Friday, November 20, 2015

The Secret Sneaker Market — and Why it Matters

00:12  This is the Air Jordan 3 Black Cement. This might be the most important sneaker in history. First released in 1988, this is the shoe that started Nike marketing as we know it. This is the shoe that propelled the entire Air Jordan lineage, and perhaps saved Nike. The Air Jordan 3 Black Cement did for sneakers what the iPhone did for phones. It's been re-released four times. Every celebrity's been seen wearing it. There's a site about what to wear with the Black Cement. It's been right under your nose for decades and you never looked down. And right about now, most of you are probably thinking, "Sneakers?"

00:57  (Laughter)

00:59  Yes. Yes, sneakers. Some extraordinary things about sneakers and data and Nike and how they're all related, possibly, to the future of all online commerce.

01:14  In 2011, the last time the Jordan 3 Black Cement was released, at a retail of 160 dollars, it sold out globally in minutes. And that's because people were camped outside of sneaker stores for days before it went on sale. And just minutes after that, thousands of those pairs were on eBay for two and three times retail. In fact, there's over 1,000 pairs on eBay right now, four years later. But here's the thing:this happens every single Saturday. Every week there's another release or two or three, and every shoe has a story as rich and compelling as the Jordan 3 Black Cement.

01:53  This is Nike building the marketplace for sneakerheads -- people who collect sneakers -- and my daughter.

02:02  (Laughter)

02:04  That's an "I love Dad" T-shirt.

02:07  For the brands, sneakerheads are a very important demographic. These are the tastemakers; these are the Apple fanboys. Because who else is going to buy a pair of $8,000 Back to the Future sneakers?

02:19 ( Laughter)

02:21  Yeah, 8,000 dollars.

02:24  And while that's obviously the anomaly, the resell sneaker market is definitely not. Thirty years in the making, what started as an underground culture of a few people who like sneakers just a bit too much --

02:36  (Laughter)

02:39  Now we have sneaker addictions. In a market where in the past 12 months, there have been over nine million pairs of shoes resold in the United States alone, at a value of 1.2 billion dollars. And that's a conservative estimate -- I should know, I am a sneakerhead. This is my collection. In the pantheon of great collections, mine doesn't even register. I have about 250 pairs, but trust me, I am small-time.People have thousands.

03:09  I'm a very typical 37-year-old sneakerhead. I grew up playing basketball when Michael Jordan played, I always wanted Air Jordans, my mother would never buy me Air Jordans, as soon as I got some money I bought Air Jordans -- literally, we all have the exact same story. But here's where mine diverged. After starting three companies, I took a job as a strategy consultant, when I very quickly realized that I didn't know the first thing about data. But I learned, because I had to, and I liked it. So I thought, I wonder if I could get ahold of some sneaker data, just to play with for my own amusement. The goal was to develop a price guide, a real data-driven view of the market. And four years later, we're analyzing over 25 million transactions, providing real-time analytics on thousands of sneakers. Now sneakerheads check prices while camping out for releases. Others have used the data to validate insurance claims.And the top investment banks in the world now use resell data to analyze the retail footwear industry.And here's the best part: sneakerheads have sneaker portfolios.

04:17  (Laughter)

04:19  Sneakerheads can track the value of their collection over time, compare it to others, and have access to the same analytics you might for your online brokerage account. So sneakerhead Dan builds his collection and identifies which 352 are his. He can see it's worth 103,000 dollars -- frankly, a modest collection. At the asset level, he can see gain-loss by shoe. Here he's made over 600 dollars on one pair. I have one of those.

04:46  (Laughter)

04:49  So an unregulated 1.2 billion dollar industry that thrives as much on the street as it does online, and has spawned fundamental financial services for sneakers? At some point I asked myself what's really going on in the market, and two comparisons started to emerge. Are sneakers more like stocks or drugs?

by Josh Luber, TED |  Read more:
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