We are yet to witness a time when sneaker prices incline. For years, footwear from top brands, including Nike and Adidas, has gradually increased. Naturally, consumers wonder why this happens and how much does it cost to make Jordans. Well, the Air Jordan 1 retails for roughly $90 for the non-SE (special edition). Special Edition retails for basketball sneakers hardly ever rise above $110. However, the average cost of Jordan’s SE is about $145. In this blog, you will find out why the Jordan Brand costs more.
In 2014, the Jordan 1 Retro Fragment had a retail price of $185. Today, the resale price for a pair of identical shoes is about $2,000. Let’s compare this to the competition. In 2016, Yeezy Boost 350 retailed at $220. Currently, the resale value of the sneakers is $900. See, Jordan’s still double the competition’s price even though both shoes are Special Editions or Limited Releases.
- Why Are Jordan’s So Expensive?
- A Detailed Financial Anatomy of Nike’s Jordan Sneakers
- Are Jordan’s A Rip Off?
Why Are Jordan’s So Expensive?
Let’s pop the big question; why are Jordan’s so expensive? Well, forget the materials and cost of the product. The actual worth of Jordan’s lies in the value of the Jordan Brand. A lot goes into making and marketing the iconic sneakers, making them pricier (read more valuable) than other basketball sneakers. While the significant markup can get anyone a little upset—including the financially endowed- many factors come to play when setting the sneaker’s pricing.
First, Nike takes into account the cost of materials and production labor. Secondly, it considered customs fees and insurance costs. Thirdly, they must take into account the charges allied with collaboration between the brand and Mike Jordan.
Here are essential facts you should know:
How Much Does It Cost To Make Jordans? The First Deal— Air Jordan 1
At first, Nike signed a five-year deal with MJ (Mike Jordan). The deal’s terms were over three times better than the best contract Nike had offered any collaborator at the time. Apart from this unusual decision, Nike made color alterations that violated the NBA’s uniform policy. The move resulted in a $5,000 fine for each game Jordan played in his sneakers.
By the time Jordan signed the first deal, he was still unapproved. He won Rookie of the year while playing each game in his “banned sneakers.” His rebelliousness attracted the people, increasing the sales of the Jordan 1 sneakers nearly overnight. Essentially, Jordan’s sparked the sneaker culture. They tossed sneakers into the fashion world, making people want something more than an average shoe. When Mike won the title rookie of the year, the original Jordan 1 retailed for $65. By the year ended, Nike’s Air Jordan franchise had generated over $100 million in revenue.
What Jordan’s Sell
So, how much does it cost to make Jordan’s? Well, this is far from the most critical question —what makes Jordan’s so expensive. What you must understand is that the Jordan brand sells more than just sneakers. It sells a story that reminds people of their childhood and what pushed them into the sneaker game in the first place. When you mention Jordan’s, everyone’s mind goes back to the 1984-85 NBA season. This was the start of Jordan’s career and a time that people think of as the “good old days.”
Nike is the master of storytelling. The brand has made a smooth transition from the history of sneakers to connect the new generation. The truth is that Jordan’s are so sensational that they are loved globally irrespective of age or race. Nike sets the price based on the value of the sneaker and not primarily the cost of its production. Generally, the shoe is a product that brings nostalgia to young adults and a sense of innovation to the youth.
How Much Does It Cost To Make Jordans? A Detailed Financial Anatomy of Nike’s Jordan Sneakers
There is so much fuss about how much it cost to make Jordans. What we all forget is that actual sales for a pair of sneakers begin way before you can find them in your favorite sneaker store. Apart from the apparent expenses for materials, labor, and overhead costs, the brand must incur logistics, product branding, and marketing costs. Moreover, a deal also benefits retailers who buy their merchandise at nearly half its shelf price.
How Much Does It Cost To Make Jordans?
Finding insider information from Nike’s costing department is challenging or rather impossible. However, we can work backward to get a rough idea of how much the brand spends to make a pair of Jordan sneakers. First, the current retail price of the shoes in the U.S. is $185. Retail stores that buy them in bulk enjoy 50% off the cost to buy each shoe at about $90. Note that retailers are at liberty to extend their profit margins depending on the high demand for their merchandise, the location of their stores, and their marketing strategies.
How Much Does It Cost To Make Jordans? How Much Does Nike Receive?
So, 50% of $185 goes to the sneaker retailer. Nike spends about $10 for the materials needed for each pair of shoes. On the other hand, the labor cost is about $2.43 per pair, with an overhead expense of $2.10. As expected, the manufacturing company will also not go empty-handed. It will scope about $0.97 for each pair of sneakers it produces.
Generally, Nike spends between $16 -$25 to make a pair of Jordan’s!
How Does Nike Sell A $25 Sneaker For 92.50?
We have answered the question, how much does it cost to make Jordans. Well, Nike spends a maximum of $25 for the production of each pair of Jordan sneakers. The manufacturing doesn’t take place in the U.S, meaning the brand must incur shipping costs. Nike shoes enter the US from Indonesia, Vietnam, or China. The brand ships its merchandise by the ocean, and an ocean container costs about $4000 to ship. Usually, each container can hold roughly 3,000 pairs. The cost incurred to ship each pair of Jordan sneakers is, therefore, about $1.50.
The shipping process simply ensures the shoes arrive in the country. However, Nike must legally import the merchandise by paying customs duty. Jordan’s are textile and leather sneakers. Therefore, the US government expects Nike to pay a customs duty of about 20% of the free-on-board price (F.O.B.). Generally, the customs duty paid for each sneaker is roughly $5.
Your Favorite Jordan Sneakers Are Finally In the US!
So, Nike spent $25 to produce each sneaker. The brand also paid a shipping cost of $1.50 per pair and $5 as custom duty. At this point, the overall cost incurred per pair of sneakers is $31.50. Unfortunately, the list of expenses is far from done, and Nike must pay Michael Jordan. The Jordan brand stems from the life work of MJ, one of the greatest basketball players the world has ever seen. Hence, Nike must pay MJ his royalty for each pair of Jordan’s.
Again, most of Nike’s insider information is classified, which makes it challenging or impossible to know how much MJ earns in royalties. Sources say that for each shipment worth 2.6 dollars, Mike receives royalties worth 100 million. Simply put, he receives 5% of 92.50 (wholesale price per pair of Jordan sneakers). Therefore, MJ gets roughly $4.63 for each pack of shoes. If you add this to the expenses incurred by Nike so far, the overall cost of producing a pair of Jordan sneakers stands at roughly $41.30. Essentially, the brand pockets only $51.20, which is relatively standard for making a high-end shoe.
How Much Does It Cost To Make Jordans? Where Is The Money?
As aforementioned, there is much to how much it costs to make Jordans than meets the eye. At this point, Nike has $51.20 for each pair. However, the brand is yet to pay its insider team. This includes designers, developers, product managers, marketing managers, sales managers, advertisers, quality assurance staff, collaborators, administrators, and more.
Typically, the practice of allowing retailers to take home 50% of the final retail price is not new—at least not in the footwear industry. It ensures that retailers are not on the losing end in case of a markdown or unsold inventory. From Nike’s perspective, it is the hard work of the retailers that makes it possible for the brand to make high sales, reach a wider audience and drive up the brand’s annual revenue.
Are Jordan’s A Rip Off?
If you wonder how much it costs to make Jordans, perhaps the real question is whether the high-end pair of sneakers is a rip-off. Well, they are not. Once Nike pays its administrative expenses, taxes, and costs allied with research and development, the brand’s actual profit for each pair is about $4.50. Note that the overall cost of production may fluctuate, leading to the brand enjoying more or lesser profits.
Our breakdown may not be 100% accurate. However, it provides a well-researched and detailed projection of where your money goes when you pay close to $200 for a pair of Jordan’s. All points considered, Nike is as fair as any high-end brand can be. The brand remains loyal to its vision and mission even when it pockets a meager amount to sell each pair of Jordan sneakers.
It’s Gotta Be the Shoes!
So, how much does it cost to make Jordans? The answer to this question is more complicated than many would assume. The cost of production of the high-end sneakers may only amount to a small fraction of their retail price. However, the “actual value” of the shoe is so much more. Essentially, Jordan’s are priceless and are worth more than what money can buy. We hope the information we have shared inspires you as an entrepreneur.