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Here’s Why the Sneaker Resale Market was Recently Valued at Over $2 Billion

When GOAT, one of the world’s leading sneaker resale marketplaces, merged with self-described “sneaker consignment pioneer,” Flight Club, in February, Eddy Lu, co-founder and CEO of Goat, said the sneaker resale industry should be valued at a record $2 billion dollars—the year before, sneaker and entertainment magazine, Complex, valued the industry at $1 billion.

It’s safe to say the legal sneaker resale market has arrived and is now a major player in the footwear industry.

In 2017, NPD valued the athletic footwear market at $19.6 billion, led by the sports leisure sector with $9.6 billion in sales. If the sneaker resale market is as large as GOAT claims, that means a significant portion of retail sales for sneakers has matriculated down to the second-hand market.

Resale markets are not new to anyone, but the influence of legal sneaker resale operations like GOAT, StockX and Stadium Goods has reached a point that high-level investors have begun to take notice. Luxury goods retailer Farfetch recently purchased Stadium Goods for $250 million with eyes on the larger sportswear market, which it says was valued at $70 billion in 2017.

However, sneakers featured prominently in the press release for the deal, with Farfetch founder and CEO, Jose Neves, saying, “I am confident that we can help Stadium Goods grow its international presence for sneakerheads around the world through our expertise, logistics and data.”

To truly understand the pull of the sneaker resale market, it requires an understanding of the current state of sneaker retail, in general. Over the last few years, sneaker brands—led by sneaker powerhouse, Nike—have adopted a highly exclusive drop-based release strategy. Sneaker brands now regularly release sneakers with very limited production runs. When popular brands like Nike and Adidas do this, the sneaker is nearly guaranteed to sell out immediately.

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The sneaker resale market joins two sides of this consumer market together. On one side, you have consumers who will wait hours, and sometimes days, for a sneaker to drop—and on the other side there’s a group of sneaker fans who will pay almost anything to buy limited-run or vintage sneakers from their original owners.

The market was built to facilitate demand for both groups and most of what resale outlets like StockX do is provide helpful pricing and demand statistics along with an outlet for deals to be made, billed as a safe alternative to the always risky “Craigslist” style of negotiation.

One of the most important services that legal resale marketplaces provide, for one, is automatic verification of the authenticity of every sale. Additionally, marketplaces generally protect individual resellers from chargebacks if authenticity is successfully verified.

Prices for second-hand sneakers are often exponentially higher than average retail prices, which NPD recorded as $58.16 in 2017. Though certain limited-edition sneakers can easily sell for $200 or more at retail, the same shoes can fetch prices in the range of a couple thousand dollars on the second-hand market. A Nike sneaker called the Nike Dunk SB Low Staple “NYC Pigeon” retailed for $200 in a very limited release on the Lower East Side offices of Staple Design, a lifestyle menswear designer. The very same sneaker last sold on StockX for $11,500.

Due to the sometimes-incredible profits made by successful resellers, an entire culture and profession has evolved around sneaker resellers. Professional resellers know exactly when a valuable sneaker will drop and do the hard work (waiting, arriving in the early hours of the morning, etc.) to obtain the shoe and then sell it for a tidy profit. A site called sixfiguresneakerhead.com offers advice on how to become a major player in the sneaker resale market, and resellers have become commonplace sighting at high-profile drops.

However, the industry has now become so competitive that larger resale companies have begun using “bots” to register for limited edition drops, quickly scooping up the available stock of exclusive sneaker drops. A Forbes reporter interviewed the owner of a sneaker bot army in 2017 and found one professional reseller who estimated that he spent $2,000 on personal bots to combat the epidemic.

It’s possible the sneaker resale market is a bubble, soon to pop with the advancement of some new technology created by sneaker brands eager to place more of that profit in their own pockets. Nike gave that notion a sly nod when it released a $160 pair of sneakers in November, called the Air Jordan 1 Retro High OG “Not For Resale,” which were decorated with helpful messages like “No Photos” and “Please Crease” on its uppers.

According to StockX, the current resale value for the sneaker sits at $680 dollars.