The Sneaker Reselling Industry -- Expert Article

 The Sneaker Reselling Industry and its Effects

Everything You Need To Know

By Kennedy Martin 

Have you ever wondered why some of Nike’s hottest sneakers are so hard to find on their website for their retail value? Or a pair of Jordan shoes you really want sell out within seconds of its release? Why you can’t just walk into NIKE and grab the hottest kicks? Say hello to the sneaker reselling industry, the buying and flipping of sneakers. 

Buying and Flipping

Let’s start with the fundamentals of flipping. James Chen of Investopedia defines flipping best. Flipping refers to purchasing an asset and holding it for only a short period of time before selling it. Flipping is generally used to describe the purchase of an asset that’s meant to be sold for a profit, rather than holding it for long-term appreciation (Chen). It used to be related to transactions involving real estate and initial public offerings (IPO), however, flipping has expanded to areas such as cars, cryptocurrencies, concert tickets, Funko Pops, electronics, and even NFTs. The list goes on, but flipping has spawned tremendously from the sneaker market.

Sneaker Reselling

In its most basic form, sneaker reselling is owning a product, usually with limited availability, and reselling, or flipping, the product at a marked-up price of hundreds to thousands more, to consumers who often cannot get the sneakers in any other way.

Immense demand paired with limited availability has made acquiring products for retail almost at an impossibility. Sneaker reselling puts customers who want the product for its long-term appreciation and not for its reselling value at an extreme disadvantage. This is especially true due to the digitalization of sneaker retail, where the majority of hyped-up products are only made available online through processes that drive even the best of us mad. And because of digitalized sneaker drops, its become easier for resellers to resort to sneaker bots to help secure the product. 

A sneaker bot is a software designed to help people quickly purchase products from retail websites with limited availability. Sneaker bots aren’t free, though, and range anywhere from hundreds to thousands of dollars. Bot users make a return on their sneaker bot investment by then reselling the purchased product at a higher price. 

Customers, especially those who want the sneaker for its value, become frustrated, hindering the reputation of retail brands and companies. It’s become a battle between retailers and resellers (Imperva). To authors at NSS Magazine, “one of the hottest in contemporary fashion at the moment is that of sneaker reselling,” and it doesn’t seem to be fading away anytime soon (NSS Magazine). With the emergence of sneaker bots, reselling brands, boutiques, and individual resellers, sneaker reselling has evolved into an entire industry, having a bilateral effect.

The Growing Industry 

Within the last few years, the sneaker industry has become a growing phenomenon. A growth with so much potential that in 2019 the footwear and apparel company Foot Locker invested $100 million in GOAT Group, which operates secondary reselling brands GOAT and Flight Club. The two brands use a middlemen method. Here’s a glimpse of how it works: the site receives the product, verifies and legitimizes it, pays the seller their dues, and supplies the product to the purchasing customer.

But why would Foot Locker, a company that carries products from retail brands, invest in GOAT Group, a reselling middleman? To Foot Locker CEO Richard Johnson, his company has a new objective: “to inspire and empower youth culture.” “We want to create a more seamless, frictionless experience for our customer that wants to partake in the secondary market,” says Johnson, who has run Foot Locker since 2014. “Partnering with GOAT strengthens our relationship and engagement with our customer,” (Badenhausen). 

Working Against the Intended Consumers 

Reselling brands, individual resellers, and investors may be thriving in the sneaker reselling industry, but it’s working against the consumers the sneaker industry was built to serve. And while the sneaker reselling market has rapidly grown into a $6 billion industry, sneaker brands are continuously losing touch with their loyal and non-robotic customers. 

With resellers leveraging sneaker bots to generate purchases of releases, it becomes challenging for retailers to connect with their customers who truly want to wear and collect sneakers for their value and not for their profit. It’s also become the reason why brands like NIKE, for example, are scoring extremely low in fairness among their consumers (Pralica). 

In October 2021, NIKE held an internal meeting to address the state and data of its SNKRS app, the digital home of its hottest products. While the platform has helped NIKE to digitalize the sale of its sneakers, its also created a lot of frustration and distrust among its consumers. In the meeting, SNKRS VP Ron Faris addressed the low perception of fairness. “Our community is becoming disenfranchised by our low fairness numbers,” he said. “Our fairness numbers are not where they should be. They’re at, like, the mid-20s; they need to be in the 80s,” (Dunne). 

Since then, NIKE has made an effort to combat resellers and bots from taking sneakers away from their most deserving customers through recalibrating demand, re-evaluating how they do business around SNKRS and neighborhood retailers, creating ways to build fair experiences around launches, and most importantly, include people who’ve felt pushed out of the sneaker culture due to the reselling industry. 

Culture, Community, and Meaning

The sneaker reselling industry not only affects retailers like NIKE, but it also affects the culture, community, and meaning behind sneakers. You may think that it’s just shoes, however, it’s people that are the most important aspect of the sneaker culture. For decades now, the sneaker culture has thrived off sneaker enthusiasts feeling a sense of belonging to a community built on their shared appreciation for sneakers and the historical meaning behind them (Pralica).  

Before marketplaces like GOAT and StockX made it possible to snag a pair of sneakers with a click, there were lines wrapped around stores and sneaker meetups where sneaker enthusiasts would get together to pick up the latest kicks that dropped that day. Each week, or however frequent drops happened, there was a sense of bonding, belonging, connectedness, and community over a shared passion. But as sneakers have fallen into their own unregulated asset, you see fewer people gathered outside of stores and more profiting in the resale industry.

Conclusions

You might be thinking, is sneaker reselling positive or negative? It’s bilateral. On one hand, sneaker reselling gives people the opportunity to purchase sneakers they otherwise couldn’t but also means that product availability becomes economically discriminatory as high prices push consumers out of the sneaker culture. Currently, the reselling market is fuel for a brand’s success of a sneaker – it’s the product with high demand, limited availability, and high resale prices that have become a parameter in identifying the success for a sneaker’s model and brand. On the other hand, the sneaker reselling industry is damaging to a brand’s reputation, the sales-to-consumer experience, brand loyalty, new customer relations, and the sneaker culture and community.

All in all, the sneaker reselling industry has no signs of slowing down. However, the void in consumer experience is spurring innovation among retail sneaker brands, and there’s a growing desire among sneaker enthusiasts to build back the personal connections that once defined the sneaker culture and community. 

Reference Page

Badenhausen, Kurt. “Foot Locker Invests $100 Million In Secondary Sneaker Platform GOAT.” https://www.forbes.com/sites/kurtbadenhausen/2019/02/07/foot-locker-invests-100-million-in-secondary-sneaker-firm-goat/?sh=68f62fd4568d 

Chen, James. “Introduction to Flipping.” https://www.investopedia.com/terms/f/flipping.asp

Dunne, Brendan. “Nike’s Shares SNKRS Data, Plans, Concerns in Internal Meeting.” https://www.complex.com/sneakers/nike-snkrs-app-data-losing-customers?utm_campaign=sneakerstw&utm_source=twitter.com&utm_medium=social 

Imperva. “Sneaker Bot.” https://www.imperva.com/learn/application-security/sneaker-bot/#:~:text=A%20sneaker%20bot%2C%20commonly%20referred,product%20at%20a%20higher%20price. 

NSS Magazine. “The Reselling Phenomenon.” https://www.nssmag.com/en/fashion/16426/reselling-phenomenon 

Pralica, Dejan. “This Is the Next Big Wave in the Sneaker Industry – and It Isn’t Resale.” https://www.entrepreneur.com/growing-a-business/this-is-the-next-big-wave-in-the-sneaker-industry-and/420542