As indicated earlier, the private-label segment of the athletic footwear market is projected to grow about
10% annually in Years 11-15, with worldwide demand averaging 800,000 pairs per company in Year 11
and 880,000 pairs in Year 12. The operation of the private-label segment of the athletic footwear market is
easy to grasp. Chain retailers take bids for their annual private-label requirements at the beginning of each
year. Contracts are awarded in the weeks following receipt of bids—in time for contract winners to fulfill
their production obligations but not in time for footwear-makers to know whether bids have been won prior
to finalizing their decisions and strategy for the full year. All chain retailers worldwide have the same
production specifications for private-label footwear: (1) an S/Q rating that is 1-star below the prior-year’s
worldwide average S/Q rating for branded footwear and (2) 100 models (however, the number of models is
subject to change by your instructor as the game progresses). Production run set-up costs for privatelabel
footwear are 75% lower than for branded footwear because chain retailers order only
models/styles that are simpler to produce in order to hold down costs. So long as the S/Q and model
specifications are met, private-label contracts provide that footwear manufacturers have the leeway to
make the footwear as they see fit.