Glynn Davis is one of the UK’s most knowledgeable and experienced retail journalists, founder of Retail Insider, and Ecommerce Age’s monthly columnists.
EBay was the pioneering online marketplace that was then joined by Amazon and in the years that followed we’ve had the likes of Etsy, Farfetch and Depop appear on the scene. But it is only in the past year or so that there has been an explosion in the model with operators including Next, Matalan and Marks & Spencer in the UK adding marketplaces to their businesses through which they are able to sell third-party brands and earn a commission on the transactions.
Amid this growing activity one category above all others has arguably undergone a transformation from the marketplace model – sneakers, or what we would have called training shoes in the UK. The key marketplaces through which the bulk of sneaker transactions takes place are StockX, Stadium Goods and Goat. They have worked on ensuring they are trusted platforms by centralising supply and providing in-house authentication of the sneakers sold on their sites.
It was StockX that set things alight when it launched in 2016 and effectively pitched itself as the stock market for buying and selling sneakers. It not only provided a system that weeded out counterfeits but also supplied price histories of all the specific shoe types sold on the site. This was very useful because although it is a resale site these are not used, second-hand, vintage (or whatever else you choose to call them) goods but pristine, fully boxed items.
These platforms have enabled what had been a small group of sneakerheads to flourish and grow exponentially into a worldwide movement. Many of these people have no intention of ever wearing the footwear but instead simply trade the sneakers for profits that are then used to fuel further purchases.
The increase in levels of activity on the marketplaces has driven sneakers into the territory of becoming a bona fide asset class alongside the likes of property, shares, wine and art. To push this concept even further StockX is considering enabling the owners of goods to have the option of keeping them stored within its warehouses thereby enabling multiple trades to take place without the inconvenience and costs associated with actually shipping the items. This mirrors the system used by the wine and art worlds where the items sit in secure warehouses waiting for delivery to an owner at some point or more likely just switches in ownership.
What has helped fuel the growth in sneaker trading is the phenomenon of limited edition releases or ‘drops’ as the likes of Nike, Adidas, Supreme, Off-White and Palace like to call their small runs of highly coveted products they release onto the market with great regularity. These products then frequently find themselves immediately back on the market and looking for buyers through StockX and its competitors – often at incredibly inflated prices for the rarest of sneakers.
This activity has been helped greatly by the moves of major brand owners like Nike and Adidas to shift their businesses to the direct-to-consumer (DTC) model whereby they limit supplies to third-party retailers like Sports Direct in the UK and instead focus on selling through their own physical stores and websites. Not only has this been great for their margins but they have also been able to fully control product ‘drops’ for maximum impact and benefit to their brands.
For Nike this strategy – dubbed ‘Consumer Direct Offense’ – is proving transformative, with sales at its DTC channel Nike Direct up 73% during the fourth quarter and its gross margins up 850 basis points to a very healthy 46%. Adidas is also travelling down the same road with its ‘Own the Game’ strategy that involves pushing direct sales up from the 33% level pre-pandemic to around 50% by 2025.
It’s clear that the sneaker market is enjoying outsized gains from the marketplace model and that the major brand owners in this category are among the most progressive with their adoption of the DTC model and limited edition releases. Retailers and brand owners in all categories should take note as there are plenty of lessons to be learnt from this exciting part of the market.