The Shoe Snob Blog

November 13, 2017

Lies in the Shoe Industry – Handmade, Middlemen, Top leather etc.

Edward Green courtesy of Skoaktiebolaget

 

****brands in post pics are not culprits of what the topic discusses***

It’s amazing the amount of crap you read these days about handmade this, no middlemen that, the best leather in the world etc. I feel that automatically if you read that on a website or ad, you should simply not believe it, especially when the shoe is for only $200-$300. And it makes me fear for humanity’s intelligence when they actually believe this crap and are going around telling people that their shoes are handmade. Come on people!! Common sense, the art of deduction and pure logic would tell you that a shoe made in Europe cannot be handmade at this price when a handmade shoe usually takes around 40-60 man-hours of work (conservatively speaking) from the second you are ready to cut the leather.

Assuming someone only gets paid €5/hour (I am using Euros as that is where most shoes are made that are claiming ‘handmade’), that shoe would have a manual labor cost of around €200-€300. Add the factory who sold the shoe’s mark up (aka wholesale price) and that would make the cost to said brand peddling these lies around €400-€600 (the factory usually likes to at least double their money). And then after the industry standard mark up of 2.6-2.7X (but let’s just say that they are only doubling their money for the sake of argument), that would make the shoes the price of €800-€1200 at retail. And that is only assuming the pay of workers is at €5/hour, which is on the low end of the reality stick. And not even taking into account the cost of the leather/materials.

Now let’s just say that having a production line of workers cuts your production time down by 25% making it around 30-45 hours per pair and a grand total of €600-€900 retail price, yet somehow they are able to sell these so-called handmade shoes for only $299.99???? What did I miss there?

Aubercy

Main D’or

Gaziano & Girling

And then the brand says, there are no ‘middlemen!!!’ What middlemen? As a brand buying from the factory and then reselling, by definition of the idea of a middleman, that brand is said middleman. It’s simply a joke and is quite hilarious that companies even use this gimmickry and even worse that consumers read it and then believe it. Only a factory making their own line of shoes and selling it directly to the customer can claim ‘no middlemen’ as James Fox of C&J said in his interview (see the last post). Yet this is the new trend of all of these cheap brands, peddling copycat shoes selling for pennies, claiming handmade production and trying to convince the consumers that they are the honest brand in the industry? Ha!! It’s laughable, to say the least.

The fact of the matter is business is business and margins are margins. If you don’t have a margin that sustains growth, you go out of business. Never allow anyone to con you of that. There is no charity in business and selling a product. Brands are doing so to make money. The problem is when you are willing to sell your soul and lie through your teeth to make that sale. And like I said, the truly sad thing and what destroys the industry is when so-called intelligent people believe it and then expect it when they should not. Shoes at $300 are not handmade and not using the best nor most expensive leather. Shoes at $600 are not even handmade either. In fact, allow me to say right now that no shoes in the Western World sold at any major department store are handmade.

And the big problem is that with how connected we are these days with everything being a click away, the world starts to believe these grand lies, that you can get handmade shoes at $300, shipped free worldwide (as if that doesn’t cost someone some money), using the best leather in the world and having no middlemen. The reality is that this cannot last and all of these companies thinking that they are one-upping the competition and the customer are really only digging themselves early graves when their so-called handmade shoes fall apart and then the next company that comes out does one better and pushes them out of the market.

Crockett & Jones – Bryan Cuero patina

Dandy Shoe Care patina

David Balzaic

I love my country (USA), I love the idea of the American dream, I love American work ethic and the great marketing abilities that my country has (when honest), but I hate that the majority of these lies comes from American based companies who are getting cheap shoes from Spain or Italy and peddling them as the greatest gift to the shoe industry and the American consumer eats those lies up like they are candy. Just like the lie that cedar shoe trees are the best in the world, especially for absorbing moisture. Another American con to try and sell the over-abundant wood that we have in our country (this will come in another post). No other country peddles Cedar shoe trees like the US does.

The fact is, all shoes with the exception of very very very few (mainly made in Eastern Europe) are made in a factory, with shoemaking machines that are simply controlled by a human who is guiding the shoe through the machine, but not doing the actual labor themselves. And that is NOT handmade. That is factory production!!! And believe it or not, there are some very low-quality shoes coming out of Europe, so don’t be fooled.

And until all of you, the consumers start to call them on their crap and stop going around telling others that your shoes are handmade when they are not, this will never change. And it must change, as these lies hurt the industry. Don’t believe everything you read or hear from a salesman when it/they are trying to sell you something!!

Hiro Yanagimachi

George Cleverley

Gaziano & Girling

Gaziano & Girling

  • H

    Hi Justin, I’m not sure where to write this but I’m wondering whether you have had the chance to cast your expert eye over the Armoury’s new Yohei Fukuda designed in-house brand made in Northampton.

    The last shapes look beautiful online and I’m tempted to pull the trigger – but I’ve never seen them in person. Do you know if they are closer to C&J main collection or hand grade in make & leather quality etc?

    • TheShoeSnob

      I have yet to have a chance to inspect them but truth be told, I did not like what I saw on pictures, They look handgrade from the pics though

      • H

        Thanks very much, I won’t be ordering a pair then haha. Do you mind if I ask why though? Is it a style thing or there something more than that my untrained eye hasn’t spotted?

  • Pach

    Any names or culprits you would call out?

  • Bryan

    Great article. You mentioned shoes at the $600 price range cannot be handmade. Enzo Bonafe sells shoes claimed to be handmade around this price range. What can you say about Bonafe then?

  • Bryan

    Great article. You mentioned shoes at the $600 price range cannot be handmade. Enzo Bonafe sells shoes claimed to be handmade around this price range. What can you say about Bonafe that claim to be handwelted in this price range?

    • TheShoeSnob

      yes handwelted is not handmade. It is partially handmade, but to do the entire process by hand would then make them more expensive. Also I said that shoes at $600 are not handmade, not that they couldn’t be handmade. What I was trying to say is that brands like Santoni and Ferragamo no matter how much the salesmen tells you they are, are not in fact handmade. VASS is apparently 100% handmade (although I have yet to confirm this and do not believe that they sew on the sole by hand) and they sell for around the same if you go to Hungary and get a pair. But these look like handmade shoes. I am talking about these cheap looking shoes that sell for $300 and the owners of the brand are claiming handmade.

  • Doug Giles

    Your understanding of profit margins is WAY off! Manufacturers are lucky to get 30%. Typically, they’re making closer to 20%. Same thing with retailers. His estimations that the manufacturers are working off a 100% profit margin and retailers are working off a 260% to 270% profit margin is laughable at best.

    Your estimation of labor rates is off too. 10 Euros per hour is $11.70/hr here in the U.S. (which is probably on the higher end of what manufacturers pay line workers). Add in payroll taxes and healthcare expenses and the employer is probably paying somewhere around 15 ($17.51 USD) Euros per hour per employee. TOTAL.

    Manufacturer’s wholesale price on raw goods for handmade shoes is probably 20-30 ($23.34 – $35.02) Euros per pair. Add that to the 450 Euros for 30 hours of labor and we’re up to 470-480 Euros. We’ll round up to 500.

    500 ($583.63 USD) Euros materials and labor. Tack on 30% = 650 Euros wholesale.
    650 ($758.71 USD) Euros wholesale. Retailer tacks on another 30% = 845 Euros.

    Translate that to U.S. Dollars:
    $758.71 wholesale
    $986.33 retail

    My numbers are right in line (maybe ever so slightly low) with what handmade shoes sell for. Entry level, hand made shoes start at about $1k.

    Fact is, labor is the highest cost of any manufacturing process both here in the U.S. and in Europe. As someone who has been in both retail and manufacturing, I know my percentages hold true to virtually every industry across the board (with the exception of pharmaceuticals). This is why so many manufacturers are moving to Asia (labor – in most cases – isn’t even a consideration). Cost of materials is often the LEAST expensive part of the process.

    • TheShoeSnob

      it’s amazing that you have no idea what you are talking about. I am in the industry actually with my own shoe brand, have dealt with retailers and know most of the shoe brands out there. Yes, some manufacturers that sell hundreds of thousands of shoes a year, maybe have a wholesale margin of 30% but NO RETAILER IN THE WORLD has a margin of 30%.

      And the fact that you say ‘Handmade’ Lobb’s even proves more that you are the one being fooled. The John Lobb shoes that are actually handmade cost £5000, not $1100. The only way one can survive on a 30% profit margin is playing the volume game and having to sell +100K in units. And there are hardly any ‘handmade’ shoes being sold in any store you have been to in the US.

      And fyi, the minimum wage in Spain and Italy is around €900 which is around €5 an hour for a 160 hour month. Factory workers are not being paid much more than that.

      Before you claim to know what you are talking about you might want to research a bit more. Also, I am not just some blogger. I own a shoe brand. And a 2.6x margin on top of the price I pay for shoes is on the low end of what many brands mark up their shoes. Many retailers want to bump up 3x the price of what they buy at wholesale.

      Just Google the article of Louis Vuitton shoes made in Romania, by the Guardian

      • Doug Giles

        In your response to “Pach” (two comments down), you say, “any brand that is marketing their “handmade shoes with no middlemen” and selling for less than $1000.”

        Now, I’m no rocket scientist. But, the numbers I quoted are less than $14 off from your $1000 target for entry level handmade shoes. I’m quite certain that I crunched the numbers correctly. Not to mention, I also have friends who are in the shoe business (manufacturing). I ran my numbers past them as well. Yes. I’m RIGHT on point with my numbers. Using my profit margins of 30% for both manufacturers and retailers, I came up with ENTRY LEVEL pricing of $986.33. Again, I’m less than $14 from what you say is what someone should pay for entry level handmade shoes.

        As for the “John Lobb” portion of my statement, I corrected that well before my comment was approved for posting. But, since we’re on the subject… True bespoke John Lobbs are in the $4000 to $5000 range. These are shoes that have MINIMUM 100 hours into making them. When you consider the amount of time that goes into making custom lasts (Roughly 30 man hours), the time that goes into selecting the leathers, the clicker’s time in hand cutting the leather, etc, etc, etc, it could easily get up to 100 man hours. Even still, without taking into consideration cost of materials, we’re only talking $40-50 per hour. For the work of HIGHLY skilled craftsmen.

        Question for ya… Are you working off of a 100% or greater profit margin with the shoes you sell??? If so, it tell me a LOT about what it is that YOU’RE selling!

        Look, pal, I’m not hating on you. Most of what you say in the article is true. You can’t buy quality handmade shoes for $300. Well, maybe you can if you completely eliminate labor as a cost (which is what most mass-producing companies are trying to do by moving manufacturing overseas).

        • TheShoeSnob

          you go ahead and keep thinking what you want, but a lot of what you say is very inaccurate and you are believing things that are simply not true, no matter what your friends say. People lie to not show what they are really making, money wise. Bespoke shoes do not take 100 hours to make either. I made bespoke shoes. That is how I started. Lobb’s start at £4000 for Lobb England. For Lobb Paris bespoke it is £5000. I said any brand under $1000 just to not confuse people fruther. THE ONLY TRUE HANDMADE SHOES FROM START TO FINISH ARE BESPOKE ONES. There are only a handful of exceptions in European manufacturing for very small workshops that sell maybe 5000 pairs a year at the very most. Please stop pretending that you are an expert and telling me that I do not know what I am talking about when I do, very well in fact. I run a shoe business and know the margins very well.

          • Doug Giles

            You never answered my question.

            Do YOU work on a 100% or greater profit margin?

          • TheShoeSnob

            of course! I would be out of business if I did not.

            and profit margin is not so simple as one thinks. It is not retail price less cost of goods sold. This is definitely over 100% mark up or I would have failed in my first year. But that difference in price versus cost does not take into account the rest of a businesses expenses (which has to be factored in), like employee wages, the absorbing of shipping costs, costs of paper, packaging for shipping, accountancy, ink for printer, and a million other recurring expenses that a business has. You clearly don’t understand the business or profit margin at all. If I sold my shoes at retail price only 30% above what I paid for them, I would have been loosing money from day one.

            The only time you put a 30% mark up is for a wholesale order of above a certain quantity to justify any kind of money making at all. Business is math. And it is simple. Clearly your maths are all wrong and not taking into account many things that consumers don’t see or apparently think about. You think wages are paid for by a money tree? No they are paid out of your profit margin. Accountancy? Free again? No Profit Margin.

            This will be the last comment I answer as it is evident you don’t know what you are speaking of

          • Doug Giles

            It’s fine. You don’t have to reply.

            I’m sure most of the people who can afford decent quality shoes aren’t the average cashier at Walmart. So, there’s at least a portion of them who actually understand how (most) businesses work and what their profit margins are. Some actually own businesses or are accountants and crunch these very numbers on a daily basis. So, they know that my model resembles most all businesses.

            Your business model that you’ve come up with has you selling shoes with an excess of 100% profit. Which means, on a pair of shoes you sell for $500, you paid $250 or less. Even more to the point, on a pair that you would sell for $1000, you paid $500 or less. What, exactly justifies the added expense???

            Here’s the problem I have with your numbers. They muddy the waters of understanding for the consumer. Manufacturers and retailers do stretch the truth. A LOT! They make claims that dance a grey line of legality. They make claims that lead consumers into believing that they are getting something that they aren’t.

            You said it yourself, “Don’t believe everything you read or hear from a salesman when it/they are trying to sell you something!!”

            Aren’t you trying to sell something????? I’m not.

            Again, part of what you say is true. You can’t buy handmade shoes for $300. When a company says that you can, they’re stretching the truth – A LOT – and using legal words rather than real-world words. The furniture industry has a similar problem (real wood, all wood, solid wood, etc.). My point remains the same though. Your figures are not based in the reality of most business models.

            If you work on a 100% profit margin, that tells me that you don’t sell enough volume to give your customers a good value for their dollar. Here’s your math in a nutshell:

            Manufacturer’s cost to make a pair of shoes:

            Materials: ???

            Labor: 40-60 hours @ $5.87/hr (based on currency conversion as of 11/14/17) = $234.80 – $352.20 (We’ll split it and say 50 hours = $293.50)

            Wholesale price with a manufacturer’s markup @ 100% = $587

            Retail price with a markup @ 260% to 300% = $1526.20 to $1761

            So, you’re making the claim that even without materials factored in, the manufacturer’s cost on Italian or Spanish handmade shoes should be $293.50 with a retail price of between $1526 and $1761???? That’s price gouging! People have actually been arrested for charging those kinds of percentages here in the U.S. following natural disasters!

            You have a pair of “Handmade Bespoke Oxfords” for sale currently at $525. So, are you saying that those shoes only cost around $87.50 to make??? Sounds like someone is making a LOT of money off of a pair of shoes that should sell for
            somewhere between $175 and $200!

          • TheShoeSnob

            either you don’t read or are just winding me up. Probably both. Yes, a handmade shoe takes that long to make. A factory made shoe does not. You are calculating apples and oranges. Handmade shoes cannot be in a large production line like a factory made shoe can be. It’s laughable what you say and write. You are sooooo delusional. And yes, every single brand in the world that sells retail for $500 paid less than $250 for them. Thinking otherwise is sheer ignorance for business which you prove every post you write.

            You think that when brands going 50%-70% off they are losing money??? You are crazy thinking that. Business is about making money, or at least your money back. If you are selling your product losing money, you will soon go out of business.

            And yes you are right about my handmade bespoke oxfords that I supplied the leather for (which I bartered for something else) and someone made for me as a gift. I could sell those for $1 if I wanted to. I am only listing them at a price that I think that they could sell at. Would the maker of them loose money if he was selling them at this price. Yes he would.

            Seriously? You should just stop as the next comment is definitely going to prove that you are a troll at best.

          • Doug Giles

            I’m not arguing the amount of time it take to make a handmade pair of shoes.

            I’m also not arguing about the advertising practices of either manufacturers or retailers. I agree with you there.

            What I am arguing is how much manufacturers and retailers mark up their goods. And, yes. I’m spot on. As someone who has been in upper management in both manufacturing and retail, someone who has LOTS of upper management business connections spanning everything from medical and pharmaceutical to power tools, I know that virtually every business in capitalistic societies operate on roughly a 30% profit margin. There are a few exceptions. Very high-dollar items that don’t sell fast enough are among them. In those instances, it’s based off of $ investment over time. Profit is calculated based on how much money is invested over a given (estimated) period of time.

          • TheShoeSnob

            think what you want man. You clearly don’t know anything about retail mark ups. If you believe that Louis Vuitton pays more than half of what they retail for, you are simply missing about 100 tricks in your head, not just one. Your business background means nothing as I am talking about the shoe industry and the standards there. Every industry has different mark up standards. I know for a fact what every brand is paying in the factory that sells me my shoes and what they are retailing at too and they are all over 100% profit margin, as is the rest of the brands in the SHOE industry. Just stop now please as I won’t approve any more of your comments.

          • Alex

            Hi Justin and Doug, I wanted to chime in because I think there is some confusion between the terms markup and profit margin. For example a 300% retailer mark up (what Justin is referring to) actually only equals 67% profit margin (what Doug is referring to), the calculations are simply different. In corporate management where one is always looking at the income statement, everything is typically calculated by the profit margins and in the retail environment it seems like markup is more standard like 3x the COGS. Margin is ratio of profit to the sale price while markup is a ratio of profit to the purchase price.

            Doug, it sounds like your experience is with large companies that are moving A TON of product at a 30% profit margin. You have to keep in mind the niche luxury shoe industry moves a lot less product compared to the medical, pharma or power tool industries do and thus need higher margins to survive. Even then, I’ve worked for a medical device company that operated on a 70% gross profit margin, though it was another niche product.

  • clee

    Not sure how you can get around that, suit has same problem, lots of pretend hand made out there…

    • TheShoeSnob

      for sure, it’s crazy when people say bespoke shoes for £399. It makes me laugh

  • Antonio garcía Enrile

    I have Justin. You are quite right, but I really think that there are people happy to be deceived … exactly the same happens in the tailoring.
    I studied Marketing, there is a pleasure in the human unconscious when it thinks that it has bought at a better price what others have paid at a much higher price, in this way the method of deception causes enormous pleasure in the client .
    Best regards

    Antonio

    • TheShoeSnob

      very true my friend, very true

  • Farhad Karimi

    Excellent article Justin! I think people if they are interested in bespoke shoes need to pay a visit to the John Lobb shop in St.James NOT the Jermyn street shop, only then they will realise what a true bespoke shoe is and why it cost around GBP 5000/= It is the same with watches or any truly hand made item.

    i like what Antonio said “there is a pleasure in the human unconscious when it thinks that it has bought at a better price what others have paid at a much higher price, in this way the method of deception causes enormous pleasure in the client ” this is so true.

    Take care and warm regards.
    Farhad

  • Cowboy Hank

    Paul Evans and Ace Marks immediately spring to mind. I’m sure there’s many others

  • matmat9

    Damn it! And I thought, when the salesman said this was goodyear, that it was made out of a tyre… ahaha.
    More seriously, I think that this is the reflection of the way we consume today. Millions crave for getting back to our roots and have products made with the same level of craftmanship than decades ago (especially in the shoe business) but only a few, the real shoe afficionados, understand the process behind it and the enormous amount of work it requires. And even fewer are ready to put the money it implies.
    That’s the difference between a consumer and an enthusiast.
    My regards dear Justin, keep making beautiful shoes!

  • ilija

    Justin, you are 100%right.
    Let me put it this way.
    Cohiba is the most popular Cuban cigar. Most people if know any Cuban cigar know Cohiba. Especially in US. Is it the best brand? Of course not. But any Arab, Russian bilioner who think is something smokes it. Only because it has a shinny ring. OK there are few in the brand worth mentioning.
    So. If someone likes his shoes being hand made for 300-600 dollars, let them be. It’s just a matter of class. You can’t just read one article on internet and know anything about shoes. It takes a few years and knowledge that good people in the know league share. Also a mind that figures and appreciate why true connoisseurs take off band off the cigar and a real gentleman don’t show off if wears really hand made shoes.
    To the rest until the time comes and they grow up, let them wear whatever they think is good for them.
    I hope my English knowledge was good enough for all of you to understand.