What is Sneaker Reselling?
A few weeks ago I’d gone to my wife’s aunt and uncle’s place for dinner. While we were there, the aunt’s newphew came over to hang out - he’s only 17 years, trying to get into competitive cricket and is very talkative. And he had a successful sneaker reselling business.
Just to set the scene - there were 10 people in that out of which 7 people were in their 60’s, there was one grandmother who was probably around 85, there were the two of us in our early 30’s and then this one 17 year old kid.
This guy was so talkative that he made the entire room talk about sneaker reselling for 30-40 minutes. Including the 7 60 year olds and the grandmother who was discussing it in gujurati. That’s the impact of charisma I guess.
Anyway, what he told us was simple. He has connections on the seller side with Nike Stores (I’m not going to mention which ones because I don’t want anyone to get into trouble) and these Nike stores give him a heads up every time there’s going to be a drop and they either allow him to come in before and just buy out the entire stock at MSRP OR he gets some people with him to wait in line and then they buy out as much as they can. Obviously, as a 17 year old, he’s front-ending all the money through his parents.
But then, once he has them in stock, he just starts messaging all the people whom he knows and asks if they want it. I guess through WhatsApp groups? I can’t remember the details of this part. Anyway, if someone is interested - then he’ll sell it to them for 2x how much he paid.
My theory on why the Nike stores are letting him come in early and buy the stock - to create hype and keep that sense of limited edition around the products. I feel like the currency of this entire market is just this one word - HYPE. This reminds me of that episode we did with John Mullins, one of the models of creating a customer funded business was these kind of limited drops.
This entire business model of HYPE i feel was started by SUPREME.
https://medium.com/predict/https-medium-com-strategy-insider-the-supreme-theory-of-hype-branding-af3f9acd7fe
Supreme, in my opinion, has mastered the art of limited supply. Supreme has always maintained a small inventory, and never released a ton of pieces. You won’t find it in large retail stores. As a result, it’s maintained a sense of authenticity, increasing desirability and demand.
Now, if you were any luxury brand at this point - you would’ve capitalised by charging more and making more money. Simple demand and supply economics - my demand is outstripping my supply so I’m going to increase prices.
But here’s the strategy that differentiates Supreme from other brands. Instead of charging a premium price for their highly desirable products, they kept them relatively cheap and affordable. But Supreme was able to convert that foregone revenue into significant hype that led to more brand equity.
Supreme could have easily generated a large revenue by increasing either its inventory or prices, instead it smartly opted for the ‘exclusivity approach’, and this has worked amazingly for Supreme. With its product’s pricing as high as 1200% more than the retail price on the secondary resell market, Supreme has achieved the brand momentum and hype that any other street wear brand could ever dream of.
And one of the things that Supreme does really well is that they send secret emails to a list of selected customers. They also did collaborations really well to build hype - like a Collab with Louis Vuitton in 2017.
In 2021, Supreme was expected to do $600 million in revenue.
Now you’ll notice that all the Sneaker brands are doing the exact same thing: