What was once a niche hobby among enthusiasts has grown into a mainstream passion with the potential to reap serious financial rewards
Currently valued at US$2 billion, the global sneaker resale market is expected to triple over the next five years, according to the investment bank Cowen. StockX, an online marketplace central to this booming industry, itself recently hit a US$1 billion valuation. The most profitable sneakers sold there in 2019, the Jordan 5 Retro Trophy Room University Red (F&F), went for an average of more than US$5,200—a premium of about 2,490 per cent. The Jordan 1 Retro High Dior has an average resale price in excess of US$11,300—and it hasn’t even been released yet.
The numbers are indicative of the journey coveted sneakers have taken from a small world of true enthusiasts to the mainstream. “The investment element has always been there as a consequence of the culture,” says Derek Morrison, StockX’s London-based director for Europe. “You would typically try to buy two pairs of the same shoe; the other pair would go up in value and pay for the first. It was passion-led and helped you scale your collection or validate what you were doing. But over the last decade people have realised the economic aspect, beyond passion.”
One Shanghai-based sneaker enthusiast who works at a major sportswear brand notes: “There aren’t many hobbies out there where you can get both the emotional and monetary gains. However, there are a lot of kids entering the game who only look at things from a resale-price perspective, and it detracts from what sneaker culture is really about, which is community, connecting to different people, love of story, love of great product in and of itself. Sometimes I’m in group chats and I can’t tell if they’re talking about stocks or shoes.”
ART ON YOUR FEET
Typically, volume is key to the professional resale game. Even though pros do deal in iconic “hype” pieces, which they might buy for US$150 and then resell for US$1,000, their bread and butter comes from trades that might yield a profit as low as US$10 a pair, says Morrison. “To get that supply, you have to invest a lot of time in relationship building.”
More inspiring is the segment who view sneakers as assets that will appreciate long-term. Morrison likens this group to art collectors, and indeed some of the shoes that have proved most valuable do have artists’ names attached to them, such as the NikeCraft Mars Yard 1.0, created with Tom Sachs. Debuting in 2012 at US$385, it now sells for between 10 and 20 times that amount.
The 2.0 iteration, launched at US$200 in 2017, has seen a similar increase in value. Another example is the Future Runner 4D collaboration between Adidas and Daniel Arsham: released at US$450 in 2018, its price has gone up fourfold.
These shoes have the collectability of any other work by the artist “at a lower entry point”, Morrison says. Of course, a shoe doesn’t have to be the work of a fine artist to rise dramatically in value. Neither does it have to be very attractive: in March, a pair of pre-worn Apple sneakers dating back to the early 90s sold at auction through Heritage Auctions as a piece of “urban art” for nearly US$10,000.
ALL ABOUT STORIES
That example might be an anomaly, but it illustrates the importance of a story to the value of a product. The story might be a nostalgic one around an athlete or around the mystique of a particular designer, such as Virgil Abloh, whose Off-White sneakers generally appreciate well. It might be around a celebrity collaborator, such as Kanye West for Adidas.
Or it might be down to the shoe’s appropriation by a subculture or validation by a figure from the world of sports or music. As well as designing his own shoes with Nike, Travis Scott might wear a 15-year-old shoe “that goes under the radar at US$500 and suddenly jumps to US$2,000”, notes Morrison. He says materials do play a role in a shoe’s value, but to a lesser degree.
Underpinning everything is scarcity. Luxury sneakers can appreciate as dramatically as more affordable releases from mainstream brands, but in order for that to happen, their supply must be genuinely limited. A lot of luxury brand pricing is built on perceived—not real—scarcity. “You have to consider what is actual scarcity,” Morrison says. He adds that if a new release doesn’t sell out immediately, it will impact long-term appreciation as an investment.
The business of investing could be set to become more complex due to growing hype fatigue. Morrison envisions a “post-hype”, more fragmented era for sneakers. He compares it to hip-hop: when it became mainstream, it attracted more people, who in turn were inspired to look within the genre for something deeper.
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