God I feel old writing this. You know when your parents use to say “back in my day, a candy bar was only 5 cents”? Well, that mentality has come full circle, and I feel like a dad (even though I am one)
But it’s true, living just isn’t cheap anymore. Just ten years ago you would get gas at $3.50 a gallon, as much McDonalds as you could eat for $3 and a pair of Jordan retros for $135. We know prices do go up on everything – we get that. But 10, 15 years ago, building a collection didn’t cipher your earnings as much it does in 2018.
So today we take a look at 5 reason why this is happening.
There’s no secret that inflation plays a big role in price hikes. As goods require more money to purchase and manufacture, the value of money falls – therefore prices must increase. But statistics don’t lie. Increased demand in manufacturing competition has actually decreased the price values of things like electronics and clothing – including sneakers. But take in to account rents, logistics, warehousing and all the activities sneaker companies need to facilitate stateside, and you will find reason enough for inflation to play a significant role in sneaker price hikes.
2. Wages aren’t increasing
In a prefect world, wages would increase with inflation – but that hasn’t been the case in recent years. And when material sourcing and manufacturing is done offshore, brands only need to pay those contractors more money for inflation. So what does that mean for us? It means wage growth Stateside is slower than the rise in inflation. That is, the cost of international inflation is passed on to local consumers.
3. Low profit margins
And because of this last point, retail has suffered. Wholesale is an integral part of any manufacturing business. Wholesaling lends itself to smaller profit margins, and with less products being sold on shelves, prices are being driven up.
4. Excessive Releases
Excessive releases have overloaded Nike with excess stock, leading to huge discounts both in-store and at the outlets. But that would make sneakers cheaper, right?
But by having more releases, more frequently, a lot of us find ourselves copping more shoes in a calendar year, blowing out budgets and giving us the perception that sneakers are costing us more and more. When in fact, we’re just buying more units – even if they are 40% off at the outlets.
5. A Licence to Print Money
Jordan Brand have had a licence to print money for decades. In fact, Mike made more money in 2016 off sneakers than he did during his entire professional career. Jordan’s marketing team are genius, tying historical events, memories and stories (some of them extremely reaching connections) in order to produce limited, higher priced releases (i.e. Defining Moments Packs) or more hype around a below-par general release (Ugly Sweater 7’s). These terms all drive demand; “Quality” “Limited” Collaboration” “Exclusive” and they work in the consumer’s mind during rationalization of a $200+ purchase.
It’s this licence to print money that has seen Jordan make a killing over the last few years. Because the market sucks up each and everything Jordan Brand put out on an annual basis.
With all that being said, be educated about the market and be smart with your money.
Stay woke or stay broke.