Made to be Discounted is honestly a natural part of the product lifecycle and not a dig at Nike. MTBD becomes a problem when the lifecycle is compacted. Let me explain, no one ever really addresses what sneaker resale was or what it encroached upon. The initial wave (90s) began with sellers finding Air Force 1s which Nike had stopped producing. People would drive the east coast to find deadstock sneakers in storerooms. Those coveted City versions of the Air Force 1 led to a demand for certain kicks. Nike wasn’t the behemoth it has become. They stuck to a schedule and didn’t overproduce. Sneakers had a natural product lifecycle at retail:
- Sneaker released
- 1 month in sneaker got a 20% off tag
- 2 months in sneaker got a 30-40% off tag
- 3 months in a new wave of sneakers showed up in Eastbay and at stores
- Old sneakers went in the storeroom or onto discount walls and could be sold at cost because there were usually only a few random sizes remaining.
With the rise of the NBA in the 90s, the chase of older styles and true collaborations like the Wu-Tang Clan Dunk from the mind of Nike-man Drew Greer, were truly limited, high-energy drops which became drivers fueling interest in in-line/general styles. Nike would use those limited drops to get feedback on what colors to deliver. At the same time, sneaker culture began celebrating the merger of Hip-Hop, basketball and fashion. The lifecycle of a sneaker was three months.
Arbitrage
A different aspect of sneaker reselling has never been discussed. This other aspect was more vital to brands. Arbitrage and clearance buyers in the 2000s were already buying a range of products. eBay became an outlet for clearance models. Foot Locker had outlet stores in different pockets of the country where they consolidated old shoes. A buyer could find a pair of FitFlops just as quickly as they could find a pair of Jordans. Store managers wanted the sales, and the arbitrage sellers assisted stores. They didn’t really care about or buy new inventory. They helped stores clear shelves. Sneaker Resale wasn’t intrusive/invasive. It was additive.
As reselling became more lucrative this created a conundrum for long-time arbitrage sellers. Those buyers didn’t want to miss out and they began attempting to buy more coveted pairs. Leading into the 2010s arbitrage sellers faced competition from new buyers who began paying store managers for hot new releases. Backdooring became prevalent. The store managers began requiring buyers to take on other slow selling product. This alienated long time arbitrage sellers who refused to pay store managers for the new more profitable, faster selling inventory. Those arbitrage sellers also faced problems with grabbing what they always picked up since store managers saw a way to get rid of less popular product. Arbitrage sellers began complaining via e-mail to customer service.
This happened as Nike had begun removing accounts around 2014. Store consolidations began taking shape. Larger chains like Jimmy Jazz bought smaller local chains like Okuns in Mississippi. Big retailers, like The Sports Authority, began closing. Foot Locker shuttered banners like Lady Foot Locker and eventually got rid of Footaction. Arbitrage buyers, who had complained behind the scenes, hurt themselves because store policies prevented all buyers from buying more than three of any sneakers from stores.
Buyers who could still access kicks appeared to be crushing it, others began falling to the side. This created a trend where the buyers began buying from the buyers, eliminating the consumer. The seemingly peak years of sneaker resale weren’t consumers propping the market up; it was buyers buying from other buyers which kept prices inflated. From 2017 to today sneaker resale was in a cycle which could only end with the Greater Fool Theory and the bottom falling out of reselling.
Arbitrage sellers are still there, but those people who saw sneakers as a “get rich quick” scheme, left. Without buyers buying from buyers, which brands mistakenly thought were fans buying their products leading to overproduction, Sneaker Resale has reverted to what it originally started as, people getting hard to find kicks and regular folks buying closeout and sneakers at or below retail. The big difference from the Glory Days? The product lifecycle, because of the heavy release schedule by brands, the three-month window is dead. The one-to-two-week window is in play. This is a major issue for third party platforms, retailers and brands.
Continue Reading this Series
StockX Adjustments in a Cooling Resale World – Part 1
The Death of FOMO in Sneaker Resale – Part 2
Made to be Discounted and the Arbitrage Snitch -Part 3
How the Year over Year Reports on Resale Provided Hints of the Reality – Part 4
