Does it cost $1.50-$2.00 to make the average size pair of top of the line Nike race flats ?

BFD, that's common knowledge amongst runners. Now try again, dipshit.

More. Much more.

Sounds like you are considering materials and cheap, foreign labor. Doesn't sound like you are including design, material engineering, rent (production facilities, and design hq), duties on foreign production, international shipping, domestic distribition, etc.

All those add up. And I am not even starting to include advertising, marketing, and all that jazz.

Try 15-20x that.

Are you getting at the seeming "exploitation" of workers who make them? Or are you wondering why a small group of people (who like money, or running, or both) don't make decent running shoes and sell them cheaper as they don't have to pay for a vast marketing network? Or are you just idly wondering?

Manufacturing Engineering wrote:

Does it cost $1.50-$2.00 to make the average size pair of top of the line Nike race flats ? More or less ?

On average to make and sell anything by Nike, something selling for 80 dollars in the FY 2009 would cost about 74 dollars.

So while the materials may cost 1.5-2 dollars, the shoe costs a hell of a lot more in real terms ($$$)

50 cent labor. 1 dollar materials. 50 cent to the Chinese Communist Party. FOB cost of $2 is about right.

Mrr82 wrote:

On average to make and sell anything by Nike, something selling for 80 dollars in the FY 2009 would cost about 74 dollars.

So while the materials may cost 1.5-2 dollars, the shoe costs a hell of a lot more in real terms ($$$)

This is about right. It's very expensive when all things are accounted for.

I think you guys are greatly exaggerating Nike's overhead.

Cost needs to be defined to answer correctly.

A shoe for $80 would be sold by nike with a 45% retail market upping. So, we'll say nike sold it to the store for $45. Including all costs, we'll assume there is a 20-40% profit margin.

Averaging it all out, we can see $80 shoes cost $31 to make.

For the entire company, overall profit margins are 10.03%, in 2010.

I don't know how that breaks down betweeen their different products.

From talking to a few Nike reps over the years they all seem to be of the opinion that Nike's competition shoes don't really make good business sense. At least spikes, not sure about flats. The profits on them are so low after factoring in R&D and fixed production costs that the labor and (more importantly) financial investment could be put to better use elsewhere in the company.

TK1451 wrote:

From talking to a few Nike reps over the years they all seem to be of the opinion that Nike's competition shoes don't really make good business sense. At least spikes, not sure about flats. The profits on them are so low after factoring in R&D and fixed production costs that the labor and (more importantly) financial investment could be put to better use elsewhere in the company.

Very true. Spikes are a "halo" item that, at least in the first year of being available, may actually lose the company money. This is why spikes are typically kept in-line for four years, and why the spike plates of lower end spikes and cross country shoes are used over and over and over.

For example, the Rival spikeplate has paid for itself many times over because it's been virtually unchanged for almost two decades, but the R&D that went into the Victory likely cost quite a bit more. The goal is to spread out the cost of development over time, but it's hard to do for spikes like the Victory because the market for high-end distance spikes is so small.

Nike is betting that if you buy Nike spikes, you'll be more likely to buy Nike shoes and apparel (apparel, especially accessories like socks and gloves, being where the real profit is made).

cheaterz.. wrote:

For the entire company, overall profit margins are 10.03%, in 2010.

I don't know how that breaks down betweeen their different products.

Exactly. In 2009 FY it was even lower than that. They aren't making a 95% profit like the original posted tried to make it out. They are spending a hell of a lot of money when all things are considered.

We're turning kids into slaves just to make cheaper sneakers

But what's the real cost, because the sneakers don't seem that much cheaper

Why are we still paying so much for sneakers when they're made by little slave children?

What are your overheads?

If you rephrase your question you'll get rid of the jokers who start looking Nike's profit margins.

I think you meant to ask: What is the marginal cost of manufacturing an average sized pair of Nike racing flats?

The answer to that questions is probably on the order of a buck or two.

if your shoe sold for $100, the store probably bought them for $50, and they likely cost the shoe company $25.

The cost of manufacturing is about $1 to $2, then there's shipping from the prison or child factory in China to the US, plus packaging, marketing, sales. So China gets $2 for every pair of flats that Nike sells us.