including research and development), true profit is approximately $4.50.
These profit and cost numbers can fluctuate depending on a number of factors. These factors include new supply chain advancements, regulations in industrial countries like China, deals with factories, international tariffs, and the costs of freight/transportation/shipping.
Keep in mind this breakdown isn’t accurate for all shoes. High priced sneakers like the Nike Foamposite or Nike Adapt BB will have different cost structures. But with that caveat listed, this breakdown is very good data to reference any time someone tells you that “Nike makes shoes for -insert ridiculously low number- dollars.“
If you have any details that should be added to the cost breakdown or would like to share information from your time working in the athletic shoe industry, please reach out via Twitter, Instagram, or email.
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