August 28, 2006
A New Economic Model for the Basketball Shoe Industry?
Posted by Lisa Fairfax

Like many other basketball players in the NBA, Stephon Marbury of the New York Knicks is endorsing and selling a basketball shoe.  Unlike other players, whose shoes cost anywhere from $125 to near $200, Marbury will be selling his shoe for less than $15.  $14.98 to be exact.

Marbury says he is selling the shoe at such a price in order to “do the right thing.”  As an African American who grew up in New York, Marbury understands that basketball is the favorite pastime of many inner city kids, and that such kids want to wear the latest and greatest basketball shoe and clothing when they are playing.  However, those items tend to be very expensive.  Indeed, Marbury explained that his mother had six other kids and thus his mother told him that the $120 he wanted her to spend on basketball shoes could be used to buy groceries for the month.  Yet many kids in the inner city will go to great lengths to own the right basketball shoes.  Thus, Marbury wanted to sell shoes that reflected the latest in basketball wear, but were affordable.

Marbury explains that he wants to reshape the economic model of the basketball shoe industry.  According to Marbury, there is no difference in quality between his shoe and other more costly shoes endorsed by NBA stars.  Then too, Marbury and other industry analysts contend that a lot of the costs associated with other shoes reflect the costs of marketing and advertising (as well as a higher profit margin).  Marbury is relying mainly on word of mouth to market his shoes, as well as exposure from specials regarding his shoes, like the one done by ESPN.  Also, apparently Marbury’s only payment for the endorsement deal will come from profits, as opposed to the lump sum amounts many other athletes receive when getting endorsement deals.

I for one hope Marbury is successful.  As Marbury points out, basketball shoes endorsed by NBA players are not only very expensive, but appear to be marketed to a population who cannot afford them.  Neither ESPN nor Marbury mentioned the worst part of this phenomenon.  Indeed, there are some who are willing to steal and kill to get their hands on a particular brand of shoes.  Hence, Marbury’s shoe pricing policy may be able to ameliorate two problems.  Moreover, if it is successful, it may put pressure on other companies to decrease their prices, and put pressure on other athletes to accept less on these deals—and thus altering they way such deals are structured.

Of course many are skeptical.  Indeed, often youth associate high price with high quality.  Thus, the fact that the shoes are so inexpensive relative to other basketball shoes may turn away potential customers.  Also, some have expressed skepticism regarding Marbury’s claim that his shoes are the same quality as other more expensive ones.  However, Marbury insist that he has confidence in the shoes quality and that he will wear the shoes while he plays.  In fact, the shoe was designed by a firm that has designed other top quality basketball shoes.  Finally, given that he is the highest paid player on a team that had one of the worst records in the NBA, some claim that Marbury is simply selling the shoes at a low cost in order to boost his image in New York. 

Given that Marbury has created a viable shoe alternative for many young kinds, frankly, that last factor does not matter to me.  Ultimately, it is likely that the success of his shoes will depend on his success on the court—whether he wears them while playing or not.  If he and the Knicks have a good season and his shoes become popular, it seems likely that they could alter the economics of both the basketball shoe industry and the apparel industry.  It is enough to make me—a loyal Lakers fan—cheer for the Knicks!

Economics, Sports | Bookmark

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