Nike’s strategy of selling sneakers in limited quantities has created a massive reselling market.
The pre-owned sneaker market, which predominantly features Nike shoes, is now worth $US1 billion, according to industry website Campless.
“If you had $US1 billion you could buy the Chicago Bulls, New Orleans Saints, or San Francisco Giants,” Campless founder and IBM consultant Josh Luber writes on his blog. “You could also buy every sneaker that was resold in the past twelve months.”
A growing culture of so-called sneakerheads buy collectible footwear on eBay, Craigslist, and other sites.
Luber questions whether Nike’s strategy of offering a limited number of sneakers that are sold for 10 times the original price is a missed opportunity.
Reselling sneakers has become an economy with “buyers, sellers, brokers, market-makers and third-party valuation services,” Luber tells FiveThirtyEight. His company compiles data from millions of online auctions.
“By restricting the supply of its popular brands, Nike is tapping into another consumer desire: to have something no else has,” the website writes.
But when it comes to reselling sneakers with hefty mark-ups, Nike lets others take the profits.
“The average eBay price of the LeBron 10 What the MVP sneaker? $US2,086,” writes FiveThirtyEight. “The Nike Air MAG Back to the Future? $US5,718. How about the Air Yeezy 2 Red October, designed by Kanye West and released by Nike this year for $US250 retail? It sold on eBay for an average price of $US2,958, with almost two dozen people paying at least $US8,000.”
If Nike created a platform for reselling shoes, it could arguably make a lot of money.
Despite the potential missed opportunity, Nike benefits greatly from the resell market through free exposure, footwear analyst Sam Poser at Sterne, Agee & Leech tells FiveThirtyEight.
“They understand the cool factor, and they know how to stay cool,” Poser says. “And if they don’t stay cool they know this business dries up, because this is fashion.”
Nike sold nearly $US28 billion last year.
Business Insider Emails & Alerts
Site highlights each day to your inbox.