Tuesday, July 8, 2014
The buzz on Converse fuzz
A few years ago someone at a party told me he works at Converse, makers of the popular canvas shoe and said it's there to dodge a tariff.
Converse sneakers are like Pabst Blue Ribbon beer: They developed a cult following because they were cheap and stylish, but after capturing a big market share and gaining customer loyalty, they pushed the brand further and raised prices, but managed to hold on to customers.
Even with that popularity the company has an incentive to save money wherever it can to maximize profits, and the purpose of the fuzzy layer is to save money.
Under American trade law, Chinese-made sneakers incur an import tariff of 37.5 percent. However, slippers have a much lower 3 percent tariff and the fuzzy layer makes the shoes count as slippers, despite everyone knowing full well that they are outdoor shoes.
A friend at that party asked that since Converse is so profitable why doesn't it just pay the full tariff. The answer is they've found a simple way to avoid it, so they have no reason to pay it.