The secret sneaker market — and why it matters | Josh Luber

The secret sneaker market — and why it matters | Josh Luber

This is the Air Jordan 3 Black Cement. This might be the most
important sneaker in history. First released in 1988, this is the shoe that started
Nike marketing as we know it. This is the shoe that propelled
the entire Air Jordan lineage, and perhaps saved Nike. The Air Jordan 3 Black Cement
did for sneakers what the iPhone did for phones. It’s been re-released four times. Every celebrity’s been seen wearing it. There’s a site about what to wear
with the Black Cement. It’s been right under
your nose for decades and you never looked down. And right about now, most of you are probably
thinking, “Sneakers?” (Laughter) Yes. Yes, sneakers. Some extraordinary things about sneakers and data and Nike and how they’re all related, possibly,
to the future of all online commerce. In 2011, the last time the Jordan 3
Black Cement was released, at a retail of 160 dollars, it sold out globally in minutes. And that’s because people were camped
outside of sneaker stores for days before it went on sale. And just minutes after that, thousands of those pairs were on eBay
for two and three times retail. In fact, there’s over 1,000 pairs on eBay
right now, four years later. But here’s the thing: this happens every single Saturday. Every week there’s another
release or two or three, and every shoe has a story as rich and compelling
as the Jordan 3 Black Cement. This is Nike building
the marketplace for sneakerheads — people who collect sneakers — and my daughter. (Laughter) That’s an “I love Dad” T-shirt. For the brands, sneakerheads
are a very important demographic. These are the tastemakers;
these are the Apple fanboys. Because who else is going to buy a pair of $8,000
Back to the Future sneakers? (Laughter) Yeah, 8,000 dollars. And while that’s obviously the anomaly, the resell sneaker market
is definitely not. Thirty years in the making, what started as an underground culture of a few people who like sneakers
just a bit too much — (Laughter) Now we have sneaker addictions. In a market where in the past 12 months, there have been over
nine million pairs of shoes resold in the United States alone, at a value of 1.2 billion dollars. And that’s a conservative estimate — I should know, I am a sneakerhead. This is my collection. In the pantheon of great collections,
mine doesn’t even register. I have about 250 pairs,
but trust me, I am small-time. People have thousands. I’m a very typical
37-year-old sneakerhead. I grew up playing basketball
when Michael Jordan played, I always wanted Air Jordans, my mother would never buy me Air Jordans, as soon as I got some money
I bought Air Jordans — literally, we all have
the exact same story. But here’s where mine diverged. After starting three companies,
I took a job as a strategy consultant, when I very quickly realized that
I didn’t know the first thing about data. But I learned, because I had to, and I liked it. So I thought, I wonder if I could
get ahold of some sneaker data, just to play with for my own amusement. The goal was to develop a price guide, a real data-driven view of the market. And four years later, we’re analyzing
over 25 million transactions, providing real-time analytics
on thousands of sneakers. Now sneakerheads check prices
while camping out for releases. Others have used the data
to validate insurance claims. And the top investment banks in the world now use resell data to analyze
the retail footwear industry. And here’s the best part: sneakerheads have sneaker portfolios. (Laughter) Sneakerheads can track the value
of their collection over time, compare it to others, and have access to the same
analytics you might for your online brokerage account. So sneakerhead Dan builds his collection
and identifies which 352 are his. He can see it’s worth 103,000 dollars — frankly, a modest collection. At the asset level,
he can see gain-loss by shoe. Here he’s made over
600 dollars on one pair. I have one of those. (Laughter) So an unregulated
1.2 billion dollar industry that thrives as much on the street
as it does online, and has spawned fundamental
financial services for sneakers? At some point I asked myself
what’s really going on in the market, and two comparisons started to emerge. Are sneakers more like stocks or drugs? (Laughter) In fact, one guy emailed to say he thought his 15-year-old son
was selling drugs and later found out
he was selling sneakers. (Laughter) And now they use the data
to do it together. And that’s because sneakers
are an investment opportunity where none other exists. And I don’t just mean the kid
selling sneakers instead of drugs. How about all kids? You have to be 18
to play the stock market. I sold chewing gum in sixth grade, Blow Pops in ninth grade and collected baseball cards
through high school. The cards are long dead, and the candy market’s
usually quite local. For a lot of people, sneakers are a legal
and accessible investment opportunity — a democratized stock market, but also unregulated. Which is why the story
you’re probably most familiar with is people killing each other for sneakers. And while that definitely
happens and is tragic, it’s not nearly the epidemic
some media would have you believe. In fact, it’s a very small piece
of a much bigger and better story. So sneakers have clear similarities to both the stock exchange
and the illegal drug trade, but perhaps the most fundamental
is the existence of a central actor. Someone is making the rules. In the case of sneakers,
that someone is Nike. Let me walk you through some numbers. The resell market,
we know, is $1.2 billion. Nike, including Jordan brand, accounts for 96 percent of all shoes
sold on the secondary market. Just complete domination. Sneakerheads love Jordans. And profit on the secondary market
is about a third. That means that sneakerheads
made 380 million dollars selling Nikes last year. Let’s jump to retail for a second. Skechers, earlier this year, became the number two
footwear brand in the country, surpassing Adidas —
this was a big deal. And in the 12 months ending in June, Skechers’s net income
was 209 million dollars. That means that Nike’s customers make almost twice as much profit
as their closest competitor. That — (Laughter) How is that even possible? The sneaker market
is just supply and demand, but Nike’s gotten very good at using
supply — limited sneakers — and the distribution of those sneakers
to their own benefit. So it’s really just supply. Sneakerheads joke that as long
as it’s limited and Nike, they’ll buy it. Shoes that sell for 8,000 dollars
do so because they’re very rare. It’s no different than any other
collectible market, only this isn’t a market at all. It’s a false construct created by Nike — ingeniously created by Nike, in the most
positive sense — to sell more shoes. And in the process, it provided tens of thousands of people
with life-long passions, myself included. If Nike wanted to kill the resell market,
they could do so tomorrow, all they have to do is release more shoes. But we certainly don’t want them to,
nor is it in their best interest. That’s because unlike Apple, who will sell
an iPhone to anyone who wants one, Nike doesn’t make their money
by just selling $200 sneakers. They sell millions of shoes to millions
of people for 60 dollars. And sneakerheads are the ones
who drive the marketing and the hype and the PR
and the brand cachet, and enable Nike to sell millions
of $60 sneakers. It’s marketing. It’s marketing the likes of which
has never been seen before — this isn’t in any textbook. For 15 years Nike has propped up
an artificial commodities market, with a Facebook-level hyped IPO
every single weekend. Drive by any Footlocker at 8am
on a Saturday morning, and there will be a line down the street
and around the block, and sometimes those kids
have been waiting there all week. You know those crazy iPhone lines
you see on the news every other year? Nike lines happen 104 times more often. So Nike sets the rules. And they do so by controlling
supply and distribution. But once a pair leaves
the retail channel, it’s the Wild West. There are very few — if any —
legal, unregulated markets of this size. So Nike is definitely
not the stock exchange. In fact, there is no central exchange. By last count, there were 48 different
online markets that I know of. Some are eBay clones,
some are mobile markets, and then you have consignment shops
and brick-and-mortar stores, and sneaker conventions,
and reseller sites, and Facebook and Instagram and Twitter — literally, anywhere sneakerheads
come into contact with each other, shoes will be bought and sold. But that means no efficiencies,
no transparency, sometimes not even authenticity. Can you imagine if that’s
how stocks were bought? What if the way to buy
a share of Apple stock was to search over 100 places
online and off, including every time
you walk down the street just hoping to pass someone
wearing some Apple stock? Never knowing who had the best price, or even if the stock
you were looking at was real. That would surely make you say: [WTF?] Of course that’s not how we buy stock. But what if that’s not how
we need to buy sneakers either? What if the inverse is true, and what if we could buy sneakers exactly the same way as we buy stock? And what if it wasn’t just sneakers,
but any similar product, like watches and handbags
and women’s shoes, and any collectible, any seasonal item
and any markdown item? What if there was
a stock market for commerce? A stock market of things. And not only could you buy in a much more
educated and efficient manner, but you could engage in all
the sophisticated financial transactions you can with the stock market. Shorts and options and futures and well, maybe you see
where this is going. Maybe you want to invest
in a stock market of things. Because if you had invested in a pair
of Air Jordan 3 Black Cement in 2011, you could either be wearing them onstage, (Laughter) or have earned 162 percent
on your money — double the S&P and 20 percent
more than Apple. (Laughter) And that’s why
we’re talking about sneakers. Thank you. (Applause)

About the Author: Michael Flood


  1. Great Nike commercial ….. You do need a lot of product , customer and lifestyle knowledge these days …. buying "the wrong shoe" ( a shoe that doesn't sell out ) can throw you back just as easy …… NIKE COMMERCIAL !!.. (this def. needed approval and prob. a script from Nike ….)

  2. If this video was on a sneaker channel, it would have about 3million views by now!!! The guy speaks a lot of sense, I'm no sneaker head, I have an interest, I grew up wearing air maxes, in Europe Jordans aren't that popular, however, I think that's changing rapidly. Also the collaboration of artist with the likes of Nike, adidas etc have created a lot of hype, personally I think the market will carry on growing

  3. Meanwhile in China…
    Nobody cares about the environment and people affected in the production of shoes and products in general.

  4. I have a real love hate relationship with Nike ! this is why, the shoes at wholesale are almost 13$ and making 300+ percent profit

  5. This is so un accurate lol, 96%? lol u tripping its almost a 60/40 by far adidas resell is going nike is DEAD unless its a colab

  6. This website is indeed very useful but whenever you talk to a big audience, is it not really true as for facts that you gain X% on your shoes because virtually the market price say so. Reality is most of the time not the amount (close to) that you will surely gets whenever you have to sell your shoes and the website tells by itself when people are bidding so low compare to market prices. If you see yourself, people in this environment are big hustlers & low ballers who rarely wants to pay for the shoe value. I went up collecting 500 pairs and whenever I see market price as good as it can be, I recall myself RARELY getting market value price back for the big amount of sneakers I've collected in time. So it is somehow very useful but those market price are not for facts (as for my experience) guaranteed that you can recover this amount of money mostly not cause sneaker game is a street thing and what kind of stuff you usually finds on the street? complete non sense, random behaviors and attitudes flowing from this lifestyle. Either you blink on customers requests or you wait freaking patiently to get around those market prices (it can be a chess game).

  7. Things like these keep on impressing me… don't people have better aspirations… Mind you, that is still better than drugs.

  8. So, how do we get our hands on this magic??? TRY TODAY

  9. Collecting sneakers is a fool's errand. Unless the sole is solid rubber they will crumble and fall apart in time and become unwearable. Then you can only open the box and look at them.

  10. I have 3 pairs of shoes
    1. Air Jordan Retro 1 Low
    2. Bruno Marc Black Italian dress shoes.
    3. Justin Bent Rail Cowboy Boots.

  11. and the irony is Nike is starting to kill the resale market slowly​ very little limit releases last couple years the whole 10%-30% profit for retailers I feel is forcing the hand.

  12. Nike is very smart. In this instant gratification and attention whoring era we live in, Nike just has to get a celebrity wearing a 60$ shoe and as soon as people see their idol wearing it, they'll just die to buy the same. I happened to sell a pair of Space Jams(Used) for 500 cause the dude seen Lil Wayne rocking a pair lololol

  13. I'm not knocking this guy, because he made smart moves in something he liked with skills he has. The thing is, there was a air of cool when copping sneakers was a dedicated art. The camping is what showed your dedication, because it was so ridiculous.

    Now, it's just a hustle and job, and sadly, one that adds no value to the world.

  14. its crazy watching this at the end of 2017, with the sneaker and reselling culture having changed so much. I forgot that at this point adidas hasn't made such big of a stir as it did yet, but going into 2018 it seems that Nike and Jordan may get their attention back. Also with stockx and other sites coming along, the information in this video is just outdated at this point. It was a great talk though, and it was from a time where this culture was at least a little better

  15. While the AJ3 Cement is a big deal, I think saying it did what the iPhone did to phones is a huge stretch.

  16. StockX is my stock market! Yes I have bought more than I have sold but it is a great way for me to get my sneaker fix.

  17. Wait… He's talking about Stock X… Wow. How far its come. From people laughing about it in the comments section and the audience to being a world famous website.

  18. This is surely a sign of the times. Humans are very perceptive and creative, and yet they use these tools for destructive and petty reasons.

  19. Link in Bio ⬇️⬇️⬇️

    Remember To use The Discount Code

    & Every Customer Gets a Discount
    You Can’t Beat That.. Thank You In advance

  20. i thought this was the anouncement for StockX cause he teased it so much and also the watches and handbags and things were so similar but he never used StockX in his sentence…

  21. This sneaker game is stupid already I rather buy balenciaga before I give Nike or addiads 400 bucks. Besides the fact there made for less than 10 bucks

  22. Sneaker 'market' shows every single sign of a bubble. First one's who are going to resell their entire collection are going to make a lot of money – the others don't…

  23. its a great way to make money if you never wear them …but if thats the case just collect/trade something with less risk if i buy sneakers i buy them as i like them ,want them and im gonna wear them

    i dont see how this has anything to do with sneakerheads its just a commodity …may as well be selling jackets/watches whatever

  24. This must be the man behind Stock X, a now multi million dollar company while everyone in the comments are making fun of him 😂

  25. You don’t wear those shoes like that🤦🏼‍♂️ your jeans broooo, cuff em, but thanks for the awesome learning experience

  26. Drug addiction is much better than sneaker addiction for sure 100 percent. Wtf sneakers? Fucking Idiotic childish pigs. You guys should go to prison and the drug addicts should be release right away.

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