Americans need to get over their view of “Asia” as being about making shoes. When I was working in engineering in the early aughts, we mocked the Chinese as being able only to copy American technology. Today, China is competitive with or ahead of America in key technology areas, including nuclear power, AI, EVs, and batteries.
We need to anticipate a future where China is equal to America on a per capita basis, but four times bigger. Is that a world where “Designed by Apple in California, Made in China” still makes sense? What will be America’s competitive edge in that scenario?
What seems most likely to me in the future is that the US will find itself in the same position the UK is in now. Dominating finance and services won’t mean anything when both the IP and the physical products are being produced somewhere else.
> But if we bump the cost of freight, insurance, and customs from $5 to, say, $28, then they wholesale the shoes to Footlocker for about $75. And if Footlocker purchases Nike shoes for $75, then they retail them for $150. Everyone needs to fixed percentages to avoid losses.
I don't understand this paragraph. If Footlocker was okay with $50 profit/shoe, why do they need to claim $75 profit/shoe in their costs per shoe go up? The costs of handling the shoes, retail space, advertising, and labor are all fixed.
Trying to summarize the summary for myself
From a $100 shoe that sells for $76:
- $24 goes overseas (22 cost, 2 freight)
- $8 goes to the US gov't (3 import, 2 Nike tax, 3 Footlocker tax)
- $33 goes to US employees or businesses (5 Nike marketing, 11 Nike expenses, 17 Footlocker expenses)
- $5 goes to Nike (11% return)
- $6 goes to Footlocker (8% return)
But now with 100% tariffs, it's a $100 shoe that sells for $100 (or a $132 shoe that sells for $100) and:
- $24 goes overseas (22 cost, 2 freight)
- $29 goes to the US gov't (22 import, 3 Nike tax, 4 Footlocker tax)
- $33 goes to US employees or businesses (5 Nike marketing, 11 Nike expenses, 17 Footlocker expenses)
- $7 goes to Nike (11% return, 7.15 exactly)
- $7 goes to Footlocker (8% return, 7.45 exactly)
And if a US shoemaker wanted to undercut the import, a Made in USA shoe that sells for $100:
- $7+ goes to the US gov't (? shoemaker tax, 3 Nike tax, 4 Footlocker tax)
- $79 goes to US employees or businesses (46 to shoemaker, 5 Nike marketing, 11 Nike expenses, 17 Footlocker expenses)
- $7 goes to Nike (11% return, 7.15 exactly)
- $7 goes to Footlocker (8% return, 7.45 exactly)
I've always wondered why the supply chain has exponential price increase at each step. The example given (guessed at) is the factory produces the shoe for $12.5 and sells it to Nike for $25. Nike then sells it to Footlocker for $50 and they then sell to a customer for $100. Everyone expects to mark up their costs by about 100 percent. Why is that the case? Even if we say the markup isn't 100 percent, why is it a percentage of cost at all? If the shoe factory can make $12 then why can't Nike and Footlocker both make $12 and retail the shoe for $50?
I'm not saying things should be different, just wondering why it is the way it is. If Footlocker was also selling some cheapo shoe for $50 presumably they do the same amount of work to bring that to the store. Are they only paying $25 for those? Why does it cost half for them to handle a cheaper shoe?
Reminded me of the folk-comedy duo Flight of the Concords' song "Issues (Think about it)”:
> They're turning kids into slaves just to make cheaper sneakers.
> But what's the real cost?
> 'Cause the sneakers don't seem that much cheaper.
> Why are we still paying so much for sneakers
> When you got them made by little slave kids
> What are your overheads?
The problem i have with this article is they use a "Hypothetical shoe" that retails for $100, but then directly quote a $220 shoe for the "American Made" side. Then use this as the entire justification for the price disperity. People absolutely pay $220 for "Chinese made" shoes too. It's all about branding...
Rockwell is price competitive with both kuka and fanuc. If you want to talk about 'Difference in manufacturing cost', why don't we start there?
The thread was kind of hand wavy over the "$24* discount" for Footlocker? From the linked article...
>Footlocker’s purchase price (read footnote #3) for every sale of $100 shows up as $66 in their financial reports, and not $50. In plain terms, Footlocker sells its merchandise for a 24% discount on the average.
So $100 was never the sale price, just some made up, hoped for number that only appears on the shoe box, and not on anyone's financial statements. Really this should be Footlocker makes $6 on selling a $66 sneaker, for a margin of ~9%.
BTW, both Footlocker and Dick's have gross margins ~30% but Dick's has an operating margin around 12% while FL is 1-2%. Clearly FL is an inferior retailer.
And the linked article does cover Nike selling directly...
>And what happens if brands skip the retailers and operate their own stores? adidas and Nike already have their own shops, but direct-to-customer retail comes with its set of challenges. Brands will incur costs otherwise absent in the wholesale business model; spends like leasing+manpower+operational costs, store set-up and periodic re-modelling cost, the entire risk of inventory, and costs associated with warehousing and distribution. That’s only at the store level, there will be additional off-site resources needed in the back-end to support retail operations. The brands will make some extra margin selling out of their own stores, but the best case scenario will be an additional 10%, which is slightly above what a highly evolved retailer like Footlocker makes annually after taxes.
I would argue that a great deal of selling today is direct, no stores involved at all.
I worked in the retail; it is the shittiest job I ever had. I was given an abnormal schedule: two days closing, one day opening, one mid shift (and I should work either Saturday or Sunday). The churn is really high: people leave even if they find a better yet shitty job. Which jobs do you want to create in US? Retail jobs or manufacturing jobs?
Sorta related: Those Crocs/clogs shoes have been extremely popular for a few years now. ... I've always wondered how much it costs to make that type of shoes (Crocs/clogs) - it can't cost more than $1 to make most of them; they're just injection-molded, right?
A few things to unpack here:
Lets say a nike shoe costs $120 or so today(searching air jordans in google lists a huge number of shoes at that price point), in my mind this is quite cheap as I wanted a pair of Air Jordans in 1990 and they were the same price, $120 for kids shoes roughly 35 years ago. Adjusted for inflation thats roughly $303 USD in 2025 dollars. So basically through outsourcing manufacturing to China and supply chain efficiencies Nike has brought down their product price by roughly 1/3.
Another thing to think about is the insane amount of money offered to athletes in sponsorship deals, I believe Jordan was one of the first athletes to command big money from a company(they made a movie about it a few years ago). This cost paying hundreds of athletes millions a year is a huge cost on Nikes bottom line.
In addition to the sponsorships some athletes have profit sharing (Jordan for sure) so a percentage of sales go to said athlete. Throw in marketing and you have another huge cost.
Would I rather see manufacturing jobs come back to the US and Nike curtail sponsorship money and profit sharing, hell yes. This is easy money to get back and would bring tens of thousands of jobs back to this country, if people were snapping up air jordans for the equivalent of $300 a pair back in the 90's they will do the same in this day and age. And if don't want to cut back sponsorship money, just raise the shoe prices, things are really really cheap compared to what they cost 30 years ago and Nike would still make a hefty profit.
Fun fact - I always buy new balance shoes that are made in usa, they sell both outsourced and domestic production and would rather have my money go to a US worker. At the very least I hope to see other companies do this so I have a choice, most give no choice and force consumers to buy Chinese made products.
"I encourage you to note assume that every Asian worker is a slave." I do NOTE, that I was on Korea for 18 months, and saw over 20 factories, and knew a few people that worked there. They were making 1/10 of the minimum wage in America at the time, $0.75 vs $7.50, Today they are making $6.94, so I would assume that They are making few shoes in Korea.
"While it's difficult to pinpoint exactly which country pays the absolute least for shoe manufacturing, countries like Vietnam and Cambodia are known for having lower labor costs and are major footwear exporters, making them likely to be at the lower end of the wage scale for shoe production."
In Cambodia, they pay $208 per month, which is assuming a 160 hour work month, which I guarantee is the bare minimum which gives them $1.30 in wages per hour.
"In Vietnam, shoe manufacturing workers typically earn wages that are significantly below a living wage, though some companies affiliated with the Fair Labor Association (FLA) pay double the minimum wage."
In Vietnam they pay $68/ month, which is $0.42 and 1/2 cents an hour.
The premise of the article, and the statistics they use are all based on preported manufactures claims, not the reality that exists in that country.
I would dismiss this article as pure fantasy.
>The second thing we see is that Asian manufacturing in Asia produces US jobs. You go to Footlocker to buy a pair of $100 shoes because you can afford them. This creates jobs for the Footlocker employees, Nike designers, marketing teams, and other US people throughout this chain.
In all fairness, most of those jobs would still exist if manufacturing was brought onshore. The fact that they were manufactured in Asia makes no difference here, except for perhaps the longshoremen that was included in "other US people."
I regularly pay in excess of $100 for my shoes and would be a bit suspect of the longevity shoes that didn't cost significantly more than that. I wonder how these costs break out when thinking more about "being shod" than "buying shoes." I have ~$200 shoes that last me over 2500 miles (about a year of walking for me). I doubt a pair of Nikes could manage that but I haven't tried. On long trails, sneakers are usually worn out and trashed after 500 miles. Yes, different terrain but it's not just the soles that give out. Eventually, all soles wear out but the uppers are still good. I've had a cobbler repair some shoes and it's felt very worth the cost.
Interesting article but fails to mention about Nike big pivot to DTC around covid times. So will likely be taking home a lot more than 9% (or _were_ up til last year)
Interesting article and substantively correct about the direct impact of tariffs. But is using a bit of a straw-man as a hook. It is very easy to buy decent quality sneakers for $2 wholesale, and Nike do sell a lot of $150 sneakers. No one assumes that they are just taking that as profit; it is mostly spent on advertising (sports sponsorships etc.) supporting retail etc. Fundamentally, they can and will choose to change the percentage they spend on raw materials and complex manufacturing techniques if that is what the marketplace demands.
It’s like people excited about the new datacenter being built in their town, think of all the jobs that will bring they cry. Nobody realizes it takes 6 people to run a datacenter.
Bringing “manufacturing back to the US” is a fool’s errand. The future of manufacturing is automation, not jobs.
I was going to link the excellent solereview article but it looks like that's exactly what the post is about.
I used to be able to buy good running shoes on clearance every year at $30-$50
Even through 2020-2021 or so
But not anymore, now even on "clearance" they almost never drop below $100 and never ever to $50
There was an interview with the local marketing managers for Coca Cola and Pepsi when I was a kid. I vaguely remember it (and also the idea was somewhat foreign to me since the world had just started opening for eastern Europe and it was the first time many of us heard the names such as Coca Cola, McDonald's, etc). The one thing that stood out was the Pepsi manager raging about campaigns, failed products and whatnot. The Coca Cola manager calmy looked at him and said: "Sir... Look at our product... Who in their right mind would pay for a rusty-colored liquid as a beverage? Absolutely no one. It's all about the advertisement".
Same story here - would you buy a pair of shoes from anyone, seeing the horrible conditions they work in, sleep deprivation and poverty if you knew they'd still get close to nothing? Probably not. You see a fancy store (or website these days), you see a product you like and you're invited to open up your wallet for a fancy pair of shoes. Deep down you still know they came from the people working in horrible conditions but, you know, out of sight, out of mind. And thus, you are willing to pay the extra price.
I recently bought shoes while in Thailand on lazada $1.5 with shipping. Of course the quality was terrible and all, but I just don’t get it how they could cost less than $1. My guess is labor camps.
Just the other day, I got a pair of shoes at Walmart for TREE FITTY.
The most comfortable pair of shoes I own are also from Walmart and they cost less than twenty bucks.
How do my $3.50 shoes from Walmart fit into this picture that justifies why Nikes are $100?
This article fails the smell test. Or maybe it’s Nike’s business model that is failing the smell test, I’m unsure.
Also, anybody commenting who claims they “need” a pair of Nikes for their special feet should try being desperately unemployed and borderline homeless for a while.
You don’t “need” anything.
>From this model, you can see a few things.
First, adding $26 tariff at the port doesn't just add $26 to the final price. Everything here works off of percentages. In this simple model, we say Nike has a landed cost of $25, sells it to Footlocker for $50, and they retail at $100
Not sure I agree that everything works on percentages. Shipping has a fixed cost, etc.
This derekguy guy always has the best posts clothing related afaik.
Also > Again, it's a popular misconception that all overseas production is sweatshops. Production can be done ethically abroad and still be relatively cheap because the cost of living is not the same everywhere. I encourage you to note assume that every Asian worker is a slave
No not necessarily slave slaves but I do assume they’re wage slaves, at least the line workers, the higher ups will be compensated a bit better I’m sure.
While the hypothetical shoes from Asia retail for $100 and US made shoes are $220ish, in real life the Asian made shoes cost $190 and the US made shoes cost $220. It’s insane how much a little bit of fabric and foam gets marked up as it works through the value chain.
Thanks for that threadreaderapp link neonate!
For some reason there's no reply-link to your post, but this is the first time in a very long time I've even read a twitter thread because of how much more pleasant it was at threadreaderapp!
Very interesting analysis/breakdown of the various layers of costs as well!
All around the "developed world", the shop/retailer/supermarket/distribution part of the price of a product is around 50%. Whatever the product or its price.
I'm wondering if part of our issue with crazy inflated prices despite low margin for industry and manufacturing actors is not because of this abused margin for retailers. That have also a huge power as it is difficult to negotiate when you depend on your product to be buyable in the market.
To me, that explain a big difference with asian world, where you notice, even for asian shops in western countries that prices are still quite cheap.
Something parallel to that that I have noticed is that decades ago we were used to buy from small individual shops, but now a few retailers and chains have almost a monopoly on the market.
I see the same pattern for movie theaters. They used to be independent mostly with affordable prices. Now 2 or 3 big chains bought them all, and it is very rare to still encounter independent movie theater. And once they got a good monopoly, ticket prices skyrocketed to insane levels.
The old adage that distributors mark up 100%, and then retailers another 100%, rings true here
Nike is the distributor in this case
This shows how non-automated retail is. on the production line, workers assemble the crosses in 5 minutes. And when selling, the courier will spend 15 minutes looking for your house to give it to you. It is reason why production is 1/4 of the price
Assuming it's not a new material, the cost of shoes are more like $3-$5, not $22.
This makes a good argument against centralized production and knowledge. It would economically be much more reasonable if any good could be produced anywhere at any time. Smaller production facilities for localized sourcing. Would IMHO also be much more in line with a free market. Everyone would be free to source goods in any country or location of their choice. Coupled with open knowledge this could be a truly free market.
But will never happen because currently free market means one business is free to dominate and control a market.
I hope the elites of US are not thinking about moving shoe-making back to the US because it doesn't make sense.
I'm sure (I hope, actually) that some policymakers, or some researchers, have done some conclusive researches about -- give X years into the future, and let's see we do not want to disrupt the current social-economic reality too much (no revolution, no major wealth re-distribution, no world wars, etc.), which industries can we bring back, and into which state, and sell its products into which countries, realistically.
I wish the discussion included the margins the fashion industry makes. In the labor sector, 10%-20% margin is respectable. But in the fashion and consumer goods sector at least 30% margins are expected. 80% margins are normal for “luxury” goods, which I’m sure is the bracket Nike falls into. I wish margins were included in the thread. It’s only true that everything increases in cost if you also have to keep the same margins.
Relatively easy stuff like shoes can be made in a bunch of countries and that production will just move to whoever has the best tariff deal at the end of all of this.
More interesting will be stuff like electronic components. Most of the cheap versions are all made in China. More expensive versions can be sourced in Japan, Taiwan and Korea (likely to do tariff deals). I think we might be looking at the end of very cheap electronics for awhile.
I think the one thing I am not seeing much discussion on is, will the end consumer pay for these $150 sneakers or will they simply switch to lower cost alternative brands?
"Retailers mark up the shoes 100% to recoup various costs and generate a profit."
Whenever I enter any physical store it always boggles my mind how insanely inefficient the whole endeavor is for all involved. But that retail basically swallows half of the price is just unbelievable.
Are comfortable and repairable shoes possible and sensible from an economic point of view? Any recommendations?
Once I was in the US and bought a pair of New Balance that were made in USA. I had the exact same model made in Vietnam or Indonesia.
The Asian made shoe of the same model out lasted the US shoe by a couple years. The US made started falling apart less than a year in.
What are the challenges that prevent humanity from further automating clothes production? We don’t weave fabrics by hand anymore, but we still sew pieces of it together by hand. Why is that?
Clearly shoes and textiles in general are extremely difficult to automate, but you only have to build one shoe building robot, and copy it. Why hasn’t this been done? Expecting a “too hard” answer honestly, but is it really?
"Everyone needs a fixed percentage to make money"
I get they WANT to, and it's what a shoe retail strives for, but this isn't accurate.
Cars for example aren't 100% marked up. That would be insanity.
Damn! I tried to answer the question without looking at the thread and arrived at a unit cost of 28 % of the retail price, after deducting reasonable guesses at VAT, store margin, shipping, etc. Fairly close to the quoted 25 %.
Fermi estimation is awesome and if you're one of today's lucky 10,000 who haven't heard of it, this is your day!
Now they’ll just have to make shoes for $11 or new balance will have to come back to North American manufacturing and make shoes for $40 wholesale
Shipping , customs , duty , port fees , transportation , packaging that can survive across the ocean should all be things that make the product unrealistic to make outside North America, not to mention environmental tariffs that should be applied to products made in Asia.
What about the $25 shoes at Walmart?
So, 100$ Nike shoes will soon be 125$.
I prefer leather shoes that last five years or more, and will happily spend $200+ for them.
For me this glosses over on why would see the same 100% markup on the customs duties as they rise. A 100% at a low tariff rate is just pricing in the increased paperwork and accounting, but at a super-high tarrif rate this become pretty unjustifiable. Why is not more likely customs becomes mostly a passthrough cost?
> First, adding $26 tariff at the port doesn't just add $26 to the final price. Everything here works off of percentages.
This doesn't have to be the case though, right? It seems very weird that when you jack up tariffs, some middleman in America is seeing their profit jump.
For me it just proves how ineffective big companies are…
cost != value and value != price. and consider alternative cost - highly trained workforce making shoes is a waste of resources.
It is better to distribute or sell shoes than to make them. It is even better to finance/own the making of shoes or even better - the selling/distribution of them. That is Economy 101, originally known as Das Kapital. The people who read those rules wrong call themselves marxists and insist on everyone producing a lot of the same standard shoes, and selling them to people at cost, $25. The people who read those rules right try to find how and where to make a factory, distribution center or retail store, or at least where to get a share of it :)
my guess, less than $5
Depends how small the child’s fingers are.
good luck getting the average person to even get past the 2nd slide with basic calculations lol. he's preaching to the choir.
i've seen certain groups defend war (really cannot imagine this) and now i'm hearing from the same group i'm a part of, well it's okay to off-shore all this because the president doesn't like offshoring? for years fashion forums have bemoaned the offshoring of american clothing. if the president said he supported communism, would certain groups suddenly become free market capitalists?
have people always been like this? was this 'anything but agree' position common back in the 70s and 80s? is this an american thing or christian society thing?
Trump's tarifs are indeed absolutely idiotic, but so are all those people claiming that free trade is entirely positive and ignore all the problems that arise from the West being unable to run industries anymore.
According to https://news.ycombinator.com/item?id=41283368 we should be linking to the primary source.
Q: Is there a specific reason* that this thread links to threadreaderapp?
* other than politics, which we try Really Hard not to bring into HN...
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> As the US has switched to a post-industrial economy, a lot of the wage growth has been in knowledge intensive services—medicine, law, engineering.
I.e. bullshit jobs.
Article has absolutely nothing to do with the actual cost of shoes. Just the simple cost of model of manufacture -> distributor -> retailer. Nothingburger.
bottom line there's very actual margin for the companies to play with on tariffs.
Nike doesn't sell shoes. Those are a loss leader. They sell you brand and lifestyle bullshit at a very high markup.
"I encourage you to note assume that every Asian worker is a slave. " The tone of this sentence, I dont know, a bit disturbing.
https://threadreaderapp.com/thread/1909741170953273353.html