Posts Tagged ‘$1 shoe’

The $1 Shoe.

November 24, 2011 Leave a comment

Reebok (earlier reports said Adidas) has plans to introduce $1 shoe in India. This is not just a fancy idea on the drawing board, the company has already tested the production and sale of the product in Bangladesh. At first instance one might be surprised at this decision by Reebok. But, the decision, although somewhat amusing, makes a lot of sense.

 The shoe costs about $3 to produce and has an equal sum in import duties. Thus, the net cost of the shoe is about $6 as of now. I doubt (as in the case of $2500 car-Nano) if the company will be able to sell the shoe at $1. Even if Reebok manages to create a sustainable business model by selling the shoe anywhere below $5, it will be a great success for the company.

Critics might come up with the example of Nano, which, although a ground breaking product is till a failed product. Why it is considered a  failed product is because it failed to create a sustainable business. According to the latest reports, Nano production is running at less than half the installed capacity. But, the biggest impact that Nano had was bring to the notice of manufacturers that it is not impossible to create an ultra low cost product with decent functionality.

So, here comes the $1 shoe.

Reebok has set up a special team to create the product with eyes on millions of people in Asia and Africa living in villages with meager means. There will be a lot of people who will be willing to upgrade from no-shoes or flip-flops to the low cost shoes. The market is definitely huge. Also, this product being a low involvement product, it will definitely have more buyers than the Nano. So, even if Reebok has very thin margins on the sale of each pair, the over all numbers will be very high.

One of the problems (which will be a boon for the consumers) that Reebok might face is that other companies will come up with knock-offs or their own low cost shoes imitating the $1 Reebok Shoe.