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How Much Is That Sneaker in the Window?

Stadium Goods is hardly the only player in this fast-growing field, of course.

GOAT (derived from the popular sports acronym, Greatest of All Time) has raised $97.6 million from investors like Alexis Ohanian, Ashton Kutcher and Guy Oseary and venture capital firms like Accel Partners and Upfront Ventures. The Culver City, Calif., company started in 2015 as a mobile-focused marketplace with what’s called a “ship-to-verify” model. (Once a sale is made, the seller sends the product to GOAT distribution centers for verification, after which it is sent out to the buyer.)

With hot sneaker styles costing $300 and up, “the last thing you want to be spending your money on is fakes,” said Mr. Lu, a co-founder and chief executive officer. “For us, it was let’s build something that solves the growing problem of counterfeits and fakes.”

In February, GOAT merged with Flight Club and the new company has since been valued at $250 million.

StockX, founded by Josh Luber a former IBM consultant who created Campless, a sneakerhead data site, and Dan Gilbert, the owner of the Cleveland Cavaliers, is a reseller model built on the concept that prices of in-demand items vary like the stock market. The company counts among its investors the actor Mark Wahlberg and the rapper Eminem. With an authenticity program akin to GOAT, StockX also adds the element of transparent pricing.

It’s built for the casual sneaker enthusiast looking for a good strike price on coveted Yeezys — like getting the Adidas Yeezy Boost 350 V2 Cream White when it is selling for $380 (original price $220) and not, say, $560 — but also for those who think of sneakers as a portfolio investment. “We’re an evolution of eBay,” Mr. Luber said. He added that StockX is now bringing in about $2 million a day in gross merchandise volume.

As with the stock market, the prices fluctuate in real time (GOAT/Flight Club and Stadium Goods offer fixed pricing). There is also the possibility of a “sneaker IPO,” Mr. Luber said, pointing to a very limited release sale of new LeBron James 14 Nike shoes that StockX held last January. With just 46 pairs offered (23 of the Lebron 14 and 23 of Mr. James’ rookie season sneaker style), bidding was opened for three days, with all pairs selling for an average of $6,000 each.

“After that, we allowed seven people who bought the shoes to resell without even touching the product,” Mr. Luber said. “That’s like true day trading.”

These companies are shaking up how the resale market but they suffer from constraints, said Matt Powell, NPD Group’s sports industry analyst.

Photo

The room where it happens: Hundreds of sneakers waiting to be bought by obsessive collectors, most of them young men.

Credit
Mark Wickens for The New York Times

One issue is just how big this market is. “It’s very difficult to tell what the true size is because there are always going to be transactions between two private individuals,” Mr. Powell said. “But I don’t believe it’s a $1 billion market like many are saying it is.” He points to the math: “When I look at the sneakers that are resold and then add a factor of three because of the higher resale value, I’m getting closer to $300-$500 million.”

With total sneaker sales in the United States around $38 billion last year, the resale market is still relatively minor, he said.

The other obstacle to major growth is inventory; the major resellers specialize in limited-release styles. “If the manufacturer starts to get greedier,” by increasing the product, “a flood of inventory would crash the market,” Mr. Powell said. Indeed, a glut of Jordans in early 2016 drove that resell market down.

The resellers seem largely aware that sneakers can only take them so far. “Yes, our main business is sneakers right now but we’re a stock market for things,” Mr. Luber, said. StockX already sells watches, and streetwear from Supreme and Kith. The company has plans to roll out more product from streetwear designers like Fear of God. (Mr. Powell noted that streetwear has the same constraint: “What really drives the streetwear market is most of those items are, again, limited in quantity.”)

But where the slick new resellers may have a leg up is their combination of product, content and convenience, said Joe La Puma, senior vice president of content strategy at Complex who hosts “Sneaker Shopping,” a sneaker program on YouTube.

“The industry is becoming more professionalized but also I’m seeing that the customer is getting choosier about what sneaker he or she wants,” Mr. La Puma said. “So instead of buying sneakers, say, every week, they’re saving up to buy one shoe they really want.”

And there is competition from people like Benjamin Kickz, a solo reseller who runs a concierge-type service for limited-edition shoes. “He’s a young kid and he’s personally delivered Yeezy’s to me in L.A.,” Mr. La Puma said. “He’s considered the top guy in this business for the celebrities. He’s delivered Off-White Jordan 1s to Halsey and her boyfriend G-Eazy when they were in the club.”

That kind of cachet matters in this world and the top resellers all have it, Mr. La Puma emphasized. Sneakerhead consumers pay attention to what celebrities are wearing, he said.

“Specifically, Kanye West, Travis Scott, ASAP Rocky, Virgil Abloh and Jared Leto are influential in their own circles,” he said. “Not every shoe starts out super special. There’s the chance that if one of these celebrities wears it, it may then become super hot.”

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News credit : Nytimes

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