Photo: MKfoto (Shutterstock)
With the highly anticipated Air Jordan 1 “Lost & Found” scheduled to drop on Nov. 19th, now is a tempting time to start investing in sneakers. The practice of reselling the limited edition kicks is polarizing, and any sneakerhead can share their perspective on how bidding up prices impacts shoe culture. One thing is certain: Even if you’re not passionate about the shoes themselves, investing in and reselling limited-edition footwear has the potential to be a wildly lucrative hustle. But is it right for you? Here’s what you need to know about the resale value of limited-edition sneakers before you dive into the sneakerhead game.
Sneakers are a risky investment
First, a quick primer on how the sneaker resale market works. The coveted sneakers are released in limited amounts, though “limited” can mean varying things. For example, 500,000 pairs of the new Jordans are rumored to be released worldwide starting tomorrow. Resellers swoop in and purchase shoes directly from retailers or the manufacturer at retail price. After building their inventory, these resellers mark up the price of their shoes and sell them to buyers on a marketplace like StockX.
The name StockX is a bit of a misnomer. Investing in sneakers is not like investing in stocks. With stocks, you want to build a diversified and balanced portfolio to reduce your risk as an investor. But to reap gains with a sneaker investment, you need far more specific knowledge of the niche commodity you’re reselling to in order to build a sensible strategy.
Even still, there are still plenty of risks to investing in sneakers as a commodity. Even for knowledgeable sneakerheads, a specific shoes’s potential resale value can’t always be accurately predicted. It’s a fast-moving market, and many limited edition shoes don’t have long-term holding value for investors.
Hype (and research) is everything
As with most any business venture, your sneaker investment depends on the basic principle of supply and demand. Take this week’s Jordans release as an example: As sneakerhead YouTuber Keith Adam explains in this video, the undeniable hype around these limited-editions kicks, combined with the promise of “only” 500,000 pairs being release the world over, suggests these shoes will be profitable for resellers. They have a $180 retail price, and Adam is one of many who estimate the reseller price to rise above $300—making your initial investment well worth your time.
But consider all the hidden costs of reselling. For instance, StockX’s charges sellers a 10 percent transaction plus a three percent payment processing rate. Complex breaks down what that means for resellers: “...if you buy a shoe at retail for $100, plus $8 of sales tax and $10 for shipping, you are in for $118 to start. If you resell that shoe for $200 as a first time seller on StockX, you will then be charged $20 for the transaction fee and $6 for the payment processing fee. When it’s all said and done, you’ve made $56.”
Ultimately, all sellers say the same thing: You really do need to know what you’re doing. Hype is directly tied to a shoe’s value, and hype is unreliable.
Tips for investing in sneakers
If you’re interested in getting into the game, consider the following tips from from Richard Xia, CEO and Co-Founder of sneaker marketplace Novelship, as shared with AsiaOne.
Resale value hinged on hype and authenticity
Shoes that aren’t authentic have no resale value. If you’re going to resell, make sure you’re getting your shoes from a trustworthy source, as most platforms involve some form of authentication to avoid fraud.
You can’t fake it ‘til you make it
You need to do plenty of research and learn how to speak the sneakerhead language before you jump in. Keeping track of trends and look for patterns in the resale for the brands and series of shoes you’re interested in. You’ll make better investment choices if you have an insider’s understanding of the commodity and the community.
Invest in a bot, too
Many resellers rely on bots programmed to automatically buy large quantities of shoes at the same time. These bots are expensive (think $1,000-$8,000), but are increasingly essential to getting a foothold in the marketplace, according to sneaker reseller expert Ari Sarafyan, speaking to Complex.
The bottom line
Any investment in reselling limited-edition shoes will involve a Jordan-sized leap of faith. Taking the risk will be a little less scary for tried and true sneakerheads who have studied the trends and understand how to accurately gauge the hype around the next buzzy release.
So before you start investing in the shoes, start by investing your time. Delve into sneaker culture and hone your skill at spotting the shoes most likely to be a profitable investment.
