Unable to keep up his supply, James Pepion turned to shadowy sellers in Hong Kong and China, and began selling hundreds of the imported counterfeit Nike sneakers to unwitting buyers, receiving $2.6 millions of dollars for the shoes in roughly a three-year period from January 2012 through March 2015.
In 2016 one of the biggest resale websites in kicks had to face the music after Nike initiated an investigation into numerous customer complaints. Supplied PDX was on Amazon at the same time that I was on Amazon and often undercut the prices that I had listed on the site. At the time I was one of the highest performing stores on Amazon in the third party market. My store was pulling down half a million in sales and if I was doing those numbers I could only imagine what Supplied was doing.
In 2016 I didn’t have to wonder anymore because I finally had my answer about how much money Supplied was making because when the site got busted they listed the amount of money he was pulling down: $2.6 million for the shoes in roughly three years from January 2012 through March 2015.
We did a show about this moment but we really hadn’t followed up on it since this time:
Today Oregon Live gave us an update on James Pepion.
The judge sentenced him to four months in prison, followed by three years of supervised release.
Pepion has forfeited $100,000 to Nike but may also have to pay additional restitution to the company for the nearly $50,000 cost of the company’s investigation.
This seems miniscule in relation to the amount of money Pepion earned selling fake kicks. What intrigues me about this is that since the Supplied PDX bust, websites and sneaker related businesses have flourished in the venture capital market earning considerable investments from Angel investors and luxury brands. Imagine had Pepion done things the right way with those numbers? Which leads me to the interesting thing about this story. I guess reading this does serve as a warning to those out there who are looking to capitalize on the culture’s desires to have the freshest gear. I don’t see a warning however… I see a business narrative that leads to a really interesting discussion.
Pepion started out selling real shoes. The seduction of the money being spent on hyped/hot sneakers was too much for him to pass up so he began selling variants, fakes, knock-offs. He made over 2 million dollars. When he was busted they seized 96,000 dollars. He then had to forfeit 100,000 with a possible 50K. That total is 240,000 dollars and what appears to be 4 months in prison with probation. Over the course of three years he earned 2.6 Million. That leaves 2,345,000 dollars left over. If his profit margin was 10% only he potentially has 235,400 dollars left over. Since he was selling fakes his margins were probably a lot better than 10% which means a guy who we wouldn’t know if he walked in the room could have 500,000 dollars somewhere and all he is spending in jail is 4 months.
While there is a warning here, there is also a risk that appears to outweigh the punishment. Do you think the punishment is fair? You need to click through and read the article to understand what Pepion’s background was. He wasn’t a habitual offender and didn’t have any priors, but is 4 months enough?