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The Ingenious Methods Nike Uses to Control the Sneaker Resell Market

It’s no secret that Nike and Jordan Brand dominate the sneaker resell game – just ask any of the bleary-eyed campers outside your local sneaker store at 7 a.m. on a Saturday. The Oregon sportswear giant’s clout in the game is so considerable that the sneaker data experts over at Campless estimate that 96% of shoes on the resell market are adorned with the Swoosh or the Jumpman.

What’s often overlooked, however, is the extent that Nike actually controls the market for deadstock kicks. While ASICS, New Balance and adidas shoes will pop up from time to time in the hands of resellers, the conditions that the resell market thrives on – namely exclusivity and hype – have been expertly manipulated by Nike to create a unique ecosystem that ensures sneakerheads will continually go to extraordinary lengths to acquire the sportswear giant’s product.

It’s obvious both Nike and resellers thrive off limited releases, but the Swoosh is so adept at forecasting demand that the volume for big drops (like the ever-popular Jordan Retro series) is so expertly calculated that only a fraction of the release hits the resell market – roughly 4%, Campless estimate. Drops may sell out instantly – keeping Nike and Jordan at the forefront of the sneakerhead conversation – but without being so limited that resellers can charge huge premiums where Nike could have been making retail sales.

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For example, 2013’s Air Jordan V “Oreo” and Air Jordan X “Steel” were both released in 2013 at a retail price of $170. 505,000 pairs of the “Oreo” hit retailers, while the “Steel” was limited to 151,000 units. While the logic of exclusivity would dictate that the “Steel” would command a much higher resell price, both hit the market at an average price of $225 as the “Oreo” was in much higher demand and Nike adjusted its production run accordingly, keeping the hype machine thirsty while still shipping over half a million shoes in a single weekend.

That’s not to say that each release perfectly balances exclusivity and availability; Nike will occasionally choose to reassert its position at the top of the game by causing pandemonium with an extraordinarily limited release. This hype can then be leveraged to drive huge sales for future releases, as was the case with 2013’s What The LeBron X. Nike produced a tiny run of the shoe, which unsurprisingly sold out instantly. When it came to the 2014 release, the What The LeBron XI, Nike dropped the sneaker in far greater quantities, and built off the previous release’s hype to shift a large volume of retail sales as customers thought the drop was highly limited just like the year before.

This tactic is sometimes used on a much grander scale, as high-volume restocks can be used several months after a big release to turn unsatisfied customers into sales dollars. Spontaneous restocking (like the 13 Jordan models that were re-upped on May 18, or the huge Retro re-release the year before) allows the brand to satisfy Jordan-hungry customers who missed out the first time, while using the hysteria surrounding the restock to persuade previously-undecided customers to pull the trigger too.

All this trickery provides an answer to the sneaker community’s million-dollar question – “Why don’t they just make more sneakers or raise the price?” Put simply, by expertly balancing limited supply and heightened demand Nike can have its cake and eat it. Producing a greater volume of shoes would discourage the 4% of customers who fuel the resell market, while raising prices would deter the other 96% from copping for themselves. By ensuring supply never quite meets demand, Nike creates a market that nets the resell community millions of dollars a year, while cultivating the sort of rabid following that keeps the Swoosh at the forefront of consumer culture – right up there with Apple and Starbucks. Not to mention allowing the brand to sell millions of 20-year-old sneakers a year without advertising, PR, discounts or sales.

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The secondary market Nike has built for itself is a strange one, and very similar to the trade in illegal drugs in many ways. Supply is highly limited and controlled by one agent – in this case Nike, but Latin America’s cocaine cartels do much the same – and at the other end of the market there are no barriers for entry. Like your local dealer, no overheads or qualifications are required for budding resellers to enter the market; just purchase some stock, line up a few potential customers and you’re in business. And much like the trade in narcotics, prices for deadstock kicks are not officially set (although Campless’s price guide does a good job) and people will go to extraordinary lengths to feed their purchasing addiction.

Nike’s cult of devoted followers has cemented its position as one of the world’s foremost megabrands, one whose products cause riots, force people to queue over a week before release, and even offer up their car in exchange. This sort of manic following would never have been possible had the Oregon brand not so ingeniously observed, experimented with, and ultimately manipulated the bizarre dynamics that take place in the marketplace for deadstock sneakers.

Source: highsnobiety.com

Author: Esperanza van den Ham