What happens after sneaker resale prices spike?

Editor’s Note: This article was last modified on August 10, 2022. A previous version of this article stated that Kick Game planned to open at least three stores in the UK in addition to its current four. This is an error. Kick Game currently has six stores in the UK and plans to add one more, plus one in Milan and one in Amsterdam.

Shoppers may be rethinking how much they’ll spend on rare sneakers, but UK-based retailer Kick Game is investing in a future where everyone is looking for Dunks and Yeezys.

By next year, the company plans to open a new store in the UK to add to its current six stores, as well as a flagship store in Milan and Amsterdam. Physical stores are helping to attract older customers who are driving more and more sneaker sales, said Alicia Thompson, the company’s chief executive.

Visions of parents and kids buying Jordans together are helping the resale market through a correction that drives prices down from their recent astronomical highs. Soaring inflation and rising interest rates have hammered the value of speculative assets of all kinds.

Sneaker prices haven’t crashed like NFTs or meme stocks. But they are not immune to the forces of the broader economy. The new Travis Scott Jordan 1 Low or Nike’s Air Force 1 collaboration with Louis Vuitton always command sky-high prices. But beyond that elite level, shoes on the resale market fetch less than before. Last month the the wall street journal also reported that resale values ​​have fallen.

“Although some styles may have been priced lower and we are sitting on [more inventory than before]our long-term vision is that the market will continue to grow and gain popularity,” Thompson said.

Before that happens, sneaker retailers have additional challenges to overcome.

Supply chain disruptions have disrupted the carefully managed distribution of brands such as Nike and Adidas, said Dylan Dittrich, author of the 2019 book “Sneakonomic Growth” and head of research at Altan Insights, a data and insights provider. research focused on alternative assets, including sneakers.

Perhaps more concerning is the feeling of fatigue that sneaker insiders say has spread among buyers faced with too many releases that are too hard to get.

The risk is not so much for companies like Nike and Adidas whose products fuel resale. Their releases continue to sell, even though the resale premium has shrunk, and they make a lot of their sales from the kind of everyday shoes people wear to mow the lawn, not to make a profit. The question facing resellers, from teenagers storing Yeezys in their garages to big players like StockX or GOAT, is whether the drop is a momentary stumble in the resale boom or a sign that secondary market prices could finally, finally, moderate.

“I think we’ve passed the peak,” Dittrich said. “Over the past few years, it’s like every sneaker drop is selling and selling at a high price, and I don’t think that’s sustainable at the end of the day.”

fall fatigue

Scarcity is key to how sneaker brands are creating demand for the handful of mostly retro styles that are driving resale. Companies like Nike realized long ago that they could keep shoppers coming back with a steady stream of limited-quantity drops, allowing individual products to remain exclusive while selling many shoes collectively.

Sneaker hype, fueled by celebrities and an endless series of hard-to-get releases, has also become mainstream. Even talk show host Dr. Phil now wears Yeezys. As more buyers entered the market and more dealers turned to methods such as automated robots to grab rare shoes, it created intense competition for new versions, which often occurs through online draws. But complaints about how hard it is to get the sneakers are growing louder, seething with every big drop on Twitter and other online forums.

The situation landed on Nike’s radar. “We risk losing our most sneaker-obsessed consumer,” read a slide from an internal presentation obtained by Complex that sought to address the perceived unfairness of releases on its popular SNKRS app.

Shoppers are always queuing up because getting shoes at retail through SNKRS or sneaker shops looks like a good deal, if not winning the lottery. But there’s also a steady stream of mundane releases that lack the rich storytelling needed to stand out, Dittrich said. Many are listed on the secondary market, where there is already a huge volume of shoes that have not found end consumers.

These are the shoes that are facing challenges right now. As of this writing, select sizes of the Jordan 1 Dark Marina Blue and Jordan 1 Heritage are trading below their original retail prices on StockX, while the Nike Dunk low UCLA, which retailed for $100, costs about $150.

“Typical sneaker releases like the Air Jordan 1s, Yeezy 350 v2s, Nike Dunks, during the pandemic and soon after, these shoes were reselling for $200 all day,” Source source co-founder Anthony Anthony sneaker information The Site Supply, who asked to be identified only by his first name, BoF said.

Earlier this year, The Site Supply noticed that the affiliate links it shares with more than 400,000 followers on its various Twitter accounts were seeing less activity. Conversions through those links on StockX and consignment sites were “a bit lower,” Anthony said.

StockX acknowledged that prices for some shoes have fallen but said transactions on its site were up in the first half of 2022 compared to the same period last year. He also said that many shoes still carry high premiums. Of the 100 most traded sneakers on the site in 2021, 63 have since gone up in value, he said.

The Air Jordan 4 White Oreo, for example, which was released to the public in July 2021, typically sells for around $100 more than this time last year, according to the price history StockX shows on the shoes. listed.

Although this is actually a drop from the start of the year.

A positive long-term outlook

Analysts say the best days for the sneaker resale market are yet to come. Investment firm Cowen predicts that global sneaker resale will reach $30 billion in sales by 2030, up from $6 billion in 2020, as new customers multiply and average sale prices increase.

This could mean that while smaller businesses and some individual sellers are finding it harder to make money returning shoes, the bigger resale players are set to get even bigger.

“I think what we’re seeing here is that the web traffic and search trends for StockX and GOAT are still pretty healthy and the top selling SKUs aren’t seeing the volume and price drops that the other “, John Kernan, research analyst Cowen, wrote in an email. “We continue to see StockX and GOAT as leaders in the evolution of the industry.”

Small and medium-sized businesses, which don’t have the same volume of sales to draw on, could be more at risk if resale values ​​continue to fall, although some say they haven’t felt any decline.

Kicks Crew, a resale company in Los Angeles, “hasn’t noticed a drop in sales yet,” according to co-founder Ross Adrian Yip. The company positions its product offering away from the high-end resale market, and 80% of its customers’ purchases are for products released more than 30 days ago, which means Kicks Crew shoppers aren’t looking for the most hype or exclusive sneakers, Yip added.

For long-term success, key players invest in scale to survive. The risk is that if the market doesn’t recover, retailers could end up with warehouses full of sneakers no one wants.

Key styles continue to drive resale business sales

This fall should reveal whether resale prices will rebound, as the release lineup includes several highly anticipated colorways, such as the yellow-tipped Jordan 1s and rumored drop green Off-White x Nike Air Force 1s, according to Anthony of The Site Provide.

It all depends on the demand for the supply.

“For fashionable styles, the majority of people would always try to buy [on the drop] as you know, your money will be worth more than what you paid for,” said Vivian Frank, a renowned London-based collector who runs two Facebook forums where around 300,000 combined followers get sneaker information or buy and sell. collaboration products from Ye, formerly Kanye West.

Based on the activity on these forums, Frank believes that demand for the most sought-after styles will not be affected by the rising cost of living and inflation in the US and UK, although he anticipates “the fall in the resale price of certain shoes due to the drop in purchasing power”. and oversupply.

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