This document analyzes the pricing structure of Carolina steel-toed boots produced by Cove Shoe, a footwear manufacturer located in Pennsylvania. Cove Shoe specializes in boots and reached $446,179 in total sales and $110,000 in profits in 2015. The Carolina boot accounts for 20.31% of Cove Shoe's sales. A pricing waterfall is presented, showing the boot's $120 list price, $61.10 in fixed and variable costs, and 49.08% profit margin. The manager was reluctant to lower prices but estimates a $10 price decrease could increase units sold to 1750.

1. Nate Negri Pricing Waterfall 3/1/16
Carolina Boots
The product that I choose to do was a pair of Carolina Steel Toed Logger Boots the Cove
Shoe. Reasoning behind choosing this product was because it is one of their most popular
brands that the company sells to consumers. Cove Shoe is located on 107 Highland St,
Martinsburg, PA 16662. Established in 1954, Cove Shoe has specialized in the creation of both
private-label and branded footwear apparel. For 2015, Cove Shoe reached $446,179.64 for total
sales while profits reached roughly $110,000. When speaking to the manager, he was reluctant
to give me exact sales so he gave me a rough estimate. They do not have and stock
performance because they do not have any stock.
This product is a specialty product due to the stores focus being devoted to footwear.
The company is both B2C product due to its sales fromboth in store and internet.
Industry(US) 2011 2012 2013 2014 2015
Revenue($M) $2,026 $2,417.8 $2,169.2 $2,223.2 $2,144.2
Profit($M) $571.5 $614.1 $586.7 $514.7 $561
Profit Margin 28.21% 25.40% 27.05% 23.15% 26.16%
NAICS: #316210- Footwear Manufacturing *Numbers found on IBIS World
This product is in the decline stage of the product life cycle. I believe this is the case
because of how the market competes with lower-priced importers. Cove Shoe’s market share is
less than 1% because of how small the company is. Cove Shoe locally competes with
Zimmerman’s, Walmart, and Payless. When asked how Cove Shoe competes with its
competitors, the manager responded that he believes they are first in the market when it
comes to meeting consumers’ needs for boots. Second was Zimmerman’s, third was Walmart,
and Payless was last. His reasoning behind why Cove Shoe and Zimmerman’s were first and
second was because of the quality and selection the two stores have in common as opposed to
the other two companies. He said that if he had to put percentages to it, he would say 40% for
Cove Shoe, 25% for Zimmerman’s, 20% for Walmart, and 15% for Payless. When comparing
margins for the brand and the industry, the industry was higher by roughly two percent at
26.16% while the brand was at 24.65% in 2015.
Market penetration is used by the company because of how they sell the same product,
boots, to the same market. Cove Shoe has an exclusive distribution because you can only get
products that are made by Cove Shoe either on their website or at their only store located in
Martinsburg, PA. Cove Shoe uses both a push and pull strategy. Push is used when they are
selling their product to military and law enforcement by bringing them the models to see and
try out before deciding if they want to purchase. Pull strategy is used through their website and
radio ads that they have on local stations like Froggy and the Bus. Skimming price is used by the
company because of how much higher the prices are for Cove Shoe when compared to others
in their local market. Pricing was difficult to gather due to the businesses not having the brands
of others. These prices, minus Cove Shoes and Zimmerman’s, was gathered at their websites.

2. Nate Negri Pricing Waterfall 3/1/16
When comparing I used the companies most expensive 12 inch boot. For Zimmerman’s,
the price of a 12 inch Carolina Steel Toed Boot was $140. Cove Shoe’s price for the same boot
with Gore-tex added was $190. Walmart’s Georgia Boot was at $144.99. And Payless’s Buster
Waterproof Boot was $59.99.
I believe the waterfall from Cove Shoe would differ from its competitors because unlike
the competition, Cove Shoe manufactures the boots and sells themin store and online. With
that being said, I think their profit margin would be higher because of their ability to cut out the
middle man unlike the other businesses. The biggest thing that I would change would be the
cost of leather since it is the highest in the waterfall. Being able to cut down on that price would
increase the profit margin even higher than it is now. Also, I was surprised how much Cove
Shoe makes from their Carolina Boot sales. Their overall margin is 24.65% but Carolina’s profit
margin is 49.08%. Although they are higher than the overall margin, Carolina sales only account
for 20.31% of overall sales. I would like to know what the other margins would be for the
company’s other products. The only change I would like to see in the waterfall would be to see
a discount off the listed price. When talking to the manager, he does add a discount to certain
prices of Carolinas but did not give me an answer for what a possible discount would be
because he likes to see how sales are going through the first three months of the year and only
offers discounts during hunting and fishing seasons. I think that if they would begin with a
lower listed price, demand would be high to start the year and in turn might increase the
overall sales of Carolina Boots. I also asked what he thinks would happen if prices both
increased and decreased. The manager gave me rough estimates about what the total units
sales would be if either possibility would happen. This product would be elastic if the price
would increase, consumers would have other options to choose from than Cove Shoe. When
doing the calculations using $120 and 1686 units, as well as $130 and 1500 units it came out to
1.46. The product would be inelastic when the price would be lower, I used $110 and 1750
units and got -0.75.

3. Nate Negri Pricing Waterfall 3/1/16
*All prices gatheredfromCove Shoe Manager
Total Sales: $446,179.64
Percentof Carolinas sold:$446,179.64 x 20.31% = $90,619.08
UnitsSold: 1686 unitssold(Manager)
Annual FixedCosts
Rent: $14,400
Salary: $30,000
Medical:$7,128
FixedCostsper Unit
Rent: $14,400 x .2031/1,686 units= $1.73
Salary: $30,000 x .2031/1,686 units= $3.61
Medical:$7,128 x .2031/1,686 units= $0.86
Variable Costs
Leather: $4.50/sq. ft. x 4.5 sq. ft.= $20.25 x 2 = $40.50
Steel:$1.80/lbs. x 2.5 lbs.= $4.50 x 2 = $9.00
Plastic: $1.10/lbs / 2 = $0.55 x 2 = $1.10
Rubber: $0.56/lbs/16oz = $0.035 x 6 = $0.21 x 2 = $0.42
Nylon:$0.09/m/39.3701in = $0.023 x 72in = $1.65 x 2 = $3.29
Glue:200 tubesx $5.00 per tube = $1,000/1686 = $0.59
Profit Margin
FixedCosts($6.20) + Variable Costs ($54.90) = $61.10
List Price ($120.00) - $61.10 = $58.90
Profit Margin: $58.90/$120.00 = 49.08%

4. Nate Negri Pricing Waterfall 3/1/16

5. Nate Negri Pricing Waterfall 3/1/16