The Economics Behind Sneakers
The Economics Behind Sneakers:
Everything has a start. When somebody introduced a new thing, people get interested in it, and they started to use it or follow it. In this way, some it time this newly introduced thing become a culture for that nation. Many things, like clothes and shoes, have been introduced in such a way and become a culture. But a small number of people know who introduced it.
In 1921, Converse introduced basketball sneakers whose name was Chuck Taylor, and it was made of canvas. Due to this, sneakers became a popular culture. Nike and Adidas were leading companies of cutting-edge footwear, which combined with youth-influenced designs.
Nowadays, the high prices of sneakers show that shoemaker websites and companies bear more expenses in making shoes because they have to compete with other major companies to maintain the brands in targeted positions. They can spend more money to get their position and sales high. Social media and celebrities have an important role in the ups and downs of the prices when the sneakers are sold by the shoe customizer stores and other shops.
There are many shoemaker factories and sneaker customization websites in the world. They outsource the production of Nike and Adidas to more than 10 lac laborers are working all over the world, including Chinese factories where the costs of labor are cheap. For example, in 2014, to manufacture one pair of sneakers, Nike reported 28.5$ and shipped them in the United States. The price Nike shoes are broken down to 27.5$ per pair for the labor of Chinese factories, and 1$ is also added in shipping.
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Nike and Adidas sell their shoes at high prices for some profit. These prices are more than the cost of manufacturing shoes.
The companies of Asia reduce labor costs using low-cost labor as it is an important factor for the factory.
Many companies are using robots in the place of manual labors to reduce labor costs.
Shoemaker websites and factories can get enough markup by dealing with celebrities and stars in selling the sneakers.
Shoe resellers can also get help to maximize theory profits by creating media show buzz and keeping shoe supplies below the demand.
Why is China called the World’s Factory?
All that is used in daily life are made in Chine. These products include electronics, clothes, shoes, pots, and all machinery parts. Many people think that the reason for selling products of Chine all over the World is low labor costs. But it is not an actual reason. Chinese factories have lower labor costs, but they have many other factors that are not in other countries.
China has low taxes and duties, a lack of regulatory compliance, and has a strong business ecosystem.
In recent years, profit margins have been impacted by increasing the labor cost by Chinese factories. Due to this change, some factories have moved to Thailand, Indonesia, and Vietnam. Some shoemaker companies have been starting to shift their manufacturing works from human labor to auto robots to reduce labor costs.
Branding partnerships is the best way to bring more customers. Many companies have partnerships with stars and celebrities, but some pay some price to celebrities to promote their brands. In this way, these companies grow fast by making partnerships.
In 1985, the first sneaker introduced - Nike’s Air Jordan brand sneakers – are the best and famous example that made Michel Jordan the world's richest athlete star in the world. After twenty years of his retirement from the game of basketball, he deposited huge money of $145 million in the bank in the twelve months, which ended in May 2019.
In this money, he got $130 million from the shoe label of Nike. Russell Westbrook, Chris Paul, and many other professional athlete stars are now included in Nike’s brand.
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In addition, many players attach to fashion as well as playing in sports. They earn money from both sides. In this way, any company can get grow its costumers and sales when a sportsman or any famous game player is partnered for a long time or a short time. For example, Adidas created Yeezy Boost sneakers by signing a partnership with famous player Kanye West.
These shoes earned a lot of profit due to this partnership. The manufacturing price of sneakers was $315, and these shoes were launched in February of 2015 and sold out a huge amount of shoes in minutes. Most of the shoes were sold out online by many enthusiasts. Jay-Z, Kylie Jenner, and Rihanna are also from those celebrities who signed a partnership with shoemaker websites or companies to launch new unique brand shoes.
The prices of sneakers are also reduced due to the sale competition among different leading sneaker companies. For example, the upcoming Under Armour has increased an equity agreement and partnership with Stephen Curry, who is the player of the National Basketball Association. Most of the sneaker companies spend investment on celebrities, athlete stars, and other sports players like Stephen Curry and Kanye West. The reason is that they are famous and beloved by their fans. That’s why all those who are associated with the figures of such players in entertainment and sports, willing to buy shoes.
Social Media And Resellers
Some consumers are ready to pay and want to get such celebrities who are involved in limited-edition sneakers. Social media helps to increase their wishes. Some private people posted pictures of new shoes on social media and generated their business. Resellers have to wait to buy limited editions so that they can generate good profit by selling them online. The fact is that the fans of brand shoes bought such shoes at any cost.