My First Week In The Sneaker Business

Admittedly, I’m not someone who is big on sneakers in the way people are today. Sneaker culture has become a multibillion-dollar industry with ravenous fans. I used to like them when I was younger. But back then there was not the same kind of hype around them, at least from what I remember. There were lots of pairs that I could not get my hands on as a kid because my parents could not afford them, but it did not bother me too much. I always thought once I got older I would come back to buy them, but it never ended up happening.

What has happened over the last year though is I have been noticing the huge business potential within the sneaker market. It is a niche community with a cult following that is willing to deal with any condition to get a pair of shoes. When you see someone that loyal to a product it is easy to imagine there is a huge potential for profit. And I’m not talking about the profits the retailers are making themselves. I mean the second hand resale market. If you look into some of the resale prices on these shoes you would see it is nothing short of outlandish.

Having been an entrepreneur for most of my life I decided I want in. First, I did some research by asking friends who are huge sneaker heads about where to begin. Then I put some time into doing research on popular shoes, and what their resale prices were across the different websites. The initial research brought me to the conclusion that there are three tiers of shoes. They are the Regular Release, Good Deal, and Holy Grail. Each offers different value propositions.

If you are looking to get into the sneaker business then understanding how the business model works in this way is important. It is what will allow you to decide how to best buy and sell the shoes you choose to. There is no right or wrong way to do it. People run businesses the way they want to. But having this kind of information at hand is what will allow someone to enter with ease.

• Regular Release — With this shoe you are looking at the ones coming out just about every weekend. They come from every brand including Nike, Jordan, Adidas, Asics, and Reebok. The retail value on them varies from shoe to shoe. Depending on the brand, they will run you between $100-$300 retail. To get these you usually need to be up on knowing time, date, and location of releases. There are specific websites for this knowledge: for example being Kicks On Fire. You can do all this online from your bedroom. There is no real reason to be at stores for these early Saturday mornings. Since the majority of people don’t know when these shoes release, or where to get them they go to reseller sites. A few places to go for this are eBay, Instagram, Kixify, and Throne. This is where people put up pairs for sale. At this point the buyer has to pay a bit extra to get the shoe, and that premium is around $25–$50 above retail. These are not the super exclusive releases, but people pay the extra just for the added convenience of not having any worries. If you want to think about these sneakers like the stock market then think about stocks that pay good dividends. You get a small piece of earning’s. But even though it is not much it is a guarantee.
• The Good Deal — There are certain shoes that may not fetch as much money right away, but are a great buy. It requires more in depth knowledge of what will be popular some time down the line. It is like the stock market. You cannot call it speculation because it needs a thorough understanding before the buy. You are not gambling here at all. Instead you investing similar to how Warren Buffet does when he purchases stocks. Sometimes these may be an older pair of shoes that you get at a great price. Other times it is because you have an understanding that others do not about the situation. At some point something happens where people start wanting to go back to that pair of shoes. But there is no way to find them in any of the regular stores so you go to a reseller. A type of sneaker right now that has been seeing a huge growth is the line of Kobe Bryant sneakers through Nike. With his impending retirement at the end of the year people are trying to stock up on what they can before it is too late. When you go to sell shoes like this the premium is higher, but still not outrageous. Likely, you will be getting about $100-$150 more than the retail price. Again, when thinking about the stock markets this is a value stock. These are stocks that have solid fundamentals, but having pricing below their peers in the eye of a sharp investor.
• The Holy Grail — Few shoes qualify to be part of this category. These are the releases that everyone wants, but no one knows how to get. These tend to be collaborations, but that is not always the case. In the past year anything Kanye West has dropped under the Adidas Yeezy line is definitely part of this category. Another sneaker that creates more demand than people know what to do with is the Jordan OVO sneaker. And finally, a pair that is coming out tomorrow is the Jordan II “Just Dons”. These are the growth stocks. Some people call them glamor stocks. All it means is their earnings are expected to grow at an above average rate relative to the market. Usually, people who get their hands on these can make hundreds of percent profit above the retail price without any effort.

As the demand for sneakers continues to grow across the world more people are looking to invest. And it makes sense. On an amazing year the portfolio returns from the stock market will give you 10%. But even regular release sneakers are going to give you more than that. There are definitely issues with scaling when thinking about a sneaker business, but there is always a way to figure things out.

Like any business there is no hard and fast rule for guaranteed success. But there are ways to be smart about what you are doing. Just like with the analogies of the stock market, you can set yourself up for success, but things do not always go as planned. Those aberrations can work in or against your favor. But dealing with that is just a part of being in business. So get to that research!