Shoe making insight… Cost of development.
Presented by BAC Magazine | Written by Laurie Diamond
Perhaps the most talked about player in the 2017 NBA Draft is Lonzo Ball. Yes. That Lonzo Ball. The 6’6 PG from UCLA who is both known for his phenomenal passing ability and for being the son of LaVar Ball. Yes. That LaVar Ball. The same man who all but guaranteed his son will be selected #2 by the Los Angeles Lakers (at the time of press, the NBA Draft has not yet occurred). The same man who has gone head-to-head with ESPN’s Stephen A. Smith in a spirited interview about Michael Jordan. With a larger-than-life personality, LaVar Ball is no stranger to controversy and welcomes it with open arms.
To know the Ball boys, which includes Lonzo’s younger brother LeMelo, who will be entering his senior year in high school this fall, is to understand where their drive to succeed began…where it all started.
The Born to Ball story starts with a lesson on hard work from dad. Wanting a basketball court in their backyard, Lonzo and LeMelo started to save their allowance(s) in order to buy cement and a basketball rim. And once they had the materials they started to build the court. It wasn’t that dad was being especially tough on his boys; instead, he was trying to show them the importance of working hard in order to achieve a dream. As LaVar explains, “If you want something, go get it. If not, leave it alone. You have to work for it.”
Being the best at whatever they do is also something LaVar instilled in his sons at a very young age. “I told my wife to let me potty train our kids…I’d wake them up every two hours – they were out of diapers at 6 months old,” he notes.
As the boys continued to grow, so too did dad’s life lessons. Some may describe his attitude as being “me vs. the world,” but understand his attitude, life philosophy, outspoken personality, is rooted in love. Love for his family. Love for his sons. Wanting nothing but the best for them. That’s the thing about life. It can make you hard. It can make you strong. It can knock you off your feet. And it’s up to you to decide how you are going to respond.
Big Baller Brand (BBB) started out as an idea and through hard work grew to be a brand. Perhaps a household brand.
“Big Baller Brand is symbolic,” explains LaVar. “It represents independence. Someone started Nike. Someone started Under Armour. Why can’t my sons and I start our own brand?”
“Look, Michael Jordan is the only athlete who has his own co-branded logo under a big brand and LeBron has made Nike billons. But he is still signed to Nike.”
There are over one million Sneakerhead (people who collect limited edition sneakers) around the world. They have seen Yeezy’s go for over $1,000. Being a Sneakerhead is like being part of “it.” The movement. The members-only club. They dictate the shoe game and market almost as much as the brands themselves. And there is an exclusivity to copping a pair of BBB’s.
And how does Lonzo feel about being the only 19-year-old on the court with his own signature shoe? “I like everything about these shoes from the laces to my personal logo. I helped design this shoe and I’m proud of the result.”
Regarding the June 25th NBA draft, the Ball family plans to be in NYC supporting Lonzo. And no, they don’t feel any pressure. “Pressure is a mental thing,” says LaVar. “Pressure stems from fear and I think anything is possible. As I’ve told Lonzo, ‘you don’t want to be as good as Michael…you want to be better.’”
“I prepared my kids to be the best at whatever they do. Whether it’s a point guard in the NBA or something else, I know they will succeed,” he adds.
Lonzo is funny and yes, confident. He’s ready to turn the page and start the next chapter in his basketball career. That as a player in the NBA. Make that the best that has ever been.
The Hardest part about making a new sneaker is trying to figure out what a teenager wants to wear on their feet and why. The process usually starts with a design of some sort or another. In most cases, there are usually a group of people creating the direction of the shoe before the actual design process begins. The process often begins with an unrealistic sales report or a contract for an athlete. https://www.youtube.com/watch?v=0CNxoTKvG20
The Shoe Design
How does this process work? Does some shoe design expert come up with a prototype for the Jordan IV’s, or the James Harden’s out of thin air? Probably not, shoe designers can’t do it alone. A shoe designer is just one part of a team of professionals needed to create the design for a shoe. (Other Personnel includes a product manager, a pattern maker, a footwear developer, and a product engineer. )
A new shoe design isn’t complete without a detailed set of logos. A nice set of logos can add value to the shoe you are creating. The logo seems to be the sole reason companies are able to sell their shoes. For instance, what is the difference between the well-known juggernauts like Nike and Adidas and new companies like BBB? Does Nike a have a special factory where their shoes are created? No! In fact, New Balance is the only shoe company that owns a shoe factory where their shoes are produced.
The Cost to make a Shoe?
Let’s start with a basic sneaker priced at $80.00 per pair.
The retail store buys the shoe from the shoe brand in bulk at the wholesale price, which is about $40. If this is a big retailer they may get a 3-5% discount or free freight. The retail store will eat up 50% of the price on the bat. I mean, the retail store has to pay employees and keep the lights on in order to stay in business. The retail store also ends up taking the biggest risk because if the shoes don’t sell or if they are moving slow, they can’t be returned to the shoe company. The store may also have to put the last few pairs on sale. Whenever you see a “40% off sale” that translates to the store is not making any money, in fact, after covering the overhead, it is probably a loss for the store.
The real cost to make an $80.00 shoe is about $15.00. So what does a shoe company make off of an $80.00 shoe?
Ocean freight from China to the USA is about $.50 per pair. A 40-foot shipping container, the size of a semi-truck trailer, holds about 5000 pairs of shoes. 5000 X $.50 = $2500.00
Once the shoe arrives in the USA it must be legally imported. In the case of a leather sneaker, the US government requires an import duty of 8.5% of the F.O.B. price. So, add $1.32 to the cost. Also, add another $.32 for customs and insurance.
Now the shoe is in the warehouse: $15.00 + $.50 + $1.32 + .32 = $17.10
Next, it’s time to sell it to the stores:
$40.00 wholesale price – $17.10 = profit of $22.90
And of course, from that $17.10 the shoe brand has to pay the designers, product managers, sales managers, marketing managers, advertisers, athletes etc…
The New Shoe Wave! Continue reading below… A sneakerhead is a person who collects, trades, or admires sneakers as a hobby. There is a big sneaker culture that continues to expand worldwide. A lot of people are collecting sneakers, limited edition sneakers. People are actually lining up at stores in big cities for the latest sneakers being released. Often riots and fights break out as a result of the frustration of waiting in line all day and not even getting the chance to buy a pair of shoes.
It’s safe to say that there are over 1,000,000 ‘sneakerheads’ in the US alone. Sneakerheads are drawn to scarcity, meaning that they are willing to pay ridiculous amounts of money to get their hands on the coolest shoes on the market. The editor of our magazine, Arzelle Lewis, openly admits standing in line for hours and paying as much as $500 for limited edition shoes.
It’s like a status symbol!
Being seen with the latest Air Jordans or the new Yeezy’s is one way to show your social status to the rest of the world. Driving an expensive car and wearing Armani suits gives off the same impression but in a different way. At the end of the day, wearing the most exclusive shoe comes with a cost that many are willing to pay. It’s the new wave!
Is BBB charging too much for the new ZO2’s?
Before you answer the question, go back and reread the top of the article. Read the section about the cost associated with making a shoe. Established shoe companies can afford to set the price of their shoes at a lower cost because they are buying in bulk from the factories in China. Big companies also don’t mind paying the expensive cost that comes along with molding a particular shoe at every size. In addition, there are external forces that tend to have more impact on new businesses than on larger more established businesses. Changes in government regulations, tax laws, and labor and interest rates usually affect a greater percentage of expenses for small businesses than they do for large corporations.
If you are BBB, marketing your brand to the one-million-plus Sneakerheads can only mean success if they happen to capture a small percentage of the Sneakerhead population.
500 shoes sold at $500 dollars per pair = $250,000 dollars.
If you add up the amounts of 3 releases per year plus merchandising, BBB should be well over a million dollars in sales at the one year mark.
Read the rest of the story in the May Issue of BAC Magazine. May 26, 2017