$15 dollar basketball shoes

**AMERICARULES** · August 27, 2006, 09:19 PM

A lot of people may not have heard about this, but New York Knick point guard Stephon Marbury is coming out with the Starbury, a basketball shoe retailing for $14.98. He claims that the shoes are no different from any others that typically retail above $100 and will be wearing them in NBA games this season to prove it. So I have just one question, if Stephon full of it, or is he about to blow up the shoe industry as we know it?

**JP226** · August 27, 2006, 09:22 PM

Well... what kind of answer would you like? A purely economical one on why he can't succeed, or a lil bit more realistic one on why he could succeed temporarily.

**AMERICARULES** · August 27, 2006, 09:27 PM

Originally Posted by JP226

Well... what kind of answer would you like? A purely economical one on why he can't succeed, or a lil bit more realistic one on why he could succeed temporarily.

Well if it turns out that his shoe really is as good as he says it is, and the big three have been absolutely jobbing us on sneaker prices for forever, than I'd like to know about it.

**RZZZA** · August 27, 2006, 09:41 PM

Originally Posted by AMERICARULES

A lot of people may not have heard about this, but New York Knick point guard Stephon Marbury is coming out with the Starbury, a basketball shoe retailing for $14.98. He claims that the shoes are no different from any others that typically retail above $100 and will be wearing them in NBA games this season to prove it. So I have just one question, if Stephon full of it, or is he about to blow up the shoe industry as we know it?

That guy is my freakin hero! Finally, someone who isnt full of s$#%^.

"Here, buy my sneaker. It costs 90% less than the leading brand, and is just as good!"

What a hero.

**JP226** · August 27, 2006, 09:42 PM

well, price comes from two things, inputs or labor value and the utility value. Basically the cost of inputs, be it actual shoe production, shoe production in quantity and marketing and whatever else i'm missing plus how much the consumer wants it. Assuming the jordans, for instance, are "equal" to the $14.98 shoe, then both should amount to cost along the lines of labor theory of value. It's the demand that makes the diference. From what I understand the high cost of most basketball shoes comes from marketing. Theoretically you could charge jordans at the same price with no advertising, and a fration of th deamnd would exist leading jordans to sooner then later disappear from the market.

You also have something called the "snob effect" playing a part. This particular demographic that buys these shoes buy based on high prices. Everyone wants the same expensive shoe. In that sense the 14.98 shoe could do well considering that his demand would remain low as a result of the snob effect and lack of advertising.

The economic answer is that he could charge 14.98 assuming his Demand is low and lack of inputs but that is unlikely to happen and he will fail if he doesn't change price

realisitically the whole basket ball shoe amrket will remain unchanged and the new shoe will go up in price if the plan on staying in business. Of course that's assuming his product is the same and demand grows as he is a big name player

**AMERICARULES** · August 27, 2006, 09:49 PM

Originally Posted by JP226

well, price comes from two things, inputs or labor value and the utility value. Basically the cost of inputs, be it actual shoe production, shoe production in quantity and marketing and whatever else i'm missing plus how much the consumer wants it. Assuming the jordans, for instance, are "equal" to the $14.98 shoe, then both should amount to cost along the lines of labor theory of value. It's the demand that makes the diference. From what I understand the high cost of most basketball shoes comes from marketing. Theoretically you could charge jordans at the same price with no advertising, and a fration of th deamnd would exist leading jordans to sooner then later disappear from the market.

You also have something called the "snob effect" playing a part. This particular demographic that buys these shoes buy based on high prices. Everyone wants the same expensive shoe. In that sense the 14.98 shoe could do well considering that his demand would remain low as a result of the snob effect and lack of advertising.

The economic answer is that he could charge 14.98 assuming his Demand is low and lack of inputs but that is unlikely to happen and he will fail if he doesn't change price

realisitically the whole basket ball shoe amrket will remain unchanged and the new shoe will go up in price if the plan on staying in business. Of course that's assuming his product is the same and demand grows as he is a big name player

I don't see how the snob effect comes into play here. Outside the Lines showed these shoes flying off the shelves as people literall ran to get them. Not to mention how this shoe opens up a whole new market that was priced out of the 100 dollar shoe range. If these shoes don't suck, and if Stephon is happy with a normal profit margin (significantly lower than the no doubt ridiculous margins of thje big 3) then I hope this shoe destroys Nike, Adidas, and Reebok.

**JP226** · August 27, 2006, 10:00 PM

I don't see how the snob effect comes into play here. Outside the Lines showed these shoes flying off the shelves as people literall ran to get them.

it may or may not come into effect with this particular shoe, as he has placed his price much much lower then traditional market value, but this particular demographic in general would be considered to proscribe to the snob effect.

as they are flying off the shelves, they will undobtedly have to raise prices.

If these shoes don't suck, and if Stephon is happy with a normal profit margin

He won't have a gross. What happens is, as demand grows, so does costs, you set your price low and cost will quickly outpace rev, hence why prices go up to keep that cost down or maximize the distance between cost and revenue.

I think it would be more along the lines of he could do this as long as he's happy losing money.

**AMERICARULES** · August 27, 2006, 10:06 PM

Originally Posted by JP226

it may or may not come into effect with this particular shoe, as he has placed his price much much lower then traditional market value, but this particular demographic in general would be considered to proscribe to the snob effect.

as they are flying off the shelves, they will undobtedly have to raise prices.

He won't have a gross. What happens is, as demand grows, so does costs, you set your price low and cost will quickly outpace rev, hence why prices go up to keep that cost down or maximize the distance between cost and revenue.

I think it would be more along the lines of he could do this as long as he's happy losing money.

While I understand your view of supply and demand, I don't think that Marbury will need to raise costs if he wants to make more shoes. As long as they're selling, and the unit margin remains constant, he won't have to raise prices if he doesn't want to. And he won't necessarily lose money by keeping them at 15 bucks. He has control over production and price and may choose to keep price artificially low in order to keep demand ever high.

**bdh** · August 27, 2006, 10:11 PM

Originally Posted by JP226

it may or may not come into effect with this particular shoe, as he has placed his price much much lower then traditional market value, but this particular demographic in general would be considered to proscribe to the snob effect.

as they are flying off the shelves, they will undobtedly have to raise prices.

He won't have a gross. What happens is, as demand grows, so does costs, you set your price low and cost will quickly outpace rev, hence why prices go up to keep that cost down or maximize the distance between cost and revenue.

I think it would be more along the lines of he could do this as long as he's happy losing money.

Thats an accurate analysis, but you have to take into account their marketing strategy: honesty. They may be able to fiddle with the price a little bit, but demand will tank if they jack up their prices. Marbury is just as much trying to sell himself as he is his shoes. If everyone likes him, he can sell more at low prices and just rake in from bulk rather than snobbish markup. If he gets his image straight, he may even become the 'in thing' which will make him appealing to every member of his demographic. We have to keep in mind, they're selling more than just shoes.

It seems very nice of him, thats why there must be an angle....

That guy is my freakin hero! Finally, someone who isnt full of s$#%^.

"Here, buy my sneaker. It costs 90% less than the leading brand, and is just as good!"

What a hero.

See, its already working :tooth:

**JP226** · August 27, 2006, 10:52 PM

Thats an accurate analysis, but you have to take into account their marketing strategy: honesty.

yea, that could be a possibilty, but i don't think it completely explains the price so low. Hell, he could charge 50 bucks a pair and still use honesty and come out much further ahead.

Although he could be absorbing the cost here and letting it pay out dividends else where. That image problem of his could gain a boost and open up doors off of cheap shoes.