How much do you think it costs to make a pair of Nike shoes in Asia?
I'll show you. 🧵
In 2014, Steve Bence served as Nike's Program Director in Footwear Sourcing and Manufacturing. He pulled back the curtain on manufacturing in an interview with Portland Business Journal. He said that, if a sneaker retails for $100, it generally costs them about $25 to manufacture
This is the FOB cost. In the industry, "free on board" is the shoe's cost at the point when it's loaded onto a vessel at the port of origin. "Free" refers to how the factory will pay to deliver a finished product up to the point when it boards a ship—the rest is your problem.
Tariffs are calculated on the declared value of the import. In this imaginary case, if Nike paid a factory $25 to produce a pair of sneakers, then their tariff cost is $26. This roughly doubles the cost of making a pair of shoes in Asia and bringing it into the US (landed cost).
"OK," you say, "so that leaves them with a $49 profit. $100 retail minus $25 manufacturing cost and $26 tariff. That's still good."
Not so! There are other costs associated with getting that shoe into your closet. You are not collecting that sneaker at the port.
In 2016, Sole Review took a look at Nike's income statement and came up with this breakdown. On an imaginary $100 shoe, they estimate manufacturing cost is $22. Add freight, insurance, and import taxes, they estimate it costs Nike $27 to bring that shoe from Asia to the US.
They also looked at Footlocker's income statement/ 10k filing and came up with this model. On the same imaginary $100 shoe, Footlocker makes $6 after expenses.
Of course, Nike can retail the shoes themselves, but then they'll also take on similar business costs.
The actual costs associated with shoes will vary depending on the design, sourcing, and other specifics. The imaginary shoe above is set at $100 to make things easier as a percentage. For completeness, you can read Sole Review's story here:
First, adding $26 tariff at the port doesn't just add $26 to the final price. Everything here works off of percentages. In this simple model, we say Nike has a landed cost of $25, sells it to Footlocker for $50, and they retail at $100
But if we bump the cost of freight, insurance, and customs from $5 to, say, $28, then they wholesale the shoes to Footlocker for about $75. And if Footlocker purchases Nike shoes for $75, then they retail them for $150. Everyone needs to fixed percentages to avoid losses.
The second thing we see is that Asian manufacturing in Asia produces US jobs. You go to Footlocker to buy a pair of $100 shoes because you can afford them. This creates jobs for the Footlocker employees, Nike designers, marketing teams, and other US people throughout this chain.
The third thing we see is that Nike only paid the factory about $25 to make these sneakers. How much did it cost the factory to produce them? I don't have numbers on that, but if we assume the usual turnkey model, then maybe $12.5? And how much of that went to the worker?
Again, it's a popular misconception that all overseas production is sweatshops. Production can be done ethically abroad and still be relatively cheap because the cost of living is not the same everywhere. I encourage you to note assume that every Asian worker is a slave.
We have some idea of how much it would cost to make sneakers in the US. Victory/ Hersey (before they closed), SAS, and certain New Balances are made here. They retail for about $220.
Note, many of these rely on imported materials (up to 30%). So they will go up with tariffs.
I think making shoes is a perfectly fine job, although it suffers from the same problem as other manufacturing jobs. As the US has switched to a post-industrial economy, a lot of the wage growth has been in knowledge intensive services—medicine, law, engineering.
That means the Nike designer and marketer typically see more wage growth year-after-year than someone working on the manufacturing line (especially if they're not unionized and can leverage collective bargaining power).
Tech optimists think that technology will make factory jobs easier and better for workers. I'm less sanguine. I think some tech improves productivity and wages; other types of tech deskills and eliminates jobs (look at AI with illustration art).
I raise this only because I see some people suggest that it only costs Nike $2 to make a pair of sneakers in Asian sweatshops, which retail on the shelf for $150, and this is $148 profit. And if we move this back to the US, American workers can capture some of that money.
I think the truth is much more complicated. Manufacturing overseas can create certain jobs here by offering a more affordable product. In the end, you may actually see a *loss* of US jobs as fewer people pay for $220 sneakers, both at home and abroad.
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We will start with the most formal and work our way down, so that you can adjust things in ways that make sense for you.
The first and most obvious choice is to wear a soft-shouldered suit rendered in a material such as linen or seersucker. Seersucker can even be tonal (pic 4)
However, when it comes to dressing for the heat, it's important to remember that the fabric's weight and weave are more important than fiber. A 10oz tropical wool — known for its open weave — will wear cooler than a densely woven 14 oz linen because it allows air to pass through
Let's first start with some terms. The term oxford refers to a footwear style where the facings have been sewn into the vamp. By contrast, the term derby refers to a style where the facings sit on top of the vamp.
On the left, we see an oxford. On the right, we see a derby.
I believe that men wore tailored clothing best from the 1930s through '80s. If you share this premise, there are certain ideas about how an outfit should be put together, such as how oxfords look best with suits, while derbies go with suits or sport coats
I interviewed a clothing factory once who said he's excited to implement robotics AI. He said this will make US manufacturing more competitive against China. I asked, "And what happens when Chinese factories also implement robotics AI?" He said, "Oh, I hadn't thought of that."
Chinese factories also have these machines. All you've done is deskill the worker, making it harder for their wages to grow. Your land and labor costs are still higher than China, India, or any other place where they can pay someone to do this simple manual operation.
If you want to reshore US manufacturing in apparel, you have to move up the value chain. Look at other successful countries: France, Italy, and Japan. They don't make crappy t-shirts. They make high-end leather goods, suits, and denim. Requires skills that can't be automated
This is a bespoke sport coat made from vintage oatmeal-colored tweed and finished with natural Loro Piana horn buttons. It's from a relatively new South Korean tailoring company called Hameen, run by a woman named Hamin Kim.
Bespoke means the garment was made from scratch specifically for one client. Unlike made-to-measure, which involves a block pattern, this pattern was drafted from scratch using a client's measurements. The garment was then made through a series of three fittings.
Have you ever noticed that people dressed better in the past? Even in the summer, when it was scorching hot?
Why is this? 🧵
I want to first dispel some myths.
Contrary to popular belief, people didn't look better because they were slimmer. We see many corpulent men in the past who dressed better than the average man today. It's not true you can look good in anything if you have an athletic body.
Dressing well was also not limited to the rich and famous. A reader sent me pics of his grandpa, born in Rhodesia (now Zimbabwe) to a working-class Chinese family. He immigrated to London and then Canada, where he worked in an auto parts store and by installing light fixtures.
Let's start with an experiment. Here are two men wearing tailored jackets with jeans.
Which do you think looks better?
If you choose the outfit on the right, then we have the same taste. But why does he look better?
The answer stems fro a basic rule of classic tailoring: the jacket needs to have a certain relationship with the trousers so as to form a harmonious whole.