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It’s a terrible time to be a sneaker reseller

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A series of complications have hit sneaker resellers.A series of complications have hit sneaker resellers.

Nike; Adidas; Yeezy; Rachel Mendelson/Insider

  • Adidas’ messy breakup with Ye is the latest in a series of complications for sneaker resellers.
  • Sneaker resellers have felt the effects of the end of the stimulus check and the rise of inflation.
  • Consumers have also lost confidence in reselling and brands are cracking down on bots. 

The last few years have seen the spectacular rise and the incredible fall of the sneaker reseller, a side hustle that flourished during the height of the pandemic. 

Adidas’ messy breakup with Ye, the rapper formerly known as Kanye West, was the latest in a series of complications to befall this enterprising group. Over the past year, sneaker resellers have felt the knock-on effects of the end of the stimulus check, the rise of inflation, an increase in sneaker production, a loss of confidence in the industry, and a crackdown on bots — software that makes it nearly effortless for resellers to nab a large volume of shoes. 

When resellers lost the e-commerce site Yeezy Supply after Adidas ended its relationship with the brand, it was the last straw for many resellers. The site is known in the sneaker-reselling space as one of the last remaining “bottable” sites. 

“After the Yeezy announcement, a handful of people have come to me and said, ‘I can’t do this anymore; it’s not worth it,” David “Kari” Daniels, a sneaker-content creator on YouTube, said.     

Sneaker resellers saw a bot crackdown 

While not as lucrative as Nike in the aftermarket, it was easier to buy Yeezys in bulk on Yeezy Supply using bots. These are the software applications that speed up the online-checkout process and help shoppers nab more product. Though the profit from each sale was slim, it was worthwhile for resellers who could buy large volumes. 

The loss of Yeezy sales then combined with Nike’s crackdown on bots. 

Adidas cut ties with Ye in 2022.Adidas cut ties with Ye in 2022.

Adidas

Taking direct aim at resellers, Nike updated its  terms of sales in October, warning that it reserved the right to cancel sales “placed with automated ordering software” as well as purchases “for the purpose of resale.”  

Nike later revealed that bot attacks can make up between about 10% and 50% of all entries on its SNKRS app. Every month, Nike stops as many as 12 billion bots trying to game SNKRS launches globally and actively identifies accounts showing bot activity during every launch. 

Daniels said the decline in demand for sneakers has especially hurt resellers who depend on quick flips — reselling the shoes immediately after buying them — to sustain their businesses.  

You live by the bot, you die by the bot. Mike Packer, owner of boutique sneaker store Packer Shoes in Teaneck, NJ

“They don’t have the financial resources to hold product for long enough to see the market rebound, so it’s not worth buying to flip right now,” Daniels said.  

The May demise of Zadeh Kicks, a resale business the Department of Justice is currently investigating for wire and bank fraud, took an added toll on resellers’ bank accounts. Federal prosecutors estimate the business ripped off more than $70 million in undelivered sneakers from customers. 

“Millions and millions of dollars were lost, and the people hurting the most are the consumers and resellers who will never see their money again,” Daniels said.  

Nike also undermined consumer confidence in the resale industry in May when the company filed a suit against StockX, partly claiming StockX was selling counterfeit shoes. Indicating it was stepping back from guaranteeing the legitimacy of products sold on its platform, in November, StockX changed the language on products sold from “verified authentic” to “StockX authentic.” 

Mike Packer, the owner of the boutique-sneaker store Packer Shoes in Teaneck, New Jersey, said that while the hardcore resellers are still there, the casual resellers have dwindled, and it’s getting harder for brands and retailers to level the playing field for manual buyers.  

“You live by the bot, you die by the bot. It’s not the brands’ or the retailers’ job to make sure they make money,” Packer said.  

Sneakers aren’t selling 

One of the biggest signs of a more-challenging resale market is shoes sitting, a reference to when launch-day sneakers are still available in multiple sizes days after a release. 

“During the pandemic, Air Jordan 1 was a guaranteed seller. Buy it at retail, and whatever you pay, it will sell,” Michelangelo Falcon, the owner of Equvalence, a sneaker-consignment shop in Encino, California, said. But that’s not the case anymore. “The other day, I saw an AJ1 yellow toe, a shoe that, in three years, will be worth $700, and it’s sitting on Nike.com.”  

One of the biggest signs of a more challenging resale market is shoes sitting.One of the biggest signs of a more challenging resale market is shoes sitting.

Wesley Lapointe/Los Angeles Times via Getty Images

Falcon said peak sales were during May 2020 when stores in California reopened after lockdowns. While a lack of inventory challenged his store at the time, customers spent stimulus and unemployment checks freely. 

Now, the tables have turned, with sellers looking to offload inventory while buyers pull back.  

To Falcon, the first quarter of 2022 is “when the COVID bubble began to pop,” adding that traffic to his store has declined by 20% since then. 

The drop-off has been starker on eBay’s site, where Chris Burns, a sneaker analyst and the founder of Arch-USA, tracked Black Friday sales. Using the key word “sneakers,” Burns found a decline of 31.6% on all athletic shoes, including Jordans, versus the prior year, with the average selling price down by 16.2%. 

Companies that rely on sneaker resale need to diversify 

As the number of customers willing to pay a high premium for sneakers continues to decline, it’s forced companies to adjust their business models. StockX has expanded offerings beyond shoes and apparel to include collectibles, electronics, and trading cards.  

In the middle of 2021, StockX began advertising products selling “below retail” and now prominently features a tab on each category page showing items selling at a discounted price. 

GOAT Group, which sells both used and new sneakers and clothing, recently bought the resale platform Grailed, bolstering its apparel and accessory offerings.  

Meanwhile, late last year, eBay brought back seller fees for shoes listed for more than $150, a reversal from the no-fee policy the site announced in December 2019.  

“If the big resell platforms like StockX and GOAT are here five years from now, it will be by acquiring new revenue streams, not by doing exactly what they’re doing now,” Daniels said. “Sneaker-resale companies are going to have to figure out how to reach new customers and create new revenue streams.” 

In Falcon’s case, he and his business partner recently launched the shoe-cleaning brand QUIQ and Boba N Tings, a streetwear-themed bubble-tea shop where customers can also buy collectibles.  

He plans to cast an even wider net to capture a bigger customer base in the future. 

“We always targeted the regular consumer, not the sneaker community. I’m working to expand my team to accommodate the online customer, walk-in customer, and sneaker customer,” Falcon said. 

Read the original article on Business Insider

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