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

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

#131

Post by ty6853 »

pfannkuchen wrote: post #105
ty6853 wrote: post #86

Earlier quoted context omitted.

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.

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 under…

Take this to the logic absurdity, you have a car you previously sold for $2 for $1 COGS. Tomorrow COGS is $1M for the car. Could you sell it for $1M+1? No you would lose your ass because your line of credit and investments would not be able to be supported by the returns, in fact if this is your only option you would probably stop making cars altogether and invest in another business and sell your assembly line, eventually enough car companies would go out of business until the supply curve met a high enough % profit to normalize with performance of other businesses.

Now this analogy has a LOT of problems but the point is it directly affects investors, even if the interpolations inbetween are imperfect.

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

#132

Post by lossolo »

rayiner wrote: post #42

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 f…

This. Anyone who doesn’t believe it — please go spend some time in Shenzhen, Shanghai, or similar cities, like I did. I just got back from China. I’ve been (also lived and worked) to the U.S. many times, and I can confidently say that China’s tier-1 cities are on another level when it comes to development and QoL (and not only T1 cities, I was in smaller regions in the north too). It’s also incredibly clean, super safe, and the infrastructure is breathtaking.

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

#133

Post by amluto »

ty6853 wrote: post #86
hx8 wrote: post #83

> 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…

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.

I don’t think this is quite a sufficient explanation. If I were an investor / owner of a distributor or retailer, I think I would observe that these businesses don’t scale arbitrarily and I would care about returns as a function of cost of goods sold, operating expense, and of cost of customer acquisition. In this context, cost of goods sold will include actual wholesale cost as well as associated costs that scale along with it: insurance, shrinkage, samples, etc. Cost of customer acquisition will not scale as strongly with wholesale cost — one would need to advertise a bit more to convince people to buy a more expensive shoe, but this should be less than linear. And operating expenses (retail square footage, warehouse space, cashiers, shipping and handling) are almost independent of the cost of the pair of shoes.

All that being said, tariffs drive up the cost of living, which drives up wages, which makes everything more expensive.

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

#134

Post by NegativeLatency »

hx8 wrote: post #83

> 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…

They'll sell fewer $150 shoes than $100 shoes?

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

#135

Post by lupire »

hamburglar wrote: post #124
pfannkuchen wrote: post #105

Earlier quoted context omitted.

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 under…

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?

"putting in" is doing a lot of work.

A shoe doesn't sit for a year waiting to be sold.

It turns over quickly.

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

#136

Post by kstrauser »

treis wrote: post #129
hx8 wrote: post #83

> 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…

Because it's mostly wrong. Luxury goods like Nike's, iPhones, et.al. are priced to maximize revenue. If those started growing on trees for free it wouldn't appreciably change the price. They'd just bank the extra as profit.

An aside: the actual functional Nikes aren't luxury items, just really good shoes. My wife’s a foot surgeon and she won’t run in anything else because they fit her perfectly.

I've never found Nikes that work for me, but Brooks seem custom made for me personally, so that's what I get. They're about the same price as my wife’s Nikes.

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

#137

Post by throw310822 »

NoMoreNicksLeft wrote: post #29
vidarh wrote: post #15

Earlier quoted context omitted.

Forcing China to become more independent of exports to the US also means China will care less about being in the good graces of the US. It cuts both ways.

One could easily have the impression that despite this, China has never really given a rat's ass about being in the good graces of the US, and that when they do relent it is often the case that they do not do so in good faith at all. If they comply with ethics and human rights, it's to the absolute minimum of that and in an underhanded way designed to undermine, but often not even that and they're just cheating and g…

[flagged]

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

#138

Post by ajmurmann »

hx8 wrote: post #83

> 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…

In addition to the points others are making, there is also the increased cost of inventory that doesn't sell. The flipside to the high markups from retailers is the high discounts you get on last season's fashion. This is the "fixed percentage to avoid losses"

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

#139

Post by hx8 »

hamburglar wrote: post #124
pfannkuchen wrote: post #105

Earlier quoted context omitted.

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 under…

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?

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.

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

#140

Post by sitkack »

pjc50 wrote: post #102
rayiner wrote: post #42

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 f…

> US will find itself in the same position the UK is in now The thing is .. there's a point here, but it's not at all tied in with physical products. People are obsessed with one side of the ledger while refusing to see the other. Most of the stuff the UK is struggling with (transport, healthcare, energy) are "state capacity" issues. Things where the state is unavoidably involved and having better, more decisive lead…

> we have to start from reality, not whatever vision of the past propaganda "news" channels are blathering about

Ha ha ha. I was this naive once. This just isn't our reality. You would have to have a functioning education system AND a population with adequate emotional regulation. Do we even have the pieces anymore?

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