I have been running since I joined the track team my sophomore year of high school. When I started, I had no clue about running shoes. I stood in front of the giant shoe rack at Dick’s Sporting Goods with hundreds of options in front of me and selected a pair of Nike running shoes. I can’t recall the style, but they cost about $70. To a sixteen year old, that is a lot of money! They had to be pretty good, right?
Those shoes worked for me during my first track season, but I learned more about running shoes and my own preferences as I got more into running. Eventually my shoe of choice cost me $120, but I don’t mind. I hope that running would stave off the costs of the health issues that arise from inactivity, and you can’t put a price tag on that. This did make me wonder, though: why are some shoes more expensive than others? What is the difference between shoes that cost $70 and shoes that cost $120 or more?
There are a lot of options when it comes to running shoes. Every brand has a variety of models at varying costs. They all have a lower-end price range and a higher-end price range. In fact, the retail cost of a running shoe is set before the shoe is even made. The company establishes a target price, a target audience and chooses the design features before production begins.
You might assume that the higher the targeted retail cost, the more that goes the making of the shoe. However, there are several other costs factor into the overall price, and the company has to make some kind of profit off of their work. The target price is made up of much more than simply the materials to make the shoe!
How much does it cost to make a running shoe?
The target price starts with the factory costs. The breakdown of the factory costs is known as the bill of materials. The bill of materials is an itemized list containing to cost of every single component utilized to create a single pair of shoes. For running shoes, this can include the costs of shoe molds, synthetic leather, mesh, threads, logos, inks, trims, midsole, outsole, and the labor and overhead costs.
The upper of the shoe makes up approximately one-third of the factory cost of the shoe. Overlays for the upper with seams are less expensive than their seamless counterparts. A more expensive shoe may have a “technically superior” upper in terms of how it wraps the foot and transfers moisture. New technologies, materials and the research that go into them are factored into cost and can definitely increase the factory cost of the shoe, but this is only a small part of the final price.
A higher end shoe may offer more cushioning and shock attenuation in the forefoot, but some of the factors that drive up the production cost of a shoe are not even performance driven. Factory costs can differ simply based on the color of the shoe. A pricier shoe can be designed to have a certain look that happens to makes it more expensive. Unfortunately, a shoe that is more expensive will not always last longer than a lower priced shoe.
How much does cost to get the shoe to the store?
After the shoe is made in the factory, it still has to be shipped to its final destination, which adds an additional layer of shipping costs, insurance and custom duties. The additional costs of leaving the country or origin make up the rest of the “landed cost.” Landed costs vary by country, footwear type, and other logistical factors. There are even different customs duty structures for the same commodity (i.e. running shoes!).
The brands then sell the shoes to retail stores for approximately 50% of the target price. For example, if a shoe costs $120, it will be sold for about $60 to the retailer. This 50% is an average, it could be higher or lower depending on the retailer. Retailers include local running stores, large chain sporting goods stores, and even websites. The difference between the price the shoe is sold to retailers and the total cost of the shoe and the is known as the gross margin for the brand.
From the gross margin, the brand still then has to cover the regular operating expenses involved in running their company. This includes staff salaries, research and design costs, distribution costs, marketing (including celebrity endorsements), depreciation, taxes and other business-related expenses, as well. After these expenses, the result is income. Taxes are taken out of the income to create a net income, or profit, for the company.
So now we see that the overall cost of a running shoe includes the production costs, shipping costs, insurance, customs duties, the retailer margin, marketing, income taxes, the overhead costs and expenses of running a company, and the small profit the brand makes from each pair of shoes. Whew! For those of you who love details, you can find some great specifics and a more detailed breakdown here.
Is more expensive always better?
Not necessarily. It all depends on the runner’s preference. If a higher priced shoe has a certain feature, quality, or technology that provides comfort to an individual runner, then the cost may be worth it to that runner. A different runner may get along just fine with a “cheap” $70 shoe, like I did in high school. Shoes are as unique as the runners who wear them, and there is a perfect match out there waiting for us all.
How much does your favorite shoe model cost? Is it worth it to you?