Consumer’s Dilemma

For decades there has been a preconceived notion; a stigma that sneakers should not cost the prices that they do. It is a notion that has lingered and trickled through the sneaker culture. And to a point rightfully so but also to a point, foolishly so. Jordan Brand has taken the hit on the notion for the entirety of their existence and to a point will. Again, to a point rightfully so to the outside eye but also foolishly so to the outside eye.

This article is dedicated to that notion and why it leans more on the side of a foolish notion but not without some backing that articulates there is a rightful point to the notion. But among the grand scheme of things; given varying factors, given evidence that can articulate the angle of both perspectives of the spectrum is an argument that does not necessarily dictate how today’s sneaker industry operates. Enlisting the help of Campless, we analyze the data and compare it to both notions.

Argument for notion:

The argument for the notion that we are paying too much for sneakers is rooted in 1985 when the Air Jordan 1 initially released. To place the Air Jordan 1 into perspective you have to look at the sneaker landscape at the time. Signatures of the early sneaker industry date back as far as 1921 with the Chuck Taylor Converse All-Star and later with the Converse Dr. J signature some five decades plus later. When the Air Jordan 1 comes along nine years after the Converse Dr. J, its $65 MSRP was at the time the most outstanding of its time. At the time, it was seen as an unfathomable price, especially for a rookie despite having all the potential in the world to be the greatest player ever.

It was a risk taken by Nike which articulated not only their belief in Jordan that he could move units but a risk that would propel the sneaker industry as we know it today. Whether it was fully confidence or mostly a calculated risk or a well thought out marketing scheme that propelled the Air Jordan 1 the stigma’s origin began with the Air Jordan 1. It is worth noting that the notion does not solely begin and end with Air Jordan line or with Nike or with any brand; but rather we are utilizing the Air Jordan line as the subject due in part to there being more data to support both arguments and because it is the current epicenter of the arguments.

air jordan 1 jumpman 1985Whether the argument that the notion is strictly subjective due to individual household factors is unknown, however if able to be quantified and thoroughly analyzed it ultimately could serve as one barometer, one metric to support the argument that the notion is sneaker prices are too high. But due to the unknown in that regard it cannot be taken as fact.

Another barometer that airs on the side of prices being too high is the recent rate of increases. Rate; in terms of price as time between each increase. Since 2000 we’ve seen increases in price on a broad spectrum five times. Not so much release-to-release but rather on a wider scale of year-to-year basis. With more increases coming in recent years since 2010. In that span since including this year’s Remastered series and price increase; the rate has been four increases in roughly six years (counting 2010) with the November (2010) release of the ‘Flint’ Air Jordan 13.

And the final aspect of the argument has lead us to where we currently are with the Remastered series. Which in some way is a almost an admittance that the quality was not entirely worth the rising cost. But as that is easy to knit pick on and rightfully so; because there is some truth to the inference…such as the cost of travel and distribution of product.

It is quite difficult to pinpoint the exact reason as to why the notion is what it is. But it is rooted in history, rooted in individual household income and circumstance; rooted in the face value of a product in which the price has steadily climbed since 1985 and almost accelerated since the turn of the 1990s.

Argument against notion:

The argument that we are paying too much is a bit of a stretch. As alluded to in the argument for above; the Air Jordan 1 at the time of its release was the highest priced sneaker on the market. Whether it be confidence in Jordan on the part of Nike or an elaborate marketing scheme, the Air Jordan 1 set the stage for the current sneaker industry we know today. And with that benchmark being rooted in its initial 1985 release. In accordance to this perspective…the line is following suit with what it has always done.

Further more, economics fluctuate as varying factors arise such as rising cost of production, labor costs, transportation and distribution. All of which can spark a domino effect which in turn sets of a chain of reactions that in theory affects the system which drives up the MSRP which companies then in theory lean on us to offset the cost and then turn the desired or estimated profit.

jordan retail inflation camplessBut another key component from the varying list of factors that was purposely omitted from the group is inflation.

As articulated by Campless in the graphic (left) and in the article here; inflation is one of the aspects we can undoubtedly point to justify the claim that we are not paying too much. Especially in comparison to the inflated rate we could be paying.

Mapped out on the graphic, the $125 retail that we either enjoyed or complained about in 1991 would cost us $225 in 2014 and roughly the exact same in 2015. Coincidentally, the Air Jordan Lab Series featuring the Air Jordan 5 retailed for $225, placing it on par with the inflation rate.

When comparing the present day value of the dollar coupled with the inflation rate, it makes sense as to how prices for OGs were much more expensive then in today’s economic climate. Because the rate reflected the market at the time while compensating for inflation; in theory the $125 is an inflated price from years prior. And today’s prices now reflect the inflated rate for the prices from 1991 and before.

Which brings us to the next topic; the Remastered series which is essentially what informed sneakerheads have been asking for…better quality. Or at least comparable quality to the releases from yesteryear and even the OG years. But what the Remastered series brings with it is one of the varying factors from earlier in the segment…the cost of production. Cost of production and labor cost can effectively change the MSRP. While they are not the only factors, they are two contributing factors. Which then comes back on the consumer as part of the economic cycle to offset the cost in the eyes of companies.

sneaker resale market graphic campless

Lastly, a new aspect has been introduced to the fray and it is the resale market. While it has virtually been around since the beginning of the sneaker industry boom which birthed the sneaker culture and the modern following.

The resale market has become so vast that it is now the secondary market which rivals the primary market. And with the costs of production for original runs, there is now more cost because of restocks which of course is offset and turned into a profit just as original releases. But the argument can be had that restocks and the rising costs go hand-in-hand to offset the rising market which Campless estimates to be upwards of $1 billion.

The graphic covers consignment shops, services such as Kixify and reseller sites but also covers Flight Club and social media which has become quite the hub for same day sales and marketing such as #Sneakersalesunday.

With an estimated $1 billion in sales that does not reach Jordan Brand or Nike and benefits the reseller; it can be inferred that perhaps the market has become oversaturated to the point that there is too much money to be left on the table that companies are not getting but rather their consumers who have then turned a profit on their product. However the supply chain suggests that the companies have already received their profit from the retail shops which purchase products wholesale who in turn are being paid by the consumer on release day. And with the after market being as prolific as it is today; more retail shops are now doubling as consignment shops. Which has become a new revenue stream in which the store takes a percentage of the resale value of the sold product with the consumer now turned co-seller.

Conclusion:

Are we paying too much for our sneakers? The argument for both sides are completely subjective however there is evidence to support both claims. Whether you believe you are paying too much or not is completely unique to the opinion and circumstance of the individual. However this is one of the components to being a consumer; because at the end of the day…if you are not comfortable with a product you will not spend your money on it. No matter the stance, the evidence is there to support either claim, no matter the end of the spectrum you may be on.

 

Thanks to Campless for their contribution to the article. Follow the link to check out their site and dive right into their plethora of sneaker data.