Black Friday, special offers, clearance sales. Discounts are an essential part of the sporting goods industry, especially the running goods industry. What seems to be a nice thing for the end consumer is often the result of strategic overproduction and has serious implications for fair production conditions and the environmental footprint of the industry as a whole.
Let's write this article beginning at the end, with the conclusion. Conventional sporting goods like running shoes or textiles are being produced from cheap petroleum-based materials, often with a problematic supply chain and without any solution for a product’s end-of-life. This leads to high margins, making it "economically viable" to strategically overproduce and, especially at the end of a season, to flood the market with heavily discounted products. Products that remain unsold often end up in incineration plants. This routine not only significantly deepens the industry's environmental footprint but also puts factories and suppliers under pressure to initially produce goods for a lower price, which then again leads to poor worker conditions and the use of problematic materials.
Furthermore, responsible brands that produce with more expensive materials and depend on proper price stability have a hard time convincing customers to buy products for a full but fair price. Here is a comparison of production costs for a comparable pair of running shoes, made by WINQS and a conventional brand (estimated average).
Let's write this article beginning at the end, with the conclusion. Conventional sporting goods like running shoes or textiles are being produced from cheap petroleum-based materials, often with a problematic supply chain and without any solution for a product’s end-of-life. This leads to high margins, making it "economically viable" to strategically overproduce and, especially at the end of a season, to flood the market with heavily discounted products. Products that remain unsold often end up in incineration plants. This routine not only significantly deepens the industry's environmental footprint but also puts factories and suppliers under pressure to initially produce goods for a lower price, which then again leads to poor worker conditions and the use of problematic materials.
Furthermore, responsible brands that produce with more expensive materials and depend on proper price stability have a hard time convincing customers to buy products for a full but fair price. Here is a comparison of production costs for a comparable pair of running shoes, made by WINQS and a conventional brand (estimated average).
Let's talk numbers now and stick to the example of a running shoe. While a conventional pair made from 95 to 100% petroleum-based plastics costs around 20 € to produce, WINQS works with new, more sustainable materials such as algae foam, castor beans, eucalyptus yarn, recycled polyester, or rubber scrap, leading to product costs of over 40 €. With textiles, the difference is even bigger. A functional polyester shirt sold for 30 € often costs conventional brands less than 4 €. The cheapest WINQS shirt, produced from plant-based materials in Europe, cannot be produced for less than 15 €. However, that's the price if you want to receive a responsibly manufactured item.
Now, of course, things are more complex than this summary. The running goods industry is a dynamic realm driven by innovation, performance, and style. Behind the scenes of every sleek and high-tech running shoe lies a complex interplay of production costs, pricing strategies, and ethical considerations. To understand these fundamentals, let’s have a look at the true costs working with our example of conventional running shoes.
Production
Crafting a conventional running shoe sold by classic running brands with a retail price of around 150 € typically involves materials costing approximately 10 € per pair, manufacturing services of around 5 to 10 €, initial logistics to some central stock of approx. 2 € and around 3 € in average customs. Meaning the very core production costs end up at around 17 to 22 €, sometimes a bit more, but sometimes less. You can be sure most hyper-performance running shoes with a price over 200 €, 300 €, or lately even over 500 € might have an even higher ratio between production costs and retail price - as there are fewer pairs sold, but the development was more expensive, more money has to be earned per pair.
What isn’t included at this stage are research and development costs. Those differ from model to model heavily. Most running shoes made with conventional materials such as EVA midsole foams or polyester uppers have very low development costs. Furthermore, even the biggest brands hardly ever develop their own materials - suppliers like Arkema (midsoles), Michelin (outsoles), Ortholite (insoles) are specialized in developing specific material innovations that are then applied by rather conventional processing. To brands, it’s often just about the visual and technical design, which can be repeated with cosmetic adjustments for a second, third, fourth generation of the same model. However, there are "lighthouse" projects that involve a specialized engineering team with a lot of testing and development in the initial development phase. Broken down, such development can amount to up to 5 € for a 150€-pair, leading to a final production price of around 25 €.
Marketing
When calculating marketing costs, you must involve two figures: 1) The general brand marketing costs, which are not connected to one specific product (i.e., branding campaigns with famous athletes or event sponsorings), and 2) the marketing costs connected to a specific product (the Instagram ad telling you to buy that very new shoe or the big billboard on Main Street advertising it). The share of marketing costs can vary depending on the importance of a model in the portfolio of a brand. "Hero products" communicating the innovative power of a brand usually get a lot of attention, although they are often bought less. Unfortunately, another example is "eco-friendlier" models that are promoted loudly to greenwash an otherwise conventional portfolio but only share a tiny fraction of such a brand’s total sales. To have a sound number, let’s work with an average of another 10 € per pair.
Distribution
This one is the most complex one, especially since the "modern" omni-channel strategies took over. To keep it simple, there are basically four ways you buy a shoe (often without being aware of the difference): 1) A brand sells the shoe directly to you, meaning you buy it via their website, in their physical store, or at an expo. Here a brand earns the biggest share. 2) A brand sells its product via a marketplace like Amazon or Planetics. The brand earns a bit less, as the marketplace takes a provision of around 5 - 20%, depending on all the services it provided and how important it is. 3) A brand sells the product to a retailer, and the retailer sells it to you. Here around 50% or more of the net price go to the retailer. And 4) a brand sells your future shoe to a regional distributor, the distributor sells it to a retailer, and the retailer sells it to you. Here an additional 10 to 20% "get lost" to the distributor.
In general, most small or midsize brands work with a combination of all these channels as they all make sense in particular situations. Some younger brands try to sell only directly to you (so-called DTC brands), while other mostly big brands try to avoid distributors and can afford to sell their products to retailers for a higher price due to higher demand.
Now, to figure out how much a sports brand really earns by selling one pair of running shoes, it's crucial to know the shares of the channels above. If we'd want to find the average of a contemporary brand, we might work with around 35% of direct sales and 65% reaching you via third-party stores. Which leads us to the following model of who gets what from your shoe.
Conventional brands: 10 € material - 10 € manufacturing - 5 € logistics - 10 € marketing - 30 € brand - 55 € retail - 30 € taxes.
Finally, let us make one thing clear: discounts are not a crime per se. WINQS is also discounting products, for example, for loyal customers, its running CLUB members, or in case an item came too late on the market and couldn't be sold out properly. But one should always bear in mind where discounts really come from. Is it a fair sign of gratitude or just another attempt to sell us as much as fast and as cheap as possible?
When calculating marketing costs, you must involve two figures: 1) The general brand marketing costs, which are not connected to one specific product (i.e., branding campaigns with famous athletes or event sponsorings), and 2) the marketing costs connected to a specific product (the Instagram ad telling you to buy that very new shoe or the big billboard on Main Street advertising it). The share of marketing costs can vary depending on the importance of a model in the portfolio of a brand. "Hero products" communicating the innovative power of a brand usually get a lot of attention, although they are often bought less. Unfortunately, another example is "eco-friendlier" models that are promoted loudly to greenwash an otherwise conventional portfolio but only share a tiny fraction of such a brand’s total sales. To have a sound number, let’s work with an average of another 10 € per pair.
Distribution
This one is the most complex one, especially since the "modern" omni-channel strategies took over. To keep it simple, there are basically four ways you buy a shoe (often without being aware of the difference): 1) A brand sells the shoe directly to you, meaning you buy it via their website, in their physical store, or at an expo. Here a brand earns the biggest share. 2) A brand sells its product via a marketplace like Amazon or Planetics. The brand earns a bit less, as the marketplace takes a provision of around 5 - 20%, depending on all the services it provided and how important it is. 3) A brand sells the product to a retailer, and the retailer sells it to you. Here around 50% or more of the net price go to the retailer. And 4) a brand sells your future shoe to a regional distributor, the distributor sells it to a retailer, and the retailer sells it to you. Here an additional 10 to 20% "get lost" to the distributor.
In general, most small or midsize brands work with a combination of all these channels as they all make sense in particular situations. Some younger brands try to sell only directly to you (so-called DTC brands), while other mostly big brands try to avoid distributors and can afford to sell their products to retailers for a higher price due to higher demand.
Now, to figure out how much a sports brand really earns by selling one pair of running shoes, it's crucial to know the shares of the channels above. If we'd want to find the average of a contemporary brand, we might work with around 35% of direct sales and 65% reaching you via third-party stores. Which leads us to the following model of who gets what from your shoe.
Conventional brands: 10 € material - 10 € manufacturing - 5 € logistics - 10 € marketing - 30 € brand - 55 € retail - 30 € taxes.
Finally, let us make one thing clear: discounts are not a crime per se. WINQS is also discounting products, for example, for loyal customers, its running CLUB members, or in case an item came too late on the market and couldn't be sold out properly. But one should always bear in mind where discounts really come from. Is it a fair sign of gratitude or just another attempt to sell us as much as fast and as cheap as possible?
