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How much do you think it costs to make a pair of Nike shoes in Asia?

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689 points taubek | 1 comments | 09 Apr 25 12:58 UTC | HN request time: 0s | source
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hx8 ◴[09 Apr 25 16:16 UTC] No.43633780[source]▶
> 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.

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ty6853 ◴[09 Apr 25 16:20 UTC] No.43633824[source]▶
Because the market recognized value add is the capital investment and returns, including the credit basis on which inventories flow. These people are operating on a per $ basis, not a per shoe basis. If the margins % lower then the capital will flow to something else more profitable and then prices rise until the margins are relatively flat across similar productive investments.
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pfannkuchen ◴[09 Apr 25 16:29 UTC] No.43633994[source]▶
That doesn’t really make sense to me.

The market cares about dollar returned vs dollar invested. If some piece in the middle of the chain goes up and end customer prices go up as well, that doesn’t directly affect investors at all.

The way it could and likely will affect investors is if people start buying fewer shoes, but that is a different process than what you are describing.

If I’m off base can you help me understand what you are saying?

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hamburglar ◴[09 Apr 25 16:39 UTC] No.43634128[source]▶
Surely you can see that putting in $75 to make $150 for a $75 profit is significantly different than putting in $10075 to make $10150 for the same $75 profit, yes?
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hx8 ◴[09 Apr 25 16:47 UTC] No.43634284[source]▶
Sure, I can see the difference.

I hope you can see how spending $75 to make $150 revenue and $75 in profit is a much better position than spending $50 to make $100 in revenue and $50 in profit, if you are limited to how many transactions you can make in a day by physical infrastructure.

I think it's understandable for the store to charge more for their shoes, and for the stores to make more than $50/profit per shoe to cover higher capital investment and increased risk of loss, but I don't understand the logical leap where the store now can make 50% more profit per shoe.

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1. hamburglar ◴[09 Apr 25 16:59 UTC] No.43634448[source]▶
From an investment perspective, $50 -> $100 is exactly the same as $75 -> $150. The difference in the number of transactions that actually occurred is trivial. I see the point you’re making but I don’t agree that it matters until the transaction value shrinks to the point where you’re selling things in huge batches (e.g a 5 cent part you sell for 10 cents, but you sell them by the 1000s)