Rares is a social investing platform that lets you invest in rare assets by buying and trading shares in them. Investing in the culture has never been easier! Rares | Invest in the Culture
I was recently on a panel for CNBC’s Financial Advisor Summit. My hope was to get a deeper series of questions on why this market is much more complex than simply loving sneakers and getting the rarest pairs. While the interview was interesting, some important topics were left on the table. One of the most important is the excitement around the unattainable sneakers that drive huge asking prices which inspire people to get involved solely in the selling kicks aspect of the culture. In the interview I was asked which sneaker would be something to watch. It was the last question and because of research the easiest answer would have been any Air Jordan. Instead, I went with the Nike Air Zoom GT Cut 1. I tried to discuss that the model was supposed to drop for the Olympics, but arrived late since the pandemic pushed the Olympics back. It was probably the most random answer anyone could give. I wanted to explain it, but the segment ended.
RRA July 2021: Part 4 – Most Popular Sneakers in August 2021
The logic was basic in my answer. This sneaker was a general release in several colors, but Nike controlled supply. That sneaker, in various colors, now has a resale value $343 dollars at a 159% price premium. The model retailed at $170.00. It flew under the radar so much I wrote a resale report explaining how this basketball sneaker was one of the best-selling models in resale. Basketball kicks were dead. Not even a signature sneaker was hitting the numbers the GT Cut hit. I wanted to explain that this is the reason resale is unpredictable and is best invested in as a part of a business strategy with buyers and businesses vs going at it alone as an individual reseller. I didn’t get to bring this aspect into the dialogue, so I’m doing it here.
On the CNBC panel my counterpart remained enthusiastic about the investing aspect of sneakers. He discussed the extremely limited Air Force 1 Off White Louis Vuitton collection. This is a sneaker with a retail price of $2,750 dollars. Only 200 released in each color. The sneakers were auctioned at Sotheby’s. I wanted to dive into the site Rares.io. The startup was launched during the height of the tech boom post Covid quarantine. The site has attained 9.3 million dollars in funding. In October the site had 5,400 visits. By comparison this site had 20,700 visitors at zero dollars in funding. Here is the interesting discussion. A browse through the Rares site is not conclusive, but the sneakers listed appear to have very little trading action. This means many of the privately held sneakers will have to be auctioned to attain any real value. I utilize resale not as a business, but as constant research on a fast shifting marketplace. In October, to monitor resale on Amazon, I began selling on October 12th. By October 31st I had attained $19,760 dollars in sales on 160 pairs sold. On StockX my gross was $55,796. That’s a combined $75,556 dollars as a research and analysis site not focused on the business of reselling. Rares as a platform has 20 IPOs and Trades listed. Of the 20 listings about 5 of the sneakers have information on trades. The Air Jordan 1 Low OG Metallic Blue provides evidence (from the outside) of how many times it has been traded. The Air Force 1 Hova appears to be the most successful asset. Investing is a long-term play. In a traditional marketplace you could put your money into a slow, but consistent mutual fund. The CNBC show wanted to discuss the more volatile, sexy sneakers as an asset and I wanted to discuss sneakers as a mutual fund, but I didn’t get the chance. This is not a knock on Rares. It’s a reality check.
The factors weighing on resale and the investment aspect of resale are plentiful. Sneakers are art, but they are artificially scarce. A work of art can’t be recreated in the exact same way twice. The variables in paint, weather, canvas and the artist are factors. A true artwork is a one-time creation. An automobile can only be made in that year. Can it be recreated? Sure, but that year can never happen again. In collectibles, items which are finite gain value as long as another person finds value. Sneakers can be this way, but at any point a brand can decide to make an exact replica of that item and the value of the original will decrease. Take one look at the LeBron 9 Big Bang. Nike recreated the model in 2022. The original pair took a hit. If it had been signed then the value is there, but now the buy in is much higher. Rares is depending on a marketplace similar to cars, art, cards, and for investors who have the money to risk without worry, it’s a sexy marketplace, but for an investor looking for a faster, boring more consistent return, wouldn’t Rares do better aligning with accounts and offering a share on verified sellers vs the items?
Rares is a dope concept and is an interesting alternative asset marketplace, but maybe there is an opportunity for an additional aspect, the Verified Seller. With the marketplace being shaped by a variety of obstacles, I have to write that resale will always exist. As sneakers are no longer available certain pairs will be in demand. Since brands are always looking to keep a balance between limited supply and satiating the consumer, resale will be here. As long as there are people who just have to get an item first, resale will be here, but these are the things shaping how resale will work:
- Brands opening more doors is moving them closer to the consumer enabling them to cater to certain demographics with more accurate product options.
- Constant product drops decrease FOMO and the pent-up demand that drives the need to purchase a sold-out item on third party.
- Brands are entering the resale marketplace with their own versions of resale: Nike Refurbished, Allbirds Rerun, Timberland Loop, adidas x ThredUp
- Resale platforms like StockX and GOAT democratizing resale and making the process easier and less risky adding more sellers who lack the ability to hold, decreasing prices quickly
- Resale platforms partnering with brands for limited drops, Sonra with eBay in Germany, StockX IPOs will cater to the hype community. Expect HBX once the SPAC launches the NASDAQ IPO to ramp up e-commerce and private label.
- Consumer frustration with brand launches and the botting of coveted models, along with a new release every week is contributing to sneakerhead apathy. Apathy is allowing some buyers to be a bit more patient on GR models.
- Encroachment on arbitrage by wholesale accounts selling products at cost on third and disrupting the marketplace
- The rise of alternative brands in performance running like Brooks, On Running, and Hoka pulling marketshare away from adidas making a once coveted sneaker for resale, the UltraBoost a promotional item and decreasing the need to focus solely on hype.
- Retail Store policies limiting the use of discounts and coupons, along with rules which change by the day on how many pair a buyer can purchase has hindered acquisition of product driving buyers all to the same places spreading the sneakers available thin.
- Sustainability will disrupt arbitrage as more brands create programs like adidas Made to be Remade, and On Running’s Cyclon program allowing runners to lease their sneakers and return them. The shoes will then be used to create new sneakers and brands can generate recurring revenue from a customer who bought one pair a year.
- Small brand growth – Brooks Running is now a billion-dollar brand. They did so without chasing cool and fashion. They focused on performance and after the pandemic they have maintained the marketshare they grew during that time.
There are other factors, but these are the most pressing for resale. Got questions? Shoot me an e-mail cburns at arch-usa.com
