Sneaker Reselling Solutions

Xiaoyu Yang
Posted on Feb 16, 2018

Introduction

There used to be a long line waiting outside the Nike stores to buy sneakers not for themselves but to make money. People resold their sneakers on eBay and publicized their business on Twitter and Facebook. At the prime time of sneaker reselling, the market was worth one billion dollars per year. Back in the day, I took part in that market as a seller. After a while, I noticed that sneaker reselling business was declining. The resell price of sneakers on eBay was even lower than its original retail price, meaning you would lose money by reselling it. So I stopped buying sneakers with the intent of selling them.

Based on my personal observation, I decided to find out if my experience was a true representation of a change happening in the sneaker resell market. I designed my project to determine whether the sneaker reselling business was actually on a decline. First,  I gathered data and analyzed the changes in reselling price. I mainly concentrated on Air Jordan sneakers as they are the most popular sneakers to resell. Second, if the sneaker reselling business was declining, I want to find out the reasons. Third, I wanted to find out if  a sneaker reseller could still make a profit in the current market.

Overview

1. Was sneaker reselling business on a decline?

To determine whether the sneaker reselling business was declining, I looked at the numbers on StockX, a website for buying and reselling sneakers. I scraped all the resale transactions, including sneaker name, resell date, size, price from 2011 to the beginning of 2018 and created a graph. Before we look at the graph, it is important to understand the term “price premium.” Price premium is a calculation utilized to figure out whether there is a profit or loss when an item is resold. If price premium is positive, it means you will make a profit. If it is negative, it means you will lose money.

The graph shows that the price premium of Air Jordan sneakers was still profitable from 2011 to 2015. However, from 2015, the premium started to decrease, which confirmed that Air Jordan reselling business was in decline.

2. What caused the decline?

The next step is to figure out why the reselling business of Air Jordan declined. I plotted the number of styles of Air Jordan released each year. There was a significant increase of number of styles from 2015 to 2017. One important thing about those released styles is that most of them were not limited editions. When merchandise is not rare or limited, especially when it comes to sneakers, buyers usually will not pay good money for it.

Competition was another cause of the Air Jordan price premium decline. When Kanye West left Nike to join Adidas, he also brought his sneaker brand, Yeezy, with him. After Adidas released Yeezy in 2015, the premium of Air Jordan began to drop.

In the winter of 2015, Adidas released another style of sneakers, called NMD, which affected the price premium of Air Jordan. Interestingly, NMD's price premium also started to drop in 2016. When Adidas initially released them in 2015, NMD sneakers were limited editions. People needed to download an app and sign in to get a pair of NMD. However, starting from 2016, Adidas decided to stop limiting the number of NMD sneakers that people could buy. That decision had a major impact on sneaker resellers.

3. How can one continue to make profits in the current market?

Here's the question, how can one continue to make money in the current sneaker reselling market? Most importantly, don't put all your eggs in one basket. In addition to Air Jordan, sneaker resellers should consider stocking sneakers from other brands, such as Adidas.

It also comes down to style. Let's take Air Jordan for an example. There are a variety of styles of Air Jordan, such as Air Jordan one, Air Jordan two, so on and so forth. On the graph, we can see that Air Jordan one sold the most for the past seven years. However, it  did not make the most profit. When you look more closely at the data, the price premium of Air Jordan one was negative. Actually the more Air Jordan ones the resellers sold, the more money they lost. When I multiplied number of sales and their price premium of all the Air Jordan styles, it is clear to see that reselling Air Jordan eleven and twelve can make the most profit.

As it turns out, when it comes to sneakers, size does matter. I created a graph showing the price premium of different sizes. It seems that you could make money from selling sneakers at size 6 as its price premium is the highest. However, when you look at the number of sales, there were only about ten pairs of size 6 sold over the past seven years. When the price premium multiplied with number of sales, it turns out that size 10 and 11 are the most profitable sizes.

4. Conclusions

Numbers don't lie. Sneaker resellers can still make a profit and reduce their losses if they stick to limited editions, choose specific styles, and offer their right sizes.

About Author

Xiaoyu Yang

Xiaoyu Yang

Xiaoyu received his Ph.D. in Pharmaceutical Sciences from North Dakota State University. For his research, he designed and conducted a variety of experiments to improve current treatments for pancreatic cancer. He developed his interest in math and statistics...
View all posts by Xiaoyu Yang >

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