If you think the stock market’s usual 10% returns are nice, wait until you hear about a brand-new asset class that’s yielding investors 200% returns in a matter of days.
Nowadays, the average person has a plethora of investment options available to them, ranging from Robo-advisors to Real Estate to Cryptocurrency. And one of the hottest new ways to accumulate riches is to wear sneakers.
The Craze in the Market is Huge
You may think that investing in shoes is weird, yet the sneaker resale business is growing by leaps and bounds. According to reports, the worldwide sneaker resale business will be worth $30 billion by 2030. Sneaker reselling accounted for more than $2 billion in North America alone as of 2020.
Sneakers have been a part of fashion and culture for a long time. However, it wasn’t until the 1980s, when Michael Jordan and Nike collaborated to market his signature Air Jordan brand shoes, that people began to regard sneakers as something to be treasured, collected, and sold. Sneakerheads launched Sneaker Con in 2009, an event for buying, selling, and swapping sneakers. Sneaker Con has held events in over 40 places around the world since its inception.
The expansion of the sneaker resale sector was fuelled by websites such as eBay, which provided a way to sell outside of local markets. Several secondary shoe resale firms have also risen in the last decade. GOAT Group, an online marketplace that debuted in 2015, acquired a $100 million investment from retail giant Foot Locker in 2019. It has forged a collaboration with the high-end consignment business Flight Club to give consumers online and offline choices.
Another start-up that has altered the scene of sneaker resale is StockX. The online sneaker resale service billed as the first stock exchange for goods, completed more than $7.5 million in trades in 2020 alone.
How Strong is the Reselling Game?
The Price Tag of Risk
Liquidity is vital in every asset class, but it is more critical in alternative asset classes such as collectibles due to the scarcity of these items. In general, the fluidity of a sneaker will be determined by its design. A visually appealing, in-demand sneaker will surely be easier to sell. When consumer preferences evolve, demand shifts as well, affecting the liquidity of a specific sneaker. Furthermore, pricing is a decisive role in the liquidity of sneakers.
- Physical Damage
One of the inherent dangers of investing in sneakers is the preservation of the shoe in its original form. When an investor keeps a sneaker, it is subjected to environmental circumstances such as humidity and sunshine, which can harm the sneaker’s materials. Storing sneakers for an extended amount of time might result in other age-related flaws such as crumbling and disintegration of the top and midsole. The risks that sneaker investors take are significant; minor flaws and damages from holding the shoe for an extended period of time might negate the advantages from holding the sneaker in an unworn condition.
- Economic Outlook
The global economy’s health and outlook have a considerable impact on the sneaker business. Consumers have less disposable income during economic downturns, thus they will use their money differently. A shift away from purchasing sneakers will have repercussions throughout the sneaker sector.
- Unregulated Marketplace
The cost of making a sale is an important part of shoe investing. There are numerous ways to sell sneakers; while selling, consumers typically offer the products through social media or marketplaces. It is deemed unregulated to sell on social media because sellers can list anything and any mutually agreed transactions are technically non-binding. The authenticity of sneakers is closely related to this, as it is a major issue for both buyers and sellers. Selling on social media platforms such as Facebook Marketplace does not ensure that the buyer obtains a genuine product. As a result of this issue in unregulated marketplaces, prices tend to be slightly discounted to compensate for the risks and opportunity costs involved for both buyers and sellers.
Are the Returns Lucrative Enough?
Sneakers, like many alternative investments, can be volatile. Shrewd traders armed with data, on the other hand, can buy with caution and profit handsomely. The Off-White Air Jordan 1, which debuted in 2018 with a retail price of $190, is a nice illustration of this. These shoes are now worth $2,000 to $3,000, a tenfold increase in less than three years.
And it only gets better from there. Here are some more excellent examples:
- Yeezy 2 Red Octobers, which were released in 2014 for $250 and are now valued at over $6,000.
- Nike SB Dunk Low Reese Forbes Denims, which cost $65 in 2002 and now sell for more than $8,000 per pair.
- In 2019, a limited edition Korean pair of Nike + Big Bang G-Dragon shoes was released for 219,000 won ($197 USD) and is now worth almost 3 million won ($2,700 USD).
Looking to Invest and Resell?
The most obvious way to acquire shoes is to simply go to your local footwear store on release day and buy a pair. However, this is not always as simple as it sounds. Because of the hypebeast culture, it can be exceedingly difficult to get a piece on the open day without having to wait in line for hours. Meanwhile, as they seek to profit, online sneaker marketplaces have grown in popularity.
StockX, the most well-known sneaker resale exchange, has been in operation since 2015. Although it began as a marketplace entirely for shoes, it has subsequently grown into the resale of jewelry, apparel, and other items. When purchasing a pair of shoes, you have the option of purchasing them outright or engaging in a bidding war with other users. Fees start at 3% for payments and go up to 10% for transactions.
GOAT, the other major player in the shoe reselling sector, just joined StockX in the unicorn club. GOAT has similar features to StockX, such as the ability to bid on products via an app and a product list that extends beyond sneakers. The main distinction between the two is that, whereas StockX only allows for the buying and selling of new shoes, GOAT allows for the purchase and sale of used sneakers.
SNKRS is Nike’s own app that gives you insider access to the latest launches, hottest events, and exclusive releases.
The omnipresence of sneaker reselling has been recognized by marketplaces. The well-known website eBay is now allowing members to list shoes worth more than $100 for free.
On the whole, sneakers have shown to be a better investment than gold. While gold isn’t the most popular alternative investment nowadays, the fact that every single sneaker evaluated beats the alternative asset’s “gold standard” is notable.
Sneaker resale may be a suitable fit for certain people who want to learn how to invest the money as a side business or full-time venture, but it is not without danger. Do your research to get the greatest shoes to flip. And don’t underestimate how much time and effort it takes to become a good sneaker reseller.
Investing in a pair of shoes because someone on the internet said it was ‘lit’ is the furthest thing from smart financial advice. Before buying a sneaker, you should know what you’re doing and make sure you’ve done your homework.