It’s often assumed that branded clothing is dramatically overpriced. How can it cost $100 to make a pair of running shoes?
Solereview wrote up a tremendously researched and written article taking a look at what it actually costs to manufacture sneakers. And while some of the conclusions are pretty evident (that higher priced items have higher margins), the ultimate takeaway is surprising: companies like Nike and Adidas are operating a high-volume, thin margin business.
On a pair of $100 shoes, Soleview estimates that Nike is profiting ~$5 per sale. $22 goes toward production, then $23 on shipping, marketing, and miscellaneous overhead. That leaves about a 10% profit on the wholesale price for Nike.
And the retailer? Ostensibly, there’s a $50 profit margin, but once you account for business expenses and discounts, they only do a little better at $6 per $100 pair of shoes (largely because they’re giving high sale markdowns at the start).