People born in the 1970s seized the chance to speculate on stocks, those born in the 1980s on real estate and those born in the 1990s on Bitcoin, while Generation Z (born in the late 1990s and early 2000s) bet on sneakers,” reads a widely circulated post on Chinese social media.
In China, the soaring resale prices of Air Jordans, adidas Yeezys and other brands, combined with hopes of overnight success, have turned the sneaker resale market into a hype-driven business. The popularity of sneaker culture among young consumers, brands complicit in hunger marketing and key online influencers are only adding fuel to the fire.
Prices can easily multiply dozens of times on the resale market. For example, a sought-after pair of shoes designed by Air Jordan and Italian design brand Off-White released earlier this year originally priced at 1,299 yuan (US$173), fetched 20,000 yuan (US$2,807) on the secondary market.
According to 2018 statistics from StockX, a US-based resale platform for streetwear and luxury accessories, prices of the top 10 most expensive sneakers ranged from US$1,430 to US$3,904, the highest increase reaching a staggering 2,169 percent.
A report by Grand View Research, an India and US-based market research and consulting company, shows that the global athletic footwear market reached US$60 billion in 2018 and is expected to surpass US$95 billion by 2025. In China alone, the resale market amounts to US$1 billion, according to a report by German-based streetwear blog Highsnobiety. This market potential has sparked the creation of trade and resale platforms specialising in sneakers. However, not everyone is jumping for joy over sneaker speculation. Liang Zhentao, a long-time aficionado and market observer, told NewsChina it has become increasingly difficult for consumers to find limited edition sneakers in physical outlets or official brand websites because most shoes reach speculators and trading platforms first.
While collectors are wary of the potential conflict of interests on platforms that both sell and authenticate shoes, industry insiders have also expressed doubts over the market’s longevity. Sneakers at best are mass-produced products without real scarcity in value, but marketing is creating a psychological scarcity, experts said.
The resale market for sought-after sneakers has existed in China for years, but online platforms have taken what was a niche market to a whole new level. Dealers usually snap up large quantities of limited-edition sneakers and resell them to collectors at inflated prices.
The Chinese mainland sees fewer new releases from major international brands.
This leads dealers to Hong Kong, where they buy limited-edition sneakers to turnaround on the mainland, said 21-year-old Tang Xiaoyi, a collector in Guangzhou, Guangdong Province.
Tang is an experienced “sneakerhead” who sometimes sells his collections. Like many enthusiasts in China, Tang first developed an interest in sneaker culture through basketball and watching the NBA. He began collecting in high school and once spent 160,000 yuan (US$22,463) on shoes in a month.
Sneaker dealers are often young and deeply identify with the culture. Chen Wenhui, a college student studying in the UK, said he has loved sneakers since childhood. Now an experienced dealer, Chen is one of many overseas students profiting from the price gap between the domestic and foreign sneaker markets.
Chen buys rare collectible shoes in the UK to resell in China. He spent six months building his business model and now employs foreign buyers. Familiar with local markets, his buyers source shoes from outlets, retailers and enthusiasts. Chen rents a separate apartment to store his stock. He mainly sells shoes to overseas Chinese students through social media or ships them back to China for resale.
As the market grows, besides the increasing number of brick-and-mortar stores and individual dealers on social media, online trading apps in China such as Poizon provide resale and authentication services to anyone interested in getting into the sneaker business.
On these platforms, dealers can earn 10 to 20 times their original investment. And more young people are dipping their toes in the trade, lured by stories of stock market-like successes surrounding these platforms. To help users track price changes, some platforms even graph transaction trends of major sneaker brands over the past 24 hours.
However, unregulated markets are easily manipulated. Some larger speculators have been accused of forging data, creating monopolies and causing artificial supply shortages by buying out and withholding certain sizes.
Zuo Su, an experienced sneaker collector, said many new dealers looking to play the sneaker market end up getting played.
“I don’t know how long the current situation will last, but without the culture, sneakers are nothing special,” Zuo said.
The market owes its existence to Generation Z, which has taken sneakers beyond basketball and NBA fans to reach a much broader consumer base as a status symbol to show off on their socials.
Over the past few years, the popularity of reality shows focused on hip-hop, dance and urban culture have helped accelerate the spread of sneaker culture. Celebrities and influencers also endorse sneakers on Weibo and WeChat.
But brands are taking advantage of their monopoly position to tantalize consumers with tactics such as hunger marketing (reducing production in order to create demand), limited-edition releases and classic reissues.
The imbalance between supply and demand translates to huge resale values. For example, dealers often buy up brands released on official websites and physical stores before ordinary consumers have a chance. Some companies hold online lottery draws to curb speculation, but the odds of winning are low. Shoppers often line up overnight at physical stores for limited-edition shoes to find scalpers already selling them for exorbitant markups.
The extreme scarcity of supply is fertile soil for knockoffs, which forces collectors to shell out for professional authentication, Liang said.
Resale apps like Poizon are further cashing in on transactions by providing authentication services. When a deal is made on Poizon, for example, payment is held in escrow
until sellers mail the sneakers to the app for authentication. Such services have since become the main business model for platforms.
But this creates a conflict of interests, some collectors argue. In 2018, two pairs of counterfeits made in Putian, a city in Southeast China’s Fujian Province known for producing counterfeit brand sneakers, appeared on Poizon. The scandal came as a blow to the app’s credibility and was fodder for competing platforms.
Also, new platforms have less-developed customer service than e-commerce giants like Taobao and JD.com. Quality issues, fake products, delay of delivery and difficult returns are among the main consumer complaints, according to a survey by 100ec.cn, a Chinese e-commerce think tank.
While providing convenience, these platforms are also accused of lacking proper supervision to reduce market hype and high service charges on both sellers and buyers.
Ramping up sneaker prices benefits dealers and trading platforms but harms the interests of collectors, Liang argued, adding that many brands are also indulging in the hype which threatens to collapse the market.
“When the consumers stop buying one day and the market becomes weak, if the brands suffer from severe declines in business, they no doubt will stop cooperating with dealers and platforms to create hype. Then trading platforms will have to make changes in advance to survive,” Liang said.