Here’s how much your favorite things actually cost!
10 - Nike shoes Just how much does it actually cost Nike to
manufacture a pair of shoes?
It costs Nike an average of only $28.50 to make a sneaker that will sell for $100.
For example, the Nike Air Max 2016 cost $33 to make.
But it sold at a retail price of $190.
The Nike Free Run 2016 cost a mere $18 dollars to make but it sold for $100.
The average 100 dollar Nike sneakers are sold to wholesalers at $50, meaning Nike will get
back $21.50.
Of course, not all of that is pure profit as there are other costs involved.
The final profit on the 100 dollar sneaker comes to around $4.50 a shoe.
Multiply that 4.50 by millions of shoes sold a year, and that’s a lot of money!
One way that allows Nike to outearn their competitors is with their overseas sales in
lower-taxed countries.
Continued overseas expansion has helped Nike to continue to grow its bottom line.
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9 - Cosmetics The cosmetic industry in the U.S. generates
$50 billion in revenue each year.
The price of lipstick, makeup and various skin care products isn’t driven by the cost
of the products.
The real cost for companies come in the form of marketing.
Beauty companies get celebrities to market the products to their fans.
And that costs money.
A lot of it!
For many people, price isn’t the deciding factor in their purchases.
If they think one product is of higher quality than a cheaper one offered by a rival company,
they're willing to pay more for what they perceive to be a better product.
And this is precisely why marketing exists!
It’s all about the perceived value, not the actual value something delivers.
People just want to FEEL like their products work, even if it actually doesn’t!
As a result, the average retail markup on cosmetics is about 50 to 60 percent.
The big names in the beauty industry are able to achieve high gross margins between 60 and
80 percent!
You can almost always find a cheaper drugstore product that will do pretty much the same
job of an expensive cosmetic item.
8 - Daniel Wellington Watches In the era of social media, it’s very likely
that you’ve heard of Daniel Wellington watches.
And chances are, you may know them better than any other watch brand that’s been in
the watch industry for many more years!
But here’s the story that’s not being told by all the Instagram influencers you
see wearing Daniel Wellington watches.
They’re mostly priced in the $149 to $229 dollar range – pretty affordable for a great
watch, right?
Well, it’s a good price for a nice looking watch.
However, many people would disagree on the word ‘great’.
The quartz movement is made in Japan while the watch is assembled in China.
The materials used don’t justify the price that it’s sold at.
The cases are thin and barely waterproof.
With such a cheap manufacturing process, you can actually buy one with the same design
at just around $10.
Is it worth paying extra for just the name?
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Filip Tysander, the founder of Daniel Wellington watches, has built himself a fortune.
But despite the crazy growth of his company, he hasn’t done anything to change or improve
the quality of his watches.
But really, does he have to if people continue buying the watches?
The company would much rather focus much more on marketing and branding, rather than improving
the quality of their watches!
7 - Eyewear For many people, glasses and sunglasses are
a basic necessity.
But if we’re keeping it real, designer eyewear can get really expensive!
Designer frames can easily cost north of $400, while standard glasses from a company such
as Pearle Vision can start at around $80.
But it turns out that these prices are marked up, way up, depending on the brand.
There’s essentially just a few select manufacturers for designer eyewear.
The biggest eyewear company is the Italian group Luxottica.
They own and control a large portion of the eyewear market.
Luxottica makes eyewear for brands such as Dolce & Gabbana, Oakley, and Ray-Ban.
They also manufacture glasses for ultra high end brands such as Prada, Chanel, and Versace!
Yep, even though the brand on the stem is different, they’re all made by the same
company.
And by doing that, Luxottica manages to earn a hefty gross profit of 64¢ per dollar in
sales!
Experts say that the actual cost for frames that are at a middle level of quality is around
$4 to $8.
For the higher quality designer frames, the cost is at most around 25 dollars.
Yep, designer sunglasses that cost 500 dollars or more, cost less than 25 dollars to make!
6 - The iPhone So what exactly is the cost to make an iPhone?
Let’s take the 256 gig iPhone XS Max.
This phone retails for $1,249 dollars.
But it’s actually pretty expensive to make, because it costs $443 dollars to make an XS
Max!
Let’s take a look at the breakdown!
Unsurprisingly, the huge 6.5-inch OLED display is the phone's most costly component at $80
dollars and 50 cents.
The A12 processor and Intel modem is $72 dollars.
The memory costs $64.50.
The mechanical parts and housing cost $58 bucks.
And the cameras are $44 dollars.
The remaining cost of $124 per phone is what the testing and assembly costs average to.
Back during the iPhone’s heyday, Apple reportedly made 74 cents on every dollar of revenue on
the sale of each iPhone.
However, earnings have gone down since.
Obviously, despite the dip, Apple is still doing just fine.
Even though iPhones account for 18% percent of smartphone sales, Apple earns a whopping
87 percent of the industry’s profit!
5 - Diamonds If you're buying diamonds at all, you're not
getting much value for your money.
A lot of people think that diamonds are an investment…..they’re not.
In case you haven't heard the news yet, the diamond industry is basically a massive scam.
First of all, diamonds are nowhere near as rare as we’ve been led to believe.
There are other gemstones, such as rubies, which are in far shorter supply.
Yet, thanks to aggressive ad campaigns since the 1930s, we still believe that diamonds
are the jewel to beat.
They're not even a sound investment, thanks to fluctuating values.
Shoppers in the market for a diamond should be prepared to pay anywhere from 50 percent
to 200 percent more than the wholesale cost!
Tiffanys is one of the most well-known luxury brands there are, but are you really getting
what you pay for?
If you buy a diamond from Tiffany’s, you're pretty much just shelling out extra money
for the name.
And the blue box.
Other jewelers sell diamonds without the steep prices.
A diamond is a diamond.
A Costco diamond of a quality similar to one sold at Tiffany's can be thousands of dollars
cheaper!
4 - Starbucks coffee
Americans drink coffee more than any other packaged beverage product!
People in the US drank an incredible 88.8 gallons of coffee per capita back in 2016,
which is more than soda, tea, and juice combined!
But coffee is also one of the products with the highest profit margins.
Chain coffee shops such as Starbucks know this all too well.
The actual coffee in a grande Starbucks Cappuccino costs roughly 31 cents.
But the drink itself sells for around $4.
The margin in this scenario is around 90% on the coffee alone.
Research confirms that on average, the usual margin for coffee shops is around 80-90% per
cup!
True, your local coffee shop will probably have slightly lower margins as their bulk
pricing isn’t likely comparable to Starbucks.
But still, even at 50 to 75 cents per cup, the margins are still high on a cup of coffee!
3 - Movie theater Food
We all know snacks at the movies are expensive.
And that’s why so many people try to sneak stuff in.
But have you ever wondered just how crazy expensive it is?
Popcorn, for example, often sells at a price that reflects over a ONE THOUSAND percent
markup compared to the cost of the kernels!
The true cost of making popcorn is around $0.35 per bag, while we buy it for around
$6 or $7 bucks!
A medium soda costs a few cents for the theater, but they sell it for $5 or $6!
But, there is a reason why prices are this crazy.
It’s kind of a double edge sword.
Well, that’s if you actually buy snacks at the movie theater.
By charging high prices on the concessions, theaters are able to keep ticket prices low.
After all, movie theaters have to rely on concession sales to keep their businesses
viable.
Although concessions account for only about 20% of gross revenues, they represent roughly
40% of theaters’ profits.
That’s because ticket revenues are shared with movie distributors, while 100% of concessions
go straight into the theater owner’s pockets!
2 - Luxury Sneakers As luxury brands look to gain a stronger foothold
in the so-called “sneakerisation” market, competition remains fierce.
So many chunky shoes are out there today, much to many people’s dismay.
But we’re going to look at Gucci as an example anyway.
A pair of ACE Gucci sneakers cost over 500 bucks – but what’s the cost to manufacture
them?
Well, for starters, luxury brands definitely have higher margins.
One of the reasons the industry is so attractive for investors are profit margins of 18%-25%
percent, which are both achievable and sustainable in the long run.
With the higher craftsmanship and higher quality materials, a premium gucci sneaker is going
to cost more than any regular pair of Nikes.
If a pair of Gucci Ace sneakers cost 600 bucks, the actual cost of manufacturing that shoe
is most likely going to be anywhere from $75 to 100 dollars, depending on the materials
used.
Just because a gucci sneaker has a lot of canvas on it, Gucci isn’t going to bring
the price down!
Remember the roughly 30 dollar cost to make a pair of 100 dollar Nike sneakers?
The process to manufacture Gucci shoes really isn’t ALL that different.
The material is going to be a bit more expensive, and the workforce is probably a bit more skilled.
But the cost to manufacture isn’t going to get astronomical until we’re talking
completely handmade shoes.
And the Ace Gucci sneaker is definitely not one of those shoes!
But the more perceived value you can put in a sneaker, the more you can charge!
The reason for the high sales price tag is two fold.
Luxury brands have a lot more to pay to have their product reach the right people.
That and to give the feeling of high quality.
People tend to associate high priced items with quality.
But that’s NOT always the case!
Luxury brands also have to spend a large chunk of the MSRP on advertising and marketing.
Then they have to spend a chunk more on store design and branding.
Then it’s another slice for producing fashion shows!
1 - Designer water
Bottled water is wildly popular but also, wildly overpriced.
In fact, for the price of a single bottle of Evian bottled water, you could pay for
1,000 gallons of municipal tap water.
And you probably know by now that 40% of bottled water is just filtered tap water anyway.
With bottled water, you're not paying for the water, but rather for the packaging and
the convenience.
Beverage companies make billions of dollars by rebranding water.
Obviously, the water itself is actually one of the cheapest parts of the final product.
It usually costs only a few cents or less to make it drinkable.
After the cost of packaging, shipping, and marketing, companies are usually left with
a healthy 30% profit margin.
Just to give you an idea of how much companies earn by selling water: Fiji profits 90 cents
per bottle, VOSS makes $1.20 per bottle, and Evian manage to make $2.10 for a limited edition
bottle!
Watch this next video to find out about billionaires who don’t care about the cost of anything!