New Economy Rant

Michael Pollak mpollak at panix.com
Wed Sep 27 01:39:28 PDT 2000


I'm curious. Are there figures available somewhere breaking down the Nike price and showing how people arrive at this calculation of mark-up? Because besides the fact that $148 is both an outlier and a suggested purchase price -- I'm willing to bet the median purchase price of a pair of Nikes is half that -- I don't quite understand, if it's 98.5% mark-up, why all other premium sneakers cost just as much. Asics, Saucony, New Balance, Adidas, Brooks & Mizuno have some brand recognition, but clearly not the brand recognition Nike does. And yet they all charge similar prices, and the market bears it. If it's all empty mark-up, what is keeping companies from entering the market and driving the price down? If it really costs $2 to produce, people should be piling in. They could still make a killing when the price was driven down to $10. These other brands don't seem to need a 1000th of Nike's investment in brand to pull in this price. They mainly sell the high performance market, but still, if the mark-up were this much, it seems it should have been eroded in that segment. Or am I missing something?

I also have to say that $100 dollar sneakers probably outstrip $15 sneakers in performance more than a $2000 stereo outstrips a $300 one. If I was limited to the converse and adidas of my childhood -- which my mother considered outrageously overpriced -- I would have had to give up running long ago. Could it possibly be that high performance sneakers cost proportionally more to produce than cheap shit sneakers? And that Nike's achievement lies in convincing people to use high-performance items when they don't need them -- kind of like the market for 4x4s? Thus converting a high-performance niche market into a mass luxury market?

I'm perfectly willing to believe brands are evil and I'm intellectually fascinated by the idea of treating the economics of brands as the creation and sustaining of pseudo-monopolies. But I wonder if these numbers mightn't be overstating the case.

Michael __________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com



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