Worked with Nike as a technology supplier...

By: Contrarian



...about a decade ago.  The following is an example of what their profit margins must be. 

I sold them equipment (T&M, QA) to help manufacture their air-bag technology, which was almost the only thing they manufactured in-house in Beverton.  They wanted to keep their processes away from Chinese competitors, and the huge amount of industrial espionage on the mainland.

The stuff my company was selling was expensive so I was dealing with one of the original dozen employees of Nike and a best friend of Phil. He actually ran huge manufacturing facilities in China and was back in Oregon to wrap up our business.   At dinner he told us a story about how all the shoe plants (Nike, Addidas, Puma, etc) were in one huge complex separated by heavily guarded barbed wire fences.  He said their most recent premium shoe had come out the week before.  About $140 retail at the time.  He said after the formal announcement he went to a very large shoe store very close to the plants out of curiosity about what they carried. 

He went in the store, and they had the shoe he had just announced.  It was selling there at less than 1/3 the retail cost in China (he said around $35).  Same box, same shoe.  Nike had not manufactured it.  It was a knock-off.  He said he looked at every aspect of the shoe for about 10 minutes and it was identical in every way. He could not tell the difference.

The manufacturing cost of the knock had to be about the same as the real Nike product.  It gives you an idea of the profit margins involved in these shoes. Some of the profit goes into branding of course.  The rest goes into the Quack's football facilities I'd imagine.

...and as much as I don't like saying so, Nike is going to make a lot of money with their Colin K. campaign.  A portion of the profit from every drug deal in the inner city will be spent on Nike products.   They will also take some of the youth segment back that they were losing to UA.

 

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