Shoes Business Market!

• March 6, 2015
• By iSayyaS
• Marketing
• 1

Shoes Business Market!

When Dior collaborated with the Jordan brand to market, among other items, Air Dior– a version of six-time NBA champion Michael Jordan’s first ever sneaker – the low-top product was priced at $2,000 with the high-top one marked at $2,200. There were only 8,000 made available on sale a couple of weeks ago for which about five million people registered their interest on the specific microsite.

However, when these sneakers entered the resale market, they went anywhere between $9,000 to $38,000 depending on the demand, according to StockX, which effectively acts as a sneaker stock market. It proved that those spending $2,000 or more to buy the product also had an eye on making a profit by selling them to those who were prepared to pay much more.

According to Cowen Equity Research, the resale market of shoes might be worth $6 billion in 2025, a claim made in early 2019. This effectively means that it’s not the $2,000+ price of the sneaker that both Jordan and Dior decide, but the resale value of the shoe, that dictates how the market reacts to it.

StockX provides a marketplace for sellers to sell sneakers at prices they choose. Buyers can either outrightly purchase a pair of sneakers or try to outbid other buyers, comparing prices as the app/website discloses price histories. The app makes its money by charging a flat 3 per cent payment processing fee on whatever orders they have and taking a 9.5 per cent cut on a sale made by new users – the latter figure keeps dropping if the new user keeps selling in the marketplace. StockX also withholds a buyer’s payment to the seller until the product is completely verified.

How is resale value determined?

When Jordan and Dior create a product that they market for $2,000 and then that product goes in the resale market at a 350 per cent profit margin, one has to question what a company like Jordan, that made $3.1 billion for Nike in 2019, is doing.

Turns out that the multibillion-dollar company knows exactly what it’s doing when it allows its customers to make a profit upwards of $7,000 in resales.

If one takes the example of the Air Dior – the Jordan and Dior collaboration, in its first ever commercial sale, only allowed 8,000 pieces of the sneakers on sale. On the one hand, it increased the desirability of an already desirable product and secondly, allowed those 8,000 buyers to make a heavy profit in a lottery of anywhere up to five million people.