Sunday, November 27, 2011
Reebok to sell running shoes in India for as little as $1?
According to a local market research consultant...."If you want to exploit a $7tn consumer-driven economy like India, you have to adopt a high-volume, low-price business model with razor-thin profit margins. Two-thirds of India is on a very modest income so if you waited for incomes to rise to levels where they could buy Adidas shoes at Adidas prices, you would have to wait a very long time. The challenge for multinational companies is how to make goods at a price that consumers want but at a cost that they can still make a profit on. If you import materials, you have to pay an import duty, she says, so to keep costs low, Adidas will be finding materials and labour locally. And it will be relying on its quality, rather than its brand name, to distinguish it from equally cheap alternatives."
While the final product may be more suited for walking rather than running, it does give some idea about how cheaply shoes can be made. If a good quality running shoe in Europe or the USA costs 50 times as much, are they 50 times better? Or are the major sporting shoe companies happy to maintain the current status quo and keep a very generous margin?