Surviving sneaker retail in Memphis is a difficult task. I’m discussing a local store in this post, but I will use the name “Store A” in this post. (5-7 minute read) pic via StockX
How long should a retail sneaker shop enforce purchasing policies on products that are perceived to be “hyped” or “hot” releases?
This question may be one of the most important questions in the current retail environment. As many stores look at a way to get customers in the door, premium retail accounts like Store A in Memphis shouldn’t have any problem getting customers in the door. The store gets Yeezy releases, limited Nike drops and they carry a variety of brands. I take the time to visit as many retail outlets as possible. I operate a third party e-commerce platform. I’ve done so for more than ten years. My e-commerce allowed me to launch my second footwear company, but more important than that, it allows me to utilize a micro analysis of the footwear industry. Looking at my data I’ve been able to accurately predict trends and in the last year I realized that the resale market informs of brand heat in a way that traditional POS sales data from previous quarters doesn’t seem to catch. I state this to establish that my form of third party reselling doesn’t really operate in the high end, hyped resale market. My e-commerce typically occurs in the general release area. Shoes that are readily accessible to customers, but for some reason retail outlets are failing to connect with buyers so they are losing sales to third party platforms like eBay, Amazon, StockX, and GOAT.
Now it shouldn’t matter that retail stores are selling to resellers right? Retail outlets where a third party reseller like me picks up footwear are typically marking down new releases because they aren’t selling. In other words, third party sellers who operate in the general release space aren’t looking at the hottest shoes, they are looking at the discount racks and reselling shoes that the stores are looking to liquidate. It is a known fact that no one likes resellers… especially the type I’m about to describe. When a shoe is so hot that even buying it for the retail price garners a considerable return on the purchase, you get a different type of resale person. I’ve explained in a number of posts that these resellers are the worst. While the buyers who help stores liquidate inventory that isn’t moving are they type of buyers stores love, the person who only shows up on the day of release is a nuisance. For instance the typical reseller who shows up for the Yeezy 500 is the person that stores have created launch day policies for. The Yeezy 500 Utility Black is a shoe that retails for 200.00 plus tax. In Memphis that means 218.50. Typically the Yeezy is a shoe that sells out immediately. Which leads me to the topic of this post. When a hyped shoe doesn’t immediately sell out, should a retailer maintain their release day policy?
I recently walked into Store A’s premium sneaker shop. Like most sneaker retailers Store A has a launch day policy. A person can only buy one pair of shoes. Sometimes this shoe has to be won in a raffle. With a store like Foot Locker, the buyer can enter a drawing via the App. With VIP membership in Foot Locker’s App the customer can earn head of the line privileges. I typically always win the drawings via Foot Locker’s App. About a week ago I was doing my daily mall visits both for research and for buying, and I noticed that Store A still had the Yeezy 500 Utility Black. I asked the sales lead/manager, “how many pair could I buy?” Now remember I wrote this post on July 8th:
Insider Ties Ep. 115: The Yeezy 500 Utility Black Is Still Available
adidas had made a considerable amount of the Yeezy 500 Utility Black shoes. This meant for the first time in a long time the shoe didn’t garner a resale value, so the shoe didn’t sell out. The shoe has been released for more than a month and a half now and Store A still has pairs in inventory. The launch day policy for most stores is the first week of release you can only buy one pair per day. Some stores have a policy that after the first week you can buy three pair of any release. The goal is to deter bulk buyers from taking all of the inventory. I’ll come back to this. I visited Store A everyday since last week, walked in, I didn’t ask for a discount, I simply walked in and asked, what sizes do you have? I then pulled my card out and bought a pair. That’s 218.50 for that store.
A few days ago I walked into the store, and asked the same question and prepared to buy another pair. Now, I had already been told there were over 30 pair of the shoes still in inventory in various sizes when I first discovered the shoes. When I walked in yesterday I was told, “They are tracking your credit card. You can’t buy the same shoe everyday.” Major red flag. I know stores can use the sales data, but if there isn’t a loyalty program in place and I’m not giving out my name other than showing my ID when I purchase, why would a store be tracking my credit card? I was then told that there weren’t any sizes left and they were being shipped out to another store. I said okay and walked out. When I walked out, I thought to myself, “Store A doesn’t like making money. Why would they stop me from buying the shoe?” I visited the store a day later and several pairs of the shoes were still being displayed. I was once again informed that I couldn’t buy any since I had bought the same shoe before.
I had seen this type of behavior before. I’m willing to spend 50,000 a month with a store. Almost everyone in a two hour radius understands this. The only time I’m froze out of buying shoes is when a shoe is extremely hot/hyped. I don’t tend to visit stores on release days anyway and everyone understands this as well. I probably do more videotaping and writing when I walk in than I do shopping. Everyone knows this as well. What I know is that sales leads and managers also watch what I’m doing. Because I tend to stay ahead of the curve, they pay attention to what I buy. I’ve seen instances where shoes that no one cared about disappeared after I left. Sales leads have friends who are the type who only show up on launch day. These sales leads and managers know that I don’t pay anyone to hold shoes. They know other buyers who will pay for shoes. This is a commentary on how stores tend to pay their employees. Store A could have been making a play to get paid and didn’t want me to buy more shoes because it would cut into their money; or I need to place myself into the position of Store A.
The store’s position:
- Selling all of the shoes to one person does not allow other loyal customers to have a chance at getting the shoes.
- Selling the shoes to one customer creates a false-positive. Yes, getting $6,000 is good for the store. However, it inflates the market for a particular model. If the shoe isn’t selling to the “regular” customer the store’s buyer will equate the shoe selling out to the shoe being a good shoe for this market. They might over order which will lead to mark downs.
It makes sense that Store A wouldn’t want me to buy multiple pairs of the shoes if you look at it from the above perspective. However, if I was a cash customer the store wouldn’t have a record of my visit other than the cashiers’ and cameras’ image of me. If I carried cash I could buy more than one. The unfortunate thing is this would create the same issues, especially on launch day/hyped shoes. Here is the problem with the two above rationales:
- I was told directly by the store manager that if I had more people with me and I used cash I could buy as many as I wanted initially. It wasn’t until I came back on the third day that there was a problem (which speaks toward my comment on possibly holding shoes for a “paying” customer).
- If the policy was one pair a day why would the store be watching my credit card?
- If there is a policy why would the store manager tell sales leads not to tell me if there were different sizes left?
- When I visited a sister store the manager looked the shoe up and while he couldn’t tell me what was in stock, he could answer my question “is size X in stock?” Contrary to what Store A’s manager told me there were more sizes available and there wasn’t any policy for tracking credit cards.
- Why would the manager tell me the shoes were being shipped out to a different store when they know I go to every shoe store in the mall everyday and I would see the shoes?
- The Yeezy 500 released almost two months ago. Any loyal customer should have been notified via either social or text that the Yeezy was still available. That loyal customer had over a month to purchase the shoe.
- If the store already ordered the shoe, then they did their research and there isn’t a false-positive. The shoe should have sold out since it was a hyped Yeezy. Almost any store in the country if they have a chance to order Yeezy footwear will order it for their store because they are almost guaranteed to sell out quickly.
In other words Store A really didn’t have a reason to prevent me from buying the shoes, so the question becomes, “Were the DM and Execs really paying attention to my credit card? If they were paying attention to it, would they stop me from buying 100 pair of adidas NMDs that had been marked down to 49.99? If they wouldn’t stop the purchase of sale shoes, then isn’t the policy broken?” (Now I know the answer to this since another store manager said that wasn’t really a policy.)
The biggest question is if I walk into your store and you have a product that I want to buy like a diamond earring and I’m willing to pay 20,000 for all of the earrings, would you refuse my money? If I walked in and wanted to buy a round of drinks for a bar, would the bar refuse my money? If I walked into Nordstrom’s Rack and tried to buy every sports coat would they refuse my money? Can a store that has over 40% of the products on its wall “on sale” afford to continuously refuse 1000 dollars a day over and over?
Don’t get me wrong, resellers shouldn’t be able to walk into a store on the day of release and buy every pair. I think all stores should have a policy that is also based on the pay schedule for jobs.
a. Release day, customers can buy only one pair. (With exception to families… which would be abused.)
b. Day 2 – 7 of the release one customer can purchase three pair per day. That means for the first week a customer can buy at the most three pair.
c. The second through fourth week of the release remains at three pair.
d. After one month the customer should be able to give the store their money.
By following this release system you give weekly, bi-weekly and monthly employees the time to purchase the shoes. Retail is in a very precarious position. As many buyers move towards e-commerce, retail outlets who have not set up a seamless omnichannel presence will lose some of their customers. Company programs like Amazon Pay, PayPal.me and Cash App are becoming more common in unbanked areas (places where Store A stores are) and those customers are beginning to experiment with online purchases, especially since they can request packages to be held for delivery. This is a disruption. Nike’s improvement of their CDO via Nike Plus providing customers with options they could never find at retail, has many customers avoiding stores altogether. This is disruptive.
At the beginning of this article I made a statement that in Memphis surviving in retail is an extremely difficult task.
In 2015 I did a video with Housakicks discussing the closure of footwear stores overall and in the Memphis area. Memphis is one of the most difficult markets in the country. There is a reason for this. Nike is one of the biggest employers in this city. Memphis has three, not one, three Nike stores. The employees have family members who can visit these stores and get discounts. Not to mention Nike is doing promos almost every weekend. People from a two hour radius drive to Memphis and bypass a variety of stores to come to the Nike Factory Store, Nike Clearance Store and to connect with family members who work at Nike and can visit the Employee Store. This is why so many hyped shoes sit on shelves here for much longer than they do in other cities. If this is the case, isn’t a Store like Store A who has closed a number of its doors in recent years moving towards a loss? I wouldn’t hesitate to think that they are already operating at a loss.
Last week I drove over to Arkansas in the middle of a Saturday to visit a location and the gates were down. No one was in the store. Store A does have some of the coolest managers I’ve met in certain stores, but they are being asked to accomplish the impossible and many of them are doing it. They are being asked to follow strict guidelines that make sense in a city where their competition consists of Hibbett Sports and Foot Locker. Unfortunately the managers here have to also take on an efficient and highly effective machine in Nike. Nike has an abundance of workers on the floor, all with handheld scanners and job descriptions allowing each person to work as a part of a unit. Store A typically often has only a manager and two sales leads which leads to missed sales and problems with loss prevention.
So I go back to the beginning and ask, should retail find a common ground with third party resellers? I’ll add this, especially in a city like Memphis? When is it too soon to allow a person to buy more than 3 pair of shoes? With so many people becoming third party sellers, are brands and retailers obligated to prevent bulk buyers and resellers from buying inventory? Yes and no. Maintaining control over inventory has inherent benefits. Not selling products after you’ve ordered them and they are sitting in stores creates issues.
While I have ideas on how retail outlets can begin to recapture many of the sales they are missing leading to resellers being able to grab multiple pairs, should their even be an issue with someone wanting to spend their money? While I’ve been talking about one store in particular, this is an issue for all sneaker retailers, even Nike. Every city has resale people. The resale business is estimated at close to 2 Billion dollars. Online sites like StockX and GOAT have garnered 100s of millions of investment dollars to create resale platforms. Retail outlets have to either adjust or face the consequences of what might happen if these resale platforms decide to pull a Warby Parker and create retail stores.
What do you think?
