Big growth ahead for sneaker investors? | Business | Economic and financial news from a German perspective | DW
Investors get creative when it comes to money. Some buy classic cars, real estate, art or fine wines. Many are looking for deals on stocks and bonds. The current high inflation and unstable stock markets are pushing investors into niche markets. And now more and more are buying and selling old sneakers.
Sneakers are undoubtedly comfortable to wear. There is, however, a difference between wearing sneakers and raising or investing thousands of dollars in them. What happened – how did the simple shoe become the “next big thing”, with its own Sneaker Con conventions and sneakerhead culture?
Blaming Michael Jordan and Nike
Long lines to buy popular sneakers have been around in the United States for decades. Beginning in the late 1980s, kids lined up for their parents to get their hands on basketball legend Michael Jordan’s latest Nikes, whose swooping silhouette was used for the Air Jordan logo.
For the most part, it wasn’t a long-term investment. There were short price shocks when certain pairs came out – but having them was more about being cool. Today, 36 years after their debut, the Air Jordans have become iconic and even have their own Wikipedia page.
At the same time, hip-hop music videos turned sneakers into status symbols. Suddenly, celebrities, and later social media influencers, were seen everywhere wearing designer sneakers.
Additionally, the shift away from suits and other formal attire to more casual styles has made streetwear and sneakers more acceptable in general. When the coronavirus pandemic forced more people to work from home, there was even less need for dressy clothes or fancy shoes for the office.
Shoes pile up at a StockX operating center in the Netherlands, ready and waiting for new owners
Keep it cozy and authentic
What started as a small subculture of American amateurs looking for special sneakers at swap meets or underground events has blossomed into a major fashion trend. It was even exported to the rest of the world and gained new fans. But two things have held back the sneaker market: a lack of reliable second-hand sales information and counterfeit sneakers.
Whether it’s sneakers, trainers, tennis shoes, trainers, or athletic shoes, eBay has long been a go-to place to buy and sell sneakers. To maintain buyer confidence, it began authenticating sneakers through external service Sneaker Con Digital in October 2020.
The company personally inspects select brands of new sneakers that sell for $100 (€87) and used pairs that sell for more than $150. It covers brands like Nike, Adidas, Puma, Gucci and Louis Vuitton.
Sneaker authentication has become a big business in itself
The program proved so popular that in just over a year, 1.55 million sneakers sold on eBay were authenticated. In November 2021, eBay purchased Sneaker Con’s authentication business, along with all of its operations in the US, UK, Canada, Australia and Germany.
It’s a sign that the online giant sees crucial potential in the sneaker business.
Be specialized in building trust
More specialized online platforms have also stepped in. StockX is a Detroit-based online marketplace that connects buyers and sellers, focusing on sneakers and streetwear. Founded by Dan Gilbert and a small team in 2016, the company now has over 1,000 employees across 11 authentication centers in the US, UK, Canada, Netherlands, Hong Kong, Australia and in South Korea.
In addition to authenticating all coins before they are sent to a buyer, StockX has built up a huge database of price histories, resale prices, and long-term trends.
In 2020, it hosted 7.5 million transactions worth $1.8 billion. The most expensive shoe sold so far was a Nike Mag Back to the Future from 2016 which sold for $65,000.
StockX employees have enough on their plate to process online orders
The platform has attracted a young user base. Today, nearly 70% are under 35, according to Derek Morrison, StockX’s managing director for Europe, Middle East and Africa.
“When you look at the data, the resale value of coveted models tends to steadily appreciate over time when kept in new, unworn condition with original packaging,” Morrison told DW. . In a recent report, “we showed that a typical Nike Air Max 1 investor saw a 50% return on their portfolio between January 2020 and June 2021.”
Not too late for the show
The ultimate stamp of approval for the sneakers is their inclusion in Sotheby’s sales. The revered auction house – known primarily for modern art, jewelry and other high-end items – began selling sneakers in 2019. It broke a previous record for the most expensive sneaker when it premiered auction, selling a Nike Moon shoe for $437,500.
It continued sneaker auctions until the official launch of streetwear as a permanent category in December last year. Brahm Wachter, head of streetwear and modern collectibles at Sotheby’s, told DW that “2021 was a banner year for sneakers at Sotheby’s and we hit several important records.”
For many customers, nostalgia plays a big part in their decision to invest in sneakers
That year he set another auction record for a pair of Nike Air Ships worn by Michael Jordan. This pair sold for $1.47 million in October. A few months prior, the Nike Air Yeezy 1 prototypes worn by Kanye West at the Grammys sold for $1.8 million in a private sale.
“Sneakers have in many ways the same characteristics as cultural assets like comic books. They mean something to a younger generation, who grew up loving cartoons. Our collectors are [aged] 20 to 40 and have international airplay,” Wachter said.
buyer be brave and beware
In another sign that sneakers have entered the big leagues, Sotheby’s is holding a timed auction, ending February 8, for 200 pairs of “special sneakers” designed by the late Virgil Abloh to raise money for its scholarships. The shoes are a collaboration between Louis Vuitton and Nike, and each pair comes in a custom orange Louis Vuitton case.
The starting bid for each pair was $2,000. Two days before the auction ended, each pair had a bid of at least $24,000. The highest, a size 11, reached $80,000.
When high fashion meets sneakers, the result can be dazzling and expensive streetwear
The market has indeed grown, become much more professional and accessible to a global audience. Talking about crazy children seems outdated. “I think we’ll continue to see collectors, who traditionally collect in other categories, move into sneakers and increase the total number of collectors in the space,” Wachter said. Likewise, he stresses the importance of comparing prices and looking at longer-term trends.
Derek Morrison of StockX has another piece of advice: “Always remember that, as with other investments, there is always an element of risk and prices can fluctuate for a number of reasons, so nothing is guaranteed. “
In other words, investors should do their homework before diving into the sneakers.
Edited by: Hardy Graupner