Prices Jumping Too High?
Prices Jumping Too High?
By: Ross PelzelSince 1984, the world’s most iconic and recognizable basketball shoe has been the Air Jordan. Whether on the court or on the street, the image of the Air Jordan is unmistakable. But, how much are people willing to pay for style? The prices for these sneakers are starting to resemble prices that should be found on Rodeo Drive, not a Foot Locker. The most recent release of the new Jordan 11 Retros showed a 10 dollar price increase from the release of 2013, taking the price up to $170.
And that’s just the retail price, on Ebay and other sneaker buying websites, minimum prices for Air Jordans range from 210 to 230 dollars, 40 to 60 more than the retail price, with the most expensive sales going up to around 340 dollars for one pair of these sneakers.
So where does one draw the line when trying to buy a pair of Air Jordans? Apparently, even after the price increase on the latest releases, the demand is still very high. According to the Washington Post, police had to be called to malls all over the U.S to control crowds vying to get their hands on a pair of the shoes.
The reason behind all of this sneaker pandemonium is the genius business plan of Nike. Nike makes sure to keep the supply of these shoes well below the demand. This results in a higher equilibrium price, allowing Nike to charge absurd prices for their brand. And it’s working, in 2013 just the Air Jordan brand made 2.3 billion dollars in profit just from retail, and profit is up 5% so far in 2014. But where will Nike eventually overstep its boundaries and charge a price that is too high even for the most avid Air Jordan fan? It’s hard to say, but with the large amount of available substitutes, these sneakers are an elastic good that could still end up in a large surplus of unwanted sneakers, should Nike not play this very carefully.
In my opinion, prices for Air Jordans are already too high, the lack of sales or any price breaks in these sneakers is ridiculous and not something that I want to funnel my minimum wage salary into. The lack of surplus of these sneakers is amazing and drives the prices too high for me to realistically put my hands on the new releases. But, in no way am I suggesting that Nike should change their business plan. The ingenious system that Nike has come up with leaves customers forced to pay the high prices that are being charged for the basketball shoes that were formerly 65 dollars when they were released in 1984. Although there has been significant controversy about the ethics of Nike's business plan, the company still generates billions of dollars in profit and has become the single leader in the production of athletic gear, whether it’s footwear, clothing, or equipment, Nike has created a monopoly in the sports world. This monopoly might just be centered around the prestigious and expensive Air Jordan Franchise.
Works Cited
Online. Associated Newspapers, n.d. Web. 12 Oct. 2014. <http://www.dailymail.co.uk/news/article-2014325/Nike-workers-kicked-slapped-verbally-abused-factories-making-Converse-line-Indonesia.html>
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