The Kanye West x Adidas has become everything we all expected it to be. The eye-catching Yeezy signature models have raised the profile and popularity of Adidas’ lifestyle lines in a more significant way than Pharrell Williams could ever have hoped to. These instant sell outs, featuring Adidas’ marquee cushioning tech, Boost, have been absolutely everywhere. Considering the retail price of $350 one would expect the profit margin Adidas is receiving to be massive, are we being robbed?
Let’s talk finances. The retail price of the Yeezy 750 Boost is $350, meanwhile production costs are down around $76, surely anyone can do that simple math and come to the conclusion that Adidas is robbing us blind. While that may have some truth to it, the actual % of that money that Adidas will see is much lower than one would expect.
Consider a typical $100 Adidas shoe. The breakdown for such a model is as follows: $21 goes on production, $5 on freight and customs, $13 on overheads and marketing, and $1 of income tax. That’s going to leave the brand with about $52 correct? Well, that’s where the retailer comes in, typically a retailer will pay 50% of the recommended retail price to the manufacturer. Leaving Adidas with $2 of profit.
Applying these ratios to the 750 Boost, assuming that the costs rise more or less to scale, retailers would buy the 750’s at $175 per unit. Adidas would in turn make a total expected profit of $7.30 profit per unit, not quite the daylight robbery we expected at the beginning. Following this it becomes reasonable to assume that retailers are the ones truly robbing the consumer. As with the model itself, once the layers are peeled back its not as it seems. Retailers generally make a profit of about 6% on footwear sales, this is due to rent, wages, taxes, marketing etc. In the case of 750’s this would result in a $21 profit on each pair sold, not so exorbitant either.
This is where things begin to truly get out of hand. Firstly, lets talk about StockX. StockX lists the range of sale prices of pretty much every shoe, displaying a true global market price based on sales occurring across platforms such as eBay, Klekt, Flight Club, RIF LA and Facebook groups. The most recent Yeezy 750, the Grey/Gum’s have been selling between $1,153 and $1,446. That’s an $800-1100 mark up for any successful reseller and significantly more profit than any retailer or manufacturer makes along the way. Considering that most pairs are secured via Raffle this means that a reseller could make this money out of 1-2hrs of their time. Due to the lucrative nature of the aftermarket as it stands its no surprise that many have gained a sudden interest in the sneaker game.
Considering the huge amount of money which is left to be made by resellers, one is left to wonder as to why brands choose to allow this to happen, rather than hiking up prices and making the money directly themselves. Aren’t these brands aware of the 250%+ mark up on retail price that still sells readily to collectors? Of course they are, but the hype which these camp outs and resellers and overall desire based around these hard to find sneakers is what drives Adidas’ ability to sell lower spec shoes. Since Adidas signed Kanye and his signature line began to release they have become the most mentioned brand on social media, beating Nike by a huge margin. All this exposure has driven the return to popularity of the Adidas Superstar and Stan Smith.
To conclude, in purchasing the Yeezy 750, or any Yeezy signature model, at retail we are not being truly robbed by the brand. Yes, the price is steep, but when the marketing and all other associated costs are taken into account it’s easy to see why retail is so high. If you find it too expensive, the answer is simple, don’t buy them. In the aftermarket however, extortionate prices are all too common, sure everybody needs their money, but it’s rare to find a collector that wants to part with 4 figures for any shoe.
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Robbie Fidgeon Kavanagh is the founder of SneakerHead Ireland (SHI), the online community for sneaker lovers in Ireland. An avid hooper, and self admitted shoe junkie, he can usually be found out on photoshoots with the boys from SHI, or sweating over a new release.