Sneaker Reselling: When Will The Bubble Burst?
The year is 2020. Through the widespread use of social media platforms, the lucrativeness of the previously close-gated business of sneaker reselling has been made known to a plethora of ambitious teenagers, eager to get their hands on some much-needed quarantine cash. The apparent procedure seems easy to carry out: purchase a pair of sought-after shoes, then sell for a higher value, securing a chunk of profit anywhere between $20 to $2000 (in some rare cases, $20,000). The accessibility of the market, along with the heavy pre-existing presence of sneaker culture in 21st-century fashion, introduced a colossal wave of newcomers hungry for income. Yet as history has repeatedly shown, when a stable, profitable market is suddenly overwhelmed by crowds of regular folk keen on sharing a slice of the benefits, a crash for all is inevitable. As such a trend washes up on the art of sneaker reselling, will the trade remain profitable for much longer? Or will it end up like countless other speculative bubbles, lying stone cold on the cutting floors of the history books?
Over-hyped profiteering trends that eventually fail after a brief period of glory have been common throughout the past four centuries. Many consider the first such instance to be the Dutch tulip mania of the 1630s, which birthed the term that would be given to future economic bubbles. Following the introduction of tulip bulbs to Europe in the 16th century, demand for them soared, particularly in the Netherlands, where prices continuously climbed for over two years. By 1636, the average bulb was being exchanged ten times a day, and tulip bulbs ranked as the fourth-highest Dutch export product. All this would come to a halt in February 1637, as prices abruptly collapsed to the floor, falling roughly 98%.
A breakdown of this extent is unlikely for the sneaker industry. Behind the frenzy of young resellers lies an experienced, consolidated base of “sneakerheads” who, in addition to their sporadic profit-flipping, collect releases out of sheer passion. Whereas the tulip mania featured an excess of investors who viewed the market with the sole purpose of revenue, the proportion of such pure investors in the sneaker community is significantly smaller. The majority of resellers hold a personal interest in the products they exchange, helping to keep demand afloat. Those involved in the Dutch tulip mania likely took no concern to the actual bulbs and viewed it as a mere tool for capital-gain. As a result, when the potential of tulip investments are deemed valueless, demand instantly evaporates. In contrast, the demand for sneakers will not be entirely wiped out if its profit margins become squeezed, thanks to its abundance of passionate consumers.
Moreover, the supply of profitable sneakers varies from previous speculative bubbles. The Dutch tulip mania was driven by a steady stream of increasing supply, as professional growers, greedy for the new opportunity, obsessively produced more bulbs to add to the market. Such a risk is much less frequent in sneakers. The very basis of the potential of profits lies within their limited stock, which forces buyers into secondary markets. Without absurdly high demand-to-supply ratios, the business would not thrive as it does today. Most hyped releases are extremely limited in quantity, and often do not see a return after their initial drop. While restocks are not unheard of, they are not routine and are often more elusive than the first.
Yet dangers hide within both of the previously stated “safeguards” of the sneaker reselling business. Although the current number of solely investment-focused members in the community sits low, it is steadily rising by the day. As more cash-thirsty people, particularly the underage without a high-paying job, flock to the trade at the influence of online content-makers or friends, the market is increasingly plagued by the mindset of “profit first”. Even more discouraging, this belief is beginning to spread among previous collectors, who, realizing the money to be made, promptly abandon their passion for a capitalist approach. A clear divide is being drawn by loyal members to the sneaker game against their reselling counterparts. Phrases like “fuck the resellers”, “the culture is dead”, and “I wish it was 2016” make everyday appearances in online discussion forums. OG devotees, frustrated about the skyrocketing of prices due to the entrance of new resellers, regularly exit the marketplace, as their peers who remain are slowly converted to be investment-minded. As interest in the financial potential of sneakers rises, interest in the actual product of sneakers stares at a grim plateau.
As for the apparent protection of limited supply, the market is not completely rid of its risks. Specific colourways are indeed each bound to a low stock number. This, however, does not prevent the danger of market oversaturation by an excess of options. The Dotcom economic bubble burst of 2000 starred this issue. At the time, an overkill of Internet equities was easily raising venture capital simply due to their digital natures. Money was being poured into any company with “.com” in its name. In the end, this torrent of options, each building off of a fad-driven investment trend rather than statistical, tangible potential, led to the collapse that saw most of the said firms sink from hundreds of millions of dollars of market capitalization to being worthless. In the sneaker industry, this phenomenon has already happened, albeit not at a scale enough to damage the entire industry. In 2017, Adidas held the lion’s share of sneaker hype with its NMD and UltraBoost models, and resell prices escalated dramatically, occasionally breaking the $1000 mark. Over the next three years, though, the silhouettes would become flooded by hundreds of different colourways that eliminated their sense of exclusivity, thus killing resale. Today, the average price for NMD options hover below their retail price, representing an automatic deficit. The issue is further exacerbated by the goals of corporate giants. Retailers such as Nike and Adidas have no regard for a release’s resale performance, as their main objective is to secure intake by selling to mass consumers. With this rift between the intents of resellers and retailers, one’s loss could be the other’s treasure. For example, even if Adidas no longer has instant sell-outs of shoes with supplies of 20,000 pairs, there are still more gains to be secured by slowly selling out 500,000 pairs sitting on shelves. Yet for resellers, this erases their source of income.
In the long run, a disintegration at the scale of the Dutch tulip mania will not be the future for the sneaker reselling market. Yet with demand at an all-time high, there is inevitably a valley on its way. Whether this will be a steep downhill tumble, a gradual and brief decline, or simply a flat plateau, remains to be seen. One thing is for sure: just as NMDs no longer sell for $700, there will come a moment when today’s hottest pickups, whether Air Jordan 1s or SB Dunk Lows, will no longer be able to win the bags of profit they do now. Perhaps they will be replaced by a new wave of sneakers. Or perhaps, like the flowers of the 17th century, they will entirely vanish.