Asked on 24 Jul 2020
There're plenty of hyped up sneakers released all the time. Some fetching prices in the thousands like certain watches. Is this worth considering as part of your portfolio?
TL;DR: Is It Worth Investing In Sneakers?
I'd say, yes.
And your returns will come in the form of capital appreciation.
But similar to rare watches, antiques or art, you gotta know your stuff really well. You need to know which sneakers to buy, to sell, and to hold. And if you do, the kind of ROI you're looking at is pretty insane.
That aside, if you're talking about building your entire retirement nest with sneakers... well... that's untested waters. And like any investor worth his or her salt would know, it's best to diversify across various asset classes.
Sneakers: Buy, Sell, Or Hold?
Collecting sneakers used to be limited to a few subcultures. It was grounded in hip hop, basketball, skateboarding... you get the picture. Basically, underground cultures which weren't mainstream before but over time have eventually become part of pop culture.
Back then, you used to have to queue up overnight to get your hands on the latest pair of sneakers. The OG Singapore sneakerheads will know about Limited Edt at Queensway Shopping Centre and the many private launches and sneaker raffles they conducted. Only a select few (who were in the know) would be privy to that information as well as when to get them.
For everyone else who might want to get the sneakers when they learn about them or see them on someone's feet, they'd have to turn to eBay, CraigsList, or FaceBook groups to buy them off someone else.
The people who were selling these sneakers are known as resellers, and they kinda have a bad rep amongst sneakerheads (aka people who collect sneakers) because they tend to charge a huge markup on the original retail prices.
Fast forward to today, you can buy sneakers via online raffles (aka lucky draws) or through an app.
And as more and more brands start having collaborations, more and more celebrities and influencers like A$AP Rocky and Kylie Jenner started wearing, endorsing, and sporting sneakers... impressionable youths everywhere are gonna want to get their hands on a pair.
Michael Jordan's and the NBA's influence on pop culture
limited runs of sneakers
player exclusive sneakers which were only made and released for certain athletes
the rise of streetwear, and
social media (where it's basically a huge competition to one-up your peers; which melds perfectly with the whole culture of owning or wearing sneakers which no one else has yet)...
the sneaker industry just took off.
Even the resellers have gotten better at reselling sneakers too. Over time, the secondary sneaker market grew and reached a level of sophistication that it has now surpassed that of other past collecting fads (remember Hello Kitty dolls and Pokemon trading cards?).
Just look at this Nike Air Max 1/97 Sean Wotherspoon, launched back in March 2018 for US$160 (S$220).
Right now, on StockX, it sells for various prices depending on the size of the shoes.
Heck, it's even got its own ticker (NK-AM197SWNA). And you can even look at the history of its sale price.
Not too different from looking at the stock prices and charts of CapitaLand Limited (SGX: C31) huh?
If you're looking at a pair of size 9s (the most common foot size, so they're usually the most expensive size), they're going for US$1,450 (S$1,993). That's an ROI of slightly more than 800% over a span of 2 years.
Some other sneakers such as the Yeezy line (a collaboration between Kanye West and adidas) and the Off White series (a collaboration between designer Virgil Abloh and Nike) will go for even more.
And these are the more contemporary examples.
What if you could own a piece of history through sneakers?
In fact, Christie's (a British auction house which offers premier auctions and privates sales of fine art, antiques, watches, and more) recently put up an Original Air auction which features 11 of the rarest Air Jordan sneakers in existence — consisting of Michael Jordan's game-worn and player exclusive sneakers.
The crown jewel of the auction?
This pair of Air Jordan 1 high-top sneakers, which Michael Jordan wore during an exhibition game in Italy, back in 1985.
During that historic game, his Airness took off for a dunk and the force of his slam shattered the backboard. You can even see a shard of the backboard embedded in the sole of the left shoe.
That's an invaluable piece of memorabilia for a serious Michael Jordan fan. And literally a piece of sporting history which you can own... for a price, of course.
The starting bid for these kicks?
An eye-watering US$500,000 (S$687,920). With the estimated value pegged at between US$650,000 to US$850,000 (S$894,296 to S$1,169,464)!
Basically, what this proves is that the secondary sneaker market has taken sneaker collecting and reselling, and elevated it to a whole new level. So if you can get your hands on the right shoes and connect with the right buyer, you might just become very rich...
Is There A Sneaker Bubble In The Horizon?
This worldwide obsession with sneakers is currently fuelled by sneakers made by everyone from luxury high-fashion brands to general releases by the likes of adidas, Nike, Puma, Reebok, Under Armour, and more.
With so many brands and companies trying to cash in on the trend, reselling sneakers might not necessarily be the road to riches for young entrepreneurs eyeing an easy buck.
Again, let's look at the Yeezy line of sneakers. Early iterations were released in limited numbers and have become sought-after collector items.
This is the Yeezy Boost 350 Turtle Dove, the first shoe which Kanye West collaborated with adidas.
The asking price?
US$1,999 (S$2,750) when the original retail price was US$200 (S$275). That's a 899.5% ROI. And if you looked at the historical prices since 2016, it's even peaked at US$2,463 (S$3,388) and have never gone below the US$1,000 mark.
Now, Kanye West is still putting out sneakers with adidas, so let's look at something a little more recent like the Yeezy Boost 350 V2.
You can see that it sells for about US$260 ($358) on average.
While the retail is US$220 (S$303). Not as good as the first iteration, but if you can get one at retail and flip it, you'll still walk away with about S$50.
The difference? The first iteration of Kanye's sneakers were way more limited. The more recent releases, while still hard to get, are still way easier to get since adidas has released it with more regularity and in a variety of different colourways.
The point I'm getting at, is this.
The way that the sneaker reselling market works right now for a lot of sneakers is kinda like a "pass the hot potato" situation. Everybody is buying and flipping sneakers, and each time it changes hands, the reseller will put a premium on it to make it worth his or her while.
The problem with doing this is that over time, this might seem like an eventual "market correction" is in the offing.
I mean, at the end of the day, sneakers are part of fashion. And once people get bored with it, they'll move on to the next big thing, right? As an investor, you wouldn't want to be the last guy stuck with a stash of sneakers which have gone out of style and have depreciated almost overnight (aka what sneakerheads call, taking an L).
So, if you wish to invest in sneakers, you'll need to be in touch with the current AND upcoming trends in the sneaker world...
You need to know that the Yeezy Boost 350 V2's are good for flipping quickly to make a quick buck.
And that you'll actually want to be collecting the Yeezy Boost 350 Turtle Dove or the original game-worn Air Jordan 1 because these can be likened to 'walkable art' and will hold their value for a much longer time.
There's also the whole thing about keeping and maintaining sneakers, but that's a whole other story for another time. If you don't have a passion or love for sneakers (or the history behind it), you're probably better off looking at other types of assets.
Study the market, evaluate your risk tolerance, develop your conviction and test your hypothesis by implementing your strategy. If you gain, that's great! What can you do to improve? However, if you made a loss, then it's time to retrace your steps and evaluate them. What could have been done better?
Imo, sneaker isn’t good for long term but it’s good for short term gain. Flipping sneakers can be lucrative. I have a lot of friends who flip sneakers. During the shoe drop, they “queue” on shoe website and try to obtain them.
In fact, I have 2 friends who managed to buy the limited edition Nike ben&jerry shoe. They profited $1000+ each. ROI is over 1000%, it’s crazy.
But most of the time, the profit is around $50-$250 per shoe. (depends on rarity)
Commodities (sneakers) or works of art rarely translate into high performance. exception: if you had the opportunity to buy special sneakers of a limited edition, where others do not have easy access to, then short term gains could be possible. but how to know that the ones you buy are the top requested ones?