Sneakers have been a part of popular culture ever since Converse introduced Chuck Taylor canvas basketball sneakers in the early 1920's. Cutting-edge footwear technology by leading companies, such as Nike (NKE) and Adidas AG (ADDYY), combined with youth-influenced de༺signs, fuels demand 𝔉for sneakers, especially among young consumers.

Today's retail sneaker prices—with an average price of almost $130 as of 2023, involving a 6.5% increase in price since the beginning of the year—reflect an overall rise in manufacturing and marketing costs as sneaker companies compete to build and maintain brands desirable to their target markets. Celebrities and social mꦛedia also play an important role in the prices at which sneakers sell.

Manufacturing Costs

Sneaker companies, such as 澳洲幸运5官方开奖结果体彩ꦆ网:Nike and Adidas, outsource produc♌tion to more than one million workers in 澳洲幸运5官方开奖结果体彩网:factories in China and other countries around the world where the labor costs are relatively cheap. As an example, it costs Nike $28.50 to make one part of the shoes with a retail price of $100. Nike's cost breakdown includes approximately $25 per pair for Chinese factory labor and overhead costs, plus $1 in shipping and $2.50 in duty costs.

In recent years, rising costs of labor in China have impacted 澳洲幸运5官方开奖结果体彩网:profit margins, and in response, some companies have moved their manufacturing operations to Vietnam, Indonesia, or Thailand. In addition, the big shoemakers are continuously shifting some manufacturing tasks from human workers to robots in order to reduce labor costs.

Branding Partnerships

A significant part of sneakers' value includes the price companies pay celebrity endorsers to attract consumers and build long-term loyalties. In the 1980s and 1990s, sneaker companies partnered with top athletes to develop footwear designed to boost athletic performance. The high-performance shoes also offered r♏egular consumers the promise of superior quality.

Nike's Air Jordan brand sneakers—first introduced in 1985—are the most famous example and have made Michael Jordan one of the richest athletes in the world. Twenty years after his retirement from the basketball court, the slam-dunking superstar banked almost $2 billion in 2022, including $150 million from the Jordan Brand. Nike's Jordan brand now includes Russell Westbrook, Satou Sabally, and dozens of other professional athletes.

Furthermore, as young consumers associate sneakers as much with fashion as they do with sports, companies have partnered with key trendsetters in arts and entertainment to design and market sneakers. Adidas signed a 澳洲幸运5官方开奖结果体彩网:partnership with Kanye West, for example, to create Yeezy Boost sneakers. The sneakers, priced at $350, sold out within minutes of their February 2015 launch, mainly because enthusiasts pre-ordered the shoes online. In October 2022, Adidas terminated the partnership with Kanye West and ended the production of Yeezy-branded products which had a negative impact of up to €250 million on the company’s net income that year. Cardi B., Kendrick Lamar, and Selena Gomez are among other celebrities who partnered with shoemakers to launch unique brands.

The competition for sales among leading sneaker companies also drives sneaker prices. For example, 澳洲幸运5官方开奖结果体彩网:Under Armour (UA) renewed an extended partnership and equity agreement with National Basketball Association (NBA) player Stephen Curry. He will be the President of the Curry Brand. Sneaker companies spend money on celebrity endorsers, such as Kanye West and Stephen Curry, because their target customers are willing to pay premiums 🔴for shoes they associa🅠te with their favorite figures in sports and entertainment.

Social Media and Resellers

When a celebrity is involved with a line of limited-edition sneakers, some consumers want them, and they want them at any cost. Social media helps to fuel their desires. Private collectors generate buzz by posting pictures of the latest sneakers on social media. The resale market also fuels demand for sneakers. Resellers typically wait in line outside 澳洲幸运5官方开奖结果体彩网:brick-and-mortar stores for limited editions, so they can resell them online at a profꦆit.

The fact is that avid sneaker fans are often willing to pay a significant markup for popular designs. For instance, soon after retailers sold out of the limited-edition Yeezy Boost sneakers at $350, enthusiasts paid up to $1,000 for the sneakers on eBay. Social media trends and the impact of resellers indicate that sneaker companies can maximize their profits by manufacturing sneaker quantities at levels just below🐬 demand.

The Bottom Line

The multibillion, highly competitive sneaker industry has experienced significant growth in recent years, with consumers around the world buying an estimated 14.5 billion to 19 billion pairs of shoes per year ( equaling two pairs per person on the planet.)

With Nike and Adidas on top of the global market share, sneaker culture in the United States continues to thrive, with a projected annual growth of 5.31% between 2023 and 2028.