←back to thread

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

(twitter.com)
689 points taubek | 1 comments | 09 Apr 25 12:58 UTC | HN request time: 0s | source
Show context
phkahler ◴[09 Apr 25 19:06 UTC] No.43636256[source]▶
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?

replies(8): >>43636287 #>>43636525 #>>43636532 #>>43636887 #>>43640309 #>>43640417 #>>43641310 #>>43642290 #
1. timewizard ◴[10 Apr 25 09:38 UTC] No.43642290[source]▶
> chain has exponential price increase at each step.

The amount of risk increases at each step.

That $24 in "discounts." Almost certainly some amount of that is "shrinkage." Storefronts are expensive in more ways than one.

You could take your monthly rent and costs and then divide by size of a product times the average hold time before sale. Each item has to pay this price plus whatever you want in profit to "earn" it's place in your store. That time multiplier gets worse at each step with an extra kick in the behind if you took those items on credit.

The manufacturer holds the product for almost no time. The retailer may hold it for months.