Sportswear vs Luxury Brands: Sneakers Next Frontier

• Global sales of sneakers were up 10% in 2017
• Hip-hop “sneakerisation” market intensifies among competitors

High end brands like Kering’s (KER.SA +0.35%) Gucci and Balenciaga are now increasing investments and marketing budgets to take a bigger stake of the sneaker market. These brands will face down incumbents in the space like Nike (NKE+0.10%) and Adidas (ADS.F +0.82%). How much is at stake in the sneaker race for the wider fashion industry as it changes its stance on hip-hop’s influence on the sector?

Why This Matters: Luxury groups and sportswear companies are looking to cash in on a booming market. Global sales of sneakers were up 10% to more than $4 billion last year. Hip-hop is a powerful tool for reaching Generations Y and Z, who are expected to account for 45% of the global luxury spend by 2025, according to Bain & Co.

Rappers are quickly becoming fashion’s new royalty. Sneaker collaborations include artists like 2 Chainz partnering with Italian fashion house Versace on the “Chain Reaction” shoes. Also, Pharrell worked with French powerhouse Chanel to create the Hu Race Trail sneaker.

A pair of Nike’s black leather Air Jordan 5 Retro premium sneakers sell for more than $470, compared to a pair of Gucci’s ACE made with the GG logo canvas which cost $520. You can easily see how the sneaker competition has changed and where the clear overlap in the market is.

Situational Awareness: Fashion brands have woken up to the reality that hip hop has replaced Hollywood as the most powerful force in global entertainment culture.The couture luxury brands now realize it is acceptable to pair sneakers with a tailored suit. Even executives at these companies recently noted the importance of sneakers for their business and the need to step up their game to face the rising competition.

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