Economics of Sneaker Resale
One of the most lucrative games in the fashion industry, the most infamous, rather, is that of reselling sneakers. Shooting in popularity alongside the rise of ‘limited edition’ launches by companies, sneaker reselling websites have become notorious hubs for staggering prices on limited edition launches - so where’s the line that separates resellers from scalpers? And what are popular brands like Nike and Adidas who time and time find themselves on reselling websites going to do about this projected 6 billion dollar industry?
Understanding the world of ‘sneakerheads’ - people who collect and buy sneakers fanatically - is essential to understanding why the market for sneaker reselling has sustained, and even thrived, for so long. Sneakers represent a perfect ‘collector’s item’ with their continued relevance in the world of fashion, celebrity and athlete endorsement and designs, and being a mode for self expression and cultural meaning in each design. Sneakers work a lot like luxury goods - or rather they are - veblen goods which work in the opposite direction of traditional supply and demand theory. Usually this increased demand for hyper-exclusive goods is borne out of a need for an elevated status, something that sneaker resellers capitalize on by hiking prices up based on amount of units released by brands as well as gauging how high a bidder is willing to go in order to be one of the lucky few to own a limited edition pair. This however, with its many downsides for companies like Nike, doesn’t always lead to a loss, there is a silver lining in this story. The reselling of sneakers allows major sneaker companies to gauge the ‘sweet spot’ when it comes to how many units they should be selling. The lower the supply of the shoes, the higher the demand, and therefore the higher the price resellers often charge; this urges companies to either sell their shoes at a markup - something they now know consumers are willing to pay for exclusivity - or to release more shoes at a lower cost so more consumers turn to them to buy their shoes and they don’t lose profits to companies like GOAT, StockX, and Grailed.
Sneakers as a good and an investment have one of the highest return on investment (ROI) seen in classes of investment - with the top three shoe brands - Yeezy, Air Jordan, and Nike - projecting almost 50-200% returns on their resale investments, making them one of the most attractive investments someone can make - especially if they’re trying to turn an almost guaranteed profit. However, the line between resellers and scalpers, especially in the world of sneaker resale, has become increasingly blurred. As aforementioned, sneakers have increasingly mutated from simply a shoe to an object of personal and cultural expression - a token of preservation for changing times and a way for people to mimic their idols and inspire their own style. Sneaker resale has twisted this into a for-profit gain by making sneakers inaccessible to those who actually view sneakers as such, and making it a prize for the highest bidder, cutting out purchase opportunities for thousands of people who otherwise cannot afford the markups resellers often slap on these shoes. A prime example of a situation where the line between reselling and scalping was nonexistent was the 2021 release of Nike’s “Go FlyEase” sneakers, created with technology catered towards people with disability who could wear and enjoy the shoes regardless of their ability to actually take the shoes on or off. A sneaker created with a target audience in mind - it would seem intuitive that it wouldn’t be difficult for people to get their hands on the shoe. True to their branding, the company dropped a set amount of units, all of which were almost immediately swiped by resellers and the originally $120 shoe was being sold for almost $400 on resale websites. Rightfully so, people were enraged at a shoe being created specifically for accessibility now being doubly inaccessible to those who actually needed it, exposing sneaker reselling to be an inherently non-inclusive practice.
Another unethical caveat into sneaker resale is the reselling of deceased athletes' sneakers - an unfortunate example being those of the late basketball player Kobe’s. In 2020, right before Kobe’s contract with Nike ended, they released a version of his Nike Zoom 6’s in a lime green “Grinch” color which were of course, never released again as a result of the end of his contract. Retailing in 2020 at $180, it was already being resold on websites like StockX for around $350 because of the fact it wouldn’t be re-released. An almost 100% markup. At every re-release of any of Kobe’s designs by Nike, the majority of the units get taken by resellers using bots of presale websites to make sure actual humans cannot buy the sneakers and are forced to buy them resale.
While it should be conceded that a lot of sneaker resellers are independent sellers - most likely people who are trying to make a living or often teenagers who are using this as a ‘side hustle’ - it opens a bigger conversation into the exploitation of people who are genuinely passionate about the avenue of expression sneakers allows. Using the memory of someone who’s passed away or purposefully making a certain show inaccessible to those who truly need it just to turn a profit doesn’t just toe the line between reselling and scalping, it crosses it by a long shot.
