BODY WATCH : Sizing It Up : WHY IT COSTS WHAT IT COSTS
The typical American owns two or three pairs of athletic shoes, which range in price from a $20 pair of old-fashioned sneakers at a discount store to $135 for top-of-the-line basketball shoes. One big seller has been Nike’s Air Pegasus, which, like nearly all athletic shoes, is manufactured by suppliers in Asia. This accounting is based on a sale at an outlet of a large national retailer.
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Cost to Nike:
Materials............................$9.00
Duties................................3.00
Rent, equipment.......................3.00
Production labor......................2.75
Supplier’s operating profit...........1.75
Shipping...............................50
Nike Total: $20
Cost to retailer:
Nike’s operating profit.............$6.25
Sales, distribution, administration..5.00
Promotion/advertising................4.00
Research/development..................25
Retailer Total: $35.50
Cost to Consumer
Personnel...........................$9.50
Rent.................................9.00
Retailer’s operating profit..........9.00
Other................................7.00
Consumer Total $70
SOURCES: Nike Inc., Reebok International Inc., the Finish Line Inc., Just for Feet Inc., Melville Corp., U.S. Customs Service, Athletic Footwear Assn., industry consultants and executives.
