publicly traded global luxury digital marketplace, in December 2018.
“We did not have access to rare sneakers, and we know our custom-
ers really want them,” says José Neves, founder and CEO of FarFetch.
Meanwhile, GOAT grew to more than 600 employees and 14 facil-
ities around the world, and then in February 2018, it merged with
the industry’s legendary original store, Flight Club. “They were our
competitors,” says Steve Luna, director of consignment at Flight Club,
“but we realized that we, too, were going to have to evolve our busi-
ness to adapt to the times.” Foot Locker, not wanting to be left out,
stepped in with a $100 million investment, driving GOAT’s outside
funding to almost $200 million.
But even if this is just industry growth as usual, you’ve got to won-
der. We’re talking unworn sneakers here. And with all the big money
flying around, it’s hard not to see tulip bulbs and Beanie Babies and
houses of toppling cards. Essentially, you’ve got this “Row, Row, Row
Your Boat” of a musical round going on. The brands are dropping rare
product. The GOATs, StockXs, and consignment stores make it easy
to resell them. And customers like Simms build independent sneaker
businesses that support the other two. But what if the brands stop
singing? And how long before these pumped-up shoes lose air—and
everyone moves on to hiking boots or loafers?
Matt Powell, vice president and senior industry adviser for the NPD
Group, a market research firm, who has been tracking the sneaker phe-
nomenon for decades, sees warning signs. Last year the primary ath-
letic shoe market was $21.2 billion in U.S. retail dollar sales, according
to NPD. “But it’s been challenged,” Powell says. “This year, I’m looking
for it to be flattish. What I’m seeing is some brands trying to get greater
sales out of these limited edition shoes because they need the business, so
instead of making a handful of pairs, they’re making millions of pairs.” He
points to Jordans and Yeezys, where that strategy not only dimmed retail
demand for the sneakers but “collapsed the
resale market,” he says. “Scarcity is really the
key. The whole resale industry is based on the
fact that there will be limited supply.”
Nike and Adidas have stayed pretty silent
on the resale industry (and didn’t respond
to requests for interviews), but Kelly Hibler,
who spent 28 years at Nike and now is gen-
eral manager of Reebok Classics, a subsidi-
ary of Adidas, told Entrepreneur, “I love the
aftermarket. The fact that the products you
create sometimes show up [there] for crazy
amounts? It’s actually great for the indus-
try.” Reebok, for one, continues to cook up
creative collaborations like the Instapump
Fury Prototype. “We brought back an actual
prototype for the original Instapump Fury,”
says Hibler. “Because it was done in 1996, we
released 1,996 pairs. We launched in March
in Japan. It’s generated all kinds of buzz.”
Part of the magic includes where they
release the sneaker—whether it’s in their
own stores or via another retailer, Twitter,
or an event. Would they ever consider
dropping a new shoe on StockX or GOAT?
“Yeah!” says Hibler. “For sure. I think
there’s all kinds of things you can do cre-
atively today.”
Luber of StockX has been pushing for
something just like that, though so far
without much success. He’s also exploring
other ways to impact the industry, like hav-
ing the price of a new shoe decided by customers. He tested the con-
cept recently by holding an IPO—initial “product” offering—where
StockX released its own limited edition of 800 sandals, a collabora-
tion with jewelry designer Ben Baller. Customers bid via a Dutch auc-
tion, a method used in traditional IPOs, and the sandals, depending on
size and color, ended up costing around $210—likely three times the
amount they would have sold for at retail, yet less than almost everyone
who got a pair bid. Going forward, Luber says, people could buy their
new Ben Ballers and resell them immediately on the site, without ever
taking possession—in other words, trading pairs of shoes the way you
trade shares of stock. “That’s the future of the business,” he says.
But of course, the next great disruptor could always come along.
As big companies dominate an industry, the small upstarts always
spot the white space. That’s what Chad Jones—a.k.a. Sneaker
Galactus, the man once stabbed over a pair of shoes—plans to do.
After nearly dying, he went from being a collector to a very focused
reseller, building a reputation on his access to the rarest of shoes.
Sometimes only 50, 10, or even five pairs are made—“the crazy stuff
brands do for celebrities and athletes, their promo departments,” he
says. They’re the kind you pay $650 to get and sell for $9,000. And
while GOAT and StockX and Stadium Goods go mainstream, he’s
working on turning his specialty into a scalable business.
Already, everything that’s happened in this industry has validated
what he knew to be true as a boy. “I am from one of the worst parts of
Brooklyn, and I now own a home on the Hudson River in Fort Lee, N.J.,”
Jones says. “Sneakers have provided an avenue for me to pull myself out
of economic distress.” And now, he says, he’s ready to make his move.Liz Brody is a contributing editor at Entrepreneur and the former
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