Sneaker Economy

This article was originally written by Demi Karanikolaou in Greek for Harper’s Bazaar Greece. You can find it here.

The 70s surely were a decade of revolution. Somewhere between many movements, a group of youth in New York city established a new lifestyle. Hip-Hop was created out of the need for a different,more relaxed silhouette and was rooted in black culture and it’s massive heritage. Sneakers became the hero product of this style and young people were scouting the American metropolis for a bargain, usually aiming at unsold inventory from local athletic stores. Sneaker mania had just begun. Celebrities and athletes continued building momentum for sneakers through the next years, however everything was set to change in 1984, when Nike released its Air Jordan 1 collaboration and sneakers became a status symbol and coveted item. Suddenly sneakers stopped being seen as utilitarian shoes, but having now become status symbols and indicators of a certain culture meant that consumers were ready to cue for hours or pay a premium on resale. As with anything that has high demand but limited supply, they transformed into a new type of asset. Being quite comparable with stocks nowadays, analysts predict that the industry of reselling sneakers might boom even further and reach up to thirty billion dollars worldwide by 2030.

The same marketing strategy continued for the years to come, with Nike’s Air Jordan’s, Reebok or even Kanye West’s Yeezy line (2009) being launched in limited quantities, making it almost impossible for many to own a piece. The luxury business model has used these techniques of artificial scarcity for millenia. The house of Hermès, for example, is notorious for building their “dream factor” by only offering their most popular bags to an exclusive list of top tier clients. Progressively, the lucky few who get access to such coveted products started slowly reselling them for a profit, oftentimes using online platforms, such as Ebay. This shift in dynamics was quickly spotted by Investors, who understood the new and innovative nature of this opportunity, given the already existing online communities of devotees, their capital and the lack of a universal business model. Having gone through years of changes, investing and a growing number of users-resellers, the now well known resale platform StockX is currently treating sneakers as real stocks since items are given a catholic “set” price for every model. Like any asset, authenticity is of high importance and StockX offers a rigorous authentication process before the sneakers being traded and sold on the platform reach the end consumer.

Just like any other promising industry, reselling has become extremely competitive as of late. Pre digital revolution, consumers were able to score their limited edition items by queuing for hours in front of a store. In the age of e-commerce however, it is sophisticated robots & programs that provide the ability to successfully buy as many of the coveted pieces as possible in a matter of seconds. They can achieve that by using multiple different IP addresses, bank account numbers and locations in order to trick the security checks of different sites. By using these technological advancements in reselling, a number of young people have actually managed to get a steady stream of income through reselling. This however is not an easy job, since one has to consistently keep on top of trends before they start, be very educated in the particular subculture and even invest heavily in technology.  

Once again the business model that has built the legendary luxury companies we know today, seems to have worked due to its limited supply and attractiveness. Being seen as a major worldwide movement today, sneaker mania is a far cry from it’s early stages as a NY subculture and has thousands of devotees seeking rare and exclusive items in every way possible. This, of course, was not only driven by the differentiation such items provide to their owners, but also the fact that they hold their value. This attribute of theirs has given them power beyond most collectibles and allows them to shape the future of the industry. Prime example of that would be the collaboration between Nike and the well known platform StockX, which saw items being released exclusively on StockX’s site. The platform has already publicly expressed their future plans of convincing companies like Adidas and Supreme to launch all of their limited edition items directly on StockX, while letting end consumers set the value/price of each item. According to them, this will reveal the “real” price of every item, since just like in a real stock exchange more desired assets would by default be more expensive regardless of who is selling them.

It might be too early to say if the so-called sneaker economy will change the world of investing as we know it. The current analyst predictions, however, are simply too big to ignore and supply and demand, which stand at the very core of every business model, are consistently growing for the sneaker market. Passionate “sneakerheads” are consistently growing in numbers, attracted by the low risk and high liquidity of this new type of valuable assets. As we are moving into a world where technology is shaping life to be both physical and digital, there is an increased need for not only the feeling belonging to the culture of a social group but also for standing out as an individual. Collectables and limited edition items are perfectly positioned to cater both of those needs and thus might be an excellent candidate for being solidified as new types of investments, perhaps going as far as being compared to traditional stock exchanges.