Isn’t it mind boggling how one can pay an x amount for a pair of sneakers and then walk out of the store, only to see its value quadruple, if not more? Don’t we all buy sneakers for the same reasons?
Well, yes and no, depending on who you ask. For some, a sneaker is a statement piece, for others it’s about getting from point A to point B. Lately however, it’s understood to be a financial asset and therefore a collectible piece of item of the highest value. I’d say the first two explanations for buying a sneaker are fairly self-explanatory. Thus, I’ll dig into the third one, which in fact sheds light to the phenomenon of “hyperinflation in the sneaker market. The European Central Bank defines hyperinflation as a situation in which the monthly inflation rate exceeds 50 %. According to a research conducted by Absolute Reports, the sneaker market worldwide, was valued at USD 78,750 million in 2020 with a projection to reach a booming valuation of USD 128,110 million by 2027. This phenomenal increase can be attributed to the widespread shift of prioritizing comfort and integrating sneakers into smart-casual occasions, to their commodification but also to the way the music industry, and especially the hip hop and sports have embraced it.
There are some defining examples that accurately illustrate the dynamics of this new market:
Nike Air Yeezy 2 Red October:
Global superstar Kanye West’s last shoe collaboration with Nike (2014), just before signing a deal with Adidas, retailed at 245$ but now has an estimated value range of around 16,000$ – 24,000$ depending on size (StockX 2022).
Jordan 1 Retro High Off-White Chicago:
This was part of an extensive collaboration between Off-White’s late fashion icon Virgil Abloh and Nike. This release changed the evolution of the sneaker market, securing a mainstream outreach and capturing the attention of luxury high-end brands like Dior and Prada. These pair of shoes retailed at 190$ but now has an estimated value of over 10,000$ depending on size (StockX 2022).
Jordan 1 High OG SP Fragment x Travis Scott:
Retail: 200$ 🡪 Current estimated value: 4000$ - 7200$ (StockX 2022)
Global phenomenon and nowadays controversial rapper Travis Scott had seen his popularity skyrocket after the release of his 2018 album Astroworld.
During the midst of the rapper’s success, global conglomerate Nike jumped on the bandwagon, releasing a collaboration with the rapper. Ranging from sneakers to articles of clothing, this turned out to become a lasting partnership, even to this day. Most of the sneakers in this collection had hefty resale prices, even though the quantities produced were not limited by comparison to that of other similar brands.
This exemplifies a noteworthy shift in the driving forces of consumer spending behaviour. He was one of the first rappers who managed to create a brand with as much success and hype as athletes used to do in the past. Other artists like Kanye West, Pharrell Williams, and Drake are amongst a few artists that also experienced this type of market penetration in recent times. This highlights a shift in the way artists are perceived globally as well as validates the claim that athletes may not have the same influence they once had. With this in mind, it is highly improbable that the weight and the impact of the Michael Jordan brand in the 1980s-90s will be matched by any athlete in the future.
However, the above analysis may not fully explain why this phenomenon occurs or what causes the exponential growth in price premiums (% increase in the price of a product).
As previously mentioned, sneakers can be seen as a financial asset whose market can endure any economic conditions. In fact, in times of economic downturn, it is more likely that the price tag will rise rather than the contrary. Why? For the same reason the value of diamonds usually stays stable during a recession: scarcity. This is the basic principle of supply and demand.
This development has led to more and more resellers entering the market, driving prices higher and higher, allowing for more appealing profits to be made. This culminated in a sharp increase in the global sneaker resale market, which from a $6 billion value in 2019, is expected to reach a lucrative $30 billion by 2030. Undoubtedly, with the onslaught of social media use, people are becoming more creative, more entrepreneurial and are constantly finding more ways to challenge and defy traditional business norms to make a profit. Who would’ve dared to rely on buying and selling sneakers for their main source of income 40 years ago? Last but not least, the ‘hype’ currently surrounding the sneaker market and the desire of people to find new creative outlets was intensified during the Covid pandemic and the prolonged lockdowns, leading to a thriving market with no signs of decline…
Ultimately, any shoe/sneaker will surely keep your feet healthy and comfortable … However, choosing the right sneaker may even offer you more…