The Economics Behind Sneakers (An All-Inclusive Guide)
Selling sneakers is indeed a profitable business. The demand for these shoes is now more than ever, and the numbers are expected to increase with every year. But not everyone can succeed in this business. Only such people are going to make profits who understand every basic and economic aspect of this business. Anyone who enters the market without having sufficient knowledge is surely going to fail and eventually run out of money.
But where can you learn everything about making and selling sneakers?
Lucky for you, we are discussing the economics behind sneakers in detail here. In this guide, you will learn about the cost and the profit involved with the Sneaker manufacturing and selling business.
The Economics Behind Sneakers- How Much Money Is Needed?
The main thing you should know if you want to enter the Sneaker market is how much money or investment you are going to need. Generally, it depends on three factors:
- Manufacturing cost
- Strategic partnerships
- Cost of Advertisement
Half of the economics of the Sneaker business depends on manufacturing costs, while the other half is on other different factors. Therefore, it is important to make notes of different manufacturing aspects of these shoes and how you are going to make them cost-effective.
It is crucial because if a company has designed an economical manufacturing plan, then its chances of dominating the market goes way up. If you don't know how to manufacture low-cost sneakers and enter the market with high prices, then the chances of you succeeding become very slim.
The manufacturing cost depends on:
- Raw material cost
- Fuel cost
- How Much do you have to pay to laborers and staff
- Electricity & other Bills
- Maintenance of machinery
If a company manages all of these things at a good price, then it can reduce the cost of sneakers to a great margin.
But here's the thing.
Each of these factors costs a lot in the USA and even in Europe. That's why companies have shifted their manufacturing factories to China, South Asia, and different third-world countries, where the daily wages are a lot lower (due to their currencies), and the price of fuel is also lower than in the west.
Moreover, since China is the leading wholesale manufacturer of almost everything, the cost of Raw materials is also way down there. In the USA and Europe, the Raw material had to be imported, which means companies will have to pay for this importation, and the extra tax applied on this.
But they can avoid it if they open a factory in China or any of its neighboring countries. That's why China is also known as The World's factory. A lot of leading businesses have chosen to manufacture or assemble their products there, including Apple, Nike, Ford, Caterpillar, and many more.
So, if you ever plan on launching a big sneaker company, consider setting up the manufacturing factory in the cheapest countries.
After calculating the manufacturing cost of sneakers, the next thing you should calculate is the branding partnerships.
It's no secret that manufacturing top-quality sneakers is not enough. You have to brand them, and the best way to do this is to make partnerships with the best athletes in the world.
Here's a case study. In 1985, Nike introduced Air Jordan sneakers after signing a deal with Michale Jordan, a famous basketball player who went on to become the wealthiest player in the world due to this deal. Out of 145 million dollars he deposited in the bank in 2019, he got 130 million dollars from Nike.
Similarly, Adidas signed a deal with Kanye West, and both of them made millions of dollars in revenue.
Therefore, if you are looking to establish a sneaker company, try to make a deal with any world's leading artist or sportsperson.
Only those products become successful that are popular among the public. A strategic partnership is one way to do it, but another equally effective way is advertisements.
You must run ads on Tv and social media so that more and more people get to know about the product.
But there's something important you should also know more about.
Social media ads are better than Tv ads. You can target locations, age groups, and many other critical factors. Plus, since they cost less.
Thus, they will significantly reduce the overall money you have to spend to build a sneakers brand.
So, these are the factors that decide how much money or investment you are going to need.
Now, let's see the other side of economics- how to make a profit.
How Are You Going To Make Profit?
After controlling the manufacturing price and other costs, it is also super crucial to find ways from which you can make as much profit as you can. When it comes to the sneakers business, there are also a few choices you can opt for to generate revenue.
Let's see them.
Open Both Online And Offline Store
Your business is going to thrive when you provide as many facilities to your customers as possible and become easily accessible. That's why you should open both online and offline stores for this purpose.
An online store does not cost much. You have to make a website, list products, and then just have to promote them.
In addition, you can also join Amazon, eBay, or any other successful online platform and sell the sneakers there. Remember, as many stores as you are going to open (both online and otherwise), the more revenue you are going to generate, and the brand value will also improve a lot.
Manufacturers also make money due to middlemen. They are the agents who open stores, get orders, and then outsource them to manufacturers. They don't invest; they just take their profit and deliver goods by purchasing from the manufacturer to the customer.
So, if you open a store, try to promote it with these agents too. Create offers for them, give them discounts, and guarantee them customer-friendly services.
With these little things, the sneaker business will become successful at an unbelievably faster rate.
We now hope that you understand everything about the economics behind the Sneakers!