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Athletic shoes and the billion-dollar resell market

When Juan Osorio was in the fifth grade in Jacksonville, he fell in love with a sneaker, the Nike Air Jordan 3 — in “fire red” — and persuaded his parents to get him a pair to wear to school. They cost $140. “I remember seeing celebrities and athletes wearing the shoes, and I wanted a pair just like them,” he says.

Since then, he’s been crazy about sneakers. “I wasn’t super into clothes. I was solely focused on shoes,” he says. “I could be wearing sweats, but I needed to have a different pair of shoes on every day.”

In middle school, Osorio began reselling sneakers to classmates, hoping to make enough money to feed his shoe habit. He’d camp out in front of stores to buy the latest models of in-demand sneakers and even paid friends to come with him and help him circumvent the one-pair-per-customer rule.

By the time he got to high school, Osorio’s passion had become an avocation. He persuaded employees at stores to reserve sneakers for him on release days. He’d keep some for himself and resell the rest. He accumulated enough stock that a guest bedroom at his home became a sneaker closet. At 16, he used his earnings to put down $12,000 toward a new Dodge Challenger.

“If I could buy something and sell it for more, why not do it?” he says. “I’ve always been about making money.”

The secondary market for sneakers has been growing since Nike came out with the Air Jordan 1 in 1985. When sneaker companies release a new, exclusive model — typically branded with the name of a hot artist or athlete — they intentionally limit the supply as part of the marketing hype, hoping to drive up demand and prices. Scarcity also lets companies manage risk, since shoes don’t always go up in price. In 2016, Nike launched a futuristic, self-lacing basketball shoe called the HyperAdapt as a limited run for $720. Although Nike did not disclose production or sales numbers, the shoe appears to have been a dud, based on the fact it resells for less than the original price.

The companies’ marketing strategy has contributed to the growth of the secondary market — comprising thousands of sneaker resellers like Osorio — that experts estimate is now worth more than $1 billion.

Osorio, 23, figures he has sold more than $300,000 in sneakers and pocketed $100,000 in profit over the past decade. He considers it an easy way to make money while he studies for a bachelor’s degree in finance at the University of North Florida. He relies on a national network of personal connections and computer savvy to find and buy sneakers and then resells through a variety of channels, including websites and local consignment shops.

“I buy in bulk. There are releases where I’m picking up 150 to 200 pairs from numerous stores and online,” he says.

Much of the sneaker business — both new and resale — is conducted via the internet. Today, most new sneakers are launched and sold online, in limited quantities that sell out quickly. Resellers like Osorio use sneaker-buying bots to snap up pairs the second they go on sale. The bots, which cost up to several hundred dollars, enable buyers to speed through the online checkout process by automatically selecting items and entering pre-loaded billing and shipping information.

Sites such as StockX offer a way to make money from the resale market. A pair of vintage-looking Off-White Air Jordan 1 Retro high-tops in black and red, which initially sold for $190 in 2017, now costs more than $2,000 on StockX.

The secondary sneaker market also includes a number of traveling expos with names like Sneaker Con and Sole Fest, which make money from admission fees (typically $20 to $25), vendor fees and corporate sponsorships. On a recent Sunday, more than 2,000 people packed an exhibit hall at the DoubleTree hotel near Miami International Airport for something called the Sneaker Games. Like a gun or coin show, the event was both social gathering and swap meet.

Attendees, many of whom appeared to be in their teens, browsed vendor booths stacked with Air Jordans and Yeezy Boosts (Kanye West’s sneaker line for Adidas) as a DJ played hip-hop music at full volume. Some attendees, carrying boxed and unboxed sneakers, shuffled about trying to make a sale or trade. There also were video game stations, free sneaker authentication services and tutorials by shoe care company Crep Protect on how to clean vintage shoes. 

Among the vendors was Mitch Drake, co-owner of Genetic Soles, a sneaker consignment store in Jacksonville. He brought collectible sneakers to generate interest in his store. “When people see I have rare stuff like this, they’ll add me on Instagram and Facebook, which might lead to a sale,” he says, sporting a $1,000 Swiss Tavannes watch. In a glass display case: Three pairs of rare, limited edition Nikes created in collaboration with music producer DJ Khaled. Drake had snagged the collectibles for between $10,000 and $12,000 each from a sneaker connection on Instagram.

Meanwhile, Drake also stocked up on $5,000 in sneakers, T-shirts and other merchandise to take back to Jacksonville. “We usually try to be at a different show every month,” he says. Since opening in early 2018, the store has increased the value of its inventory from $15,000 to $100,000, he says.

Drake worked for eight years as a cook at a Chili’s restaurant in Jacksonville before he turned his passion for sneaker culture into a career. “For the longest time, I was wondering how I was ever going to get out of” the restaurant business, Drake says. “It took me two years, but I built my inventory up to about 150 pairs. My business partner also had about 150 pairs. We combined our pairs and started taking in consignment to fill up the store.”

Osorio now is one of Drake’s top consigners. Drake takes a 10% cut of each pair of Osorio’s the store sells. Osorio also sells through the sneaker market app StockX, which charges 8%.

While Osorio could sell directly to buyers and cut out the middleman, he’d have to spend more time developing an audience and market on social media, he says. “I’d end up spending hours and hours of my day doing absolutely nothing but replying to people,” he says. “I don’t do person-to-person transactions anymore — I just don’t waste my time.”

His interest in sneakers hasn’t waned, however — he currently owns about 100 pairs for personal wear. His favorite: A pair of Nike Air Jordan 4s. “It’s just a classic shoe,” he says. The most he’s ever sold a sneaker for? $4,000, for Kanye West’s Louis Vuitton “Jasper,” which originally cost $1,140.

Osorio says he’s now thinking about changing his major from finance to computer science. His next business idea: Selling his own bot service to sneakerheads.

Sneaker Event Biz

More than 2,000 people attended a Sneaker Games event in Miami in March. The company was founded by Erick Palma, who quit his marketing job at video-game company EA Tiburon in Maitland to launch the business in 2014. Palma says his next scheduled show will be in New York this summer.

“We’re still in building mode,” he says, noting that the business has yet to break even. “We have over 350,000 followers on social media. Our brand is out there, especially in the YouTube world.”

For the coming show in New York, Palma expects to charge an entry fee of $25. His biggest expense will be the venue rental. If 5,000 people show up, he says, and costs are kept to half of the revenue from that, he stands to make $62,500 in profit. “We’ll bring in big influencers and YouTubers and give people more reason to come out,” he says.

What Makes a Sneaker Valuable

As with any product, the sneaker resale market turns on supply and demand — the fewer pairs of a popular model that are available, the more money they’re worth. Several other factors also can make or break a deal.

  • The color scheme (colorway)
    Sneakerhead culture began in 1985 with the original Nike Air Jordan 1, which came in a Chicago Bulls-inspired black and red colorway called Bred. In addition to Bred, fan favorites include Shattered Backboard, a black-and-orange colorway scheme inspired by the uniform Michael Jordan wore when he broke a backboard while dunking in an exhibition game in Italy.
  • The collaborator
    One way to build hype around a new sneaker line or model is to harness the power of celebrity. Adidas has Kanye West and Pharrell Williams, while Nike has rapper Travis Scott, who unexpectedly released a new pair of shoes on the company’s SNKRS website during the Grammy Awards in February. The shoes sold out within seconds.
  • Cleanliness
    Those who resell sneakers resist the urge to wear them. Brand new, never-worn shoes are worth more than shoes with flaws or signs of wear.
  • Size
    When it comes to the secondary sneaker market, resellers try to acquire sizes that will fit the largest number of people. The most common shoe size for men in the U.S. is 10½, while a typical size for teenage boys runs between 7 and 9.

 

Read more in our May issue.

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