Investing in Sneakers: A Beginner’s Guide
Investing in sneakers (“trainers” for our British readers) has become big business. This area of collecting is a new field but one that has rapidly gained in both popularity and value. Ranging from skateboarding to basketball, films to music, sneaker collecting provides a variety of sub-categories and approaches. It is a far more interesting investment than “one size fits all.”
Investing in sneakers allows you to own a piece of the action in this well-heeled field. Although sports stars, musicians and influencers have encouraged consumer interest, the increased interest from investors or resellers has been spurred by the provision of reliable price data and authentication services .
At this point, it should be noted that investing is different to buying for your own love for shoes, whether you intend to collect or resell. Condition is all-important and many reselling sites only accept unworn sneakers.
As such, all rare trainers are probably best left at home, should you wish to own them primarily as an investment, not merely a fashion statement! This way, you can potentially capitalise on the increase in prices as limited-edition pieces sell out in the retail market.
“Before you criticise someone, walk a mile in their shoes….” Anon.
The modern sneaker was born out of a combination of the needs of sport and the development of modern industry. Elizabeth Semmelhack details how sneakers have their origin in the increase in leisure time, particularly through the requirements of tennis and basketball, and the discovery of rubber. It was the latter which provided their nickname:
‘The origin of the word sneaker lay in the fact that rubber soles let one pad around noiselessly – a quality enjoyed by pranksters and criminals alike.’
This subversive quality, alongside their utility for athletes, ensure their wide appeal across the social spectrum. Sneakers can provide a cultural statement as well as being a fashion accessory. These factors provided the conditions for a surge in popular (and financial) interest…
To understand sneaker investing, it is important to understand how sneakers have become central to contemporary fashion. Remember the futuristic trainers with self-tying laces worn by Marty McFly in Back to the Future 2 (1989)?
The film props were created by Nike’s legendary Tinker Hatfield in 1987, a designer famed for his role in creating the modern sneaker, then recreated by the company in 2011 and 2016 editions.
Both editions fetch high prices but the extremely limited production of the 2016 edition (only 89 were made to commemorate the date of the film) has ensured prices approaching $20,000 per pair. As the original audience of the Back to the Future trilogy matures and becomes wealthier, the market for vintage collectibles associated with the films increases significantly.
Sneakers have become a hobby for the well-heeled… The Design Museum, London, held an exhibition in 2021 dedicated to this pioneering collecting category: Sneakers Unboxed: Studio to Street.
The sneaker has walked a long way from being seen as purely sporting goods; attention from curators, the museum-going public and high-end fashion reveal that the sneaker has “arrived” as a design icon. Prices have risen alongside this growing interest to make sneakers one of the hottest alternative investments available today.
It is the collaborative relationship between designers such as Hatfield and sports stars that has defined the sneaker as a style icon. The most famous collaboration and most long-lasting collaboration was with basketball legend, Michael Jordan.
Jordan and Nike had been working together since 1985 but it was Hatfield’s design for the Air Jordan 3 (1988) which helped ensure sneakers (and Nike) a place in history.
Such successes moved sneakers from utilitarian sportswear to must-have fashion, led by the Air Jordan brand. Today, this trend is reinforced by the role played by social media (including Instagram) and influencers in encouraging ownership of rare and exclusive footwear.
Investing in your sole mates can be both fun and profitable! It is important to decide upon a strategy for investing in sneakers from the outset:
What is your budget? Decide and stick to it!
Do you wish to form your own collection to enjoy (or to show off to your friends!) or if you just wish for a financial return by holding for resale?
Define the scope of your collection; for example: new or vintage or a particular sport/style?
Will your collection will be limited to a particular brand or designer?
Once you have answers to these questions (and having done some swatting-up on the subject), you are ready to go into more detail…
The most readily available option for investing in sneakers is to directly purchase new products as they are released. Retail conventions, such as Sneakercon, or the manufacturers’ own retail stores can provide access to the releases of limited-edition sneakers.
The release of some editions in “stashes” (for example, accessible through Nike’s SNKRS Stash app) mean that contacts and an understanding of the market are essential. Competition will be fierce!
Resale provides a broad field to invest in sneakers and this market is estimated by the Financial Times to be worth over $2bn (Film: Donell Newkirk, ‘How sneaker fans are cashing in on the $2bn resale market for limited edition trainers’ (The Financial Times, 2019)).
One of the largest specialist marketplaces is StockX, which provides an exchange for collectibles and includes authentication. Sneakers comprise just one asset class on this platform, which has seen merchandise with a gross value of $3.8bn traded over the lifetime of the company.
Interestingly, StockX sponsored the Design Museum’s 2021 exhibition Sneakers Unboxed, demonstrating overlap between commercial support and curatorial attention in the circles of high culture.
Even major mainstays of the fine art world, such as Sotheby’s, have sought to involve themselves in this rapidly-expanding market (both at auction and through fixed-price private treaty sales).
Items with impeccable provenance and connections to famous names tend to be the preserve of these high-end auctions. On 17th May 2020, a pair of 1985 sample Air Jordan 1s worn on court by basketball legend Michael Jordan fetched $560,000 at auction at Sotheby’s, the world record price for a pair of sneakers.
Exchanges tend to specialise in unworn examples no longer available to retail. However, there is also the potential to collect vintage trainers which were icons of style in past decades. This is an enormous subject and gaining specialist knowledge in your chosen collecting niche is crucial.
In contrast to StockX, GOAT also allows the sale of worn and vintage trainers, providing a secure hub for the novice collector. Once you have more familiarity with the subject, it is possible to trawl car boot sales (“tag sales” for the USA) and salerooms for overlooked historical rarities (which will require dedication and patience!).
To spread your risk, fractional investing is a further option. Platforms such as Otis and Rally allow collectors to buy shares in a particular pair of sneakers. This method will be discussed further below.
Oh, before we forget, do not ever throw away the box and other paraphernalia! These can have a sizeable effect upon the value you can potentially realise from your investment.
For a broad exposure to the new sneaker market, purchasing shares in sportswear manufacturers is an option. This avoids the need to choose a particular pair of sneakers to buy or the need to store your collection at home. Companies such as Nike, Adidas and Puma are amongst the sporting goods and apparel companies which have outperformed the S&P 500 average over the five years until 2022.
Research published in 2018 by Grand View research estimated that the ‘global athletic footwear market’ would surge from $95bn in 2019 to $120bn in 2026. Many luxury goods companies and high-end fashion houses have also entered the market. Louis Vuitton and Kering, whose subsidiaries include Gucci and Balanciaga, are notable examples of this trend. The sneaker has become acceptable in haute-couture.
Magical shoes are an element of many myths and legends, from Mercury’s winged sandals to “seven-league” boots. However, investing in sneakers may not necessarily be a miracle investment for everyone. This category differs from investments in the stock market in a number of ways, with benefits and drawbacks:
Physical Asset – They are a physical asset you get to hold and enjoy. It is far from being simply a number on a page…
Personal interest – It is possible to select sneakers in a style or sport which is of personal interest to you. Being passionate about a subject will help you become knowledgeable about it.
Profitability – There is the potential to make significant returns upon your initial investment. The rapid increases in the value of the resale market suggest that this trend has a way to go.
The early bird catches the worm – This is a new collecting area. Although it is too late to get in at the ground floor, there appears to be plenty of room for growth in the sneaker investment world.
Fashion – Your investment is dependent upon the whims of fashion. The footwear choices of influencers, musicians and sports-stars wield huge and unpredictable influence.
Unwearable – If buying trainers for fashion first-and-foremost, you can wear your sneakers around town but this is an absolute no-no for investment.
Illiquid – When seeking to sell any item, there is the need to find a buyer to take them off your hands at a mutually acceptable price. This may take time for sneakers.
No Income – There is no regular dividend and the theoretical increase in value is only a reality once the sneakers are sold.
Storage – Proper handling and storage are key requirements for most valuable assets. Do you have space at home to store your collection appropriately, let alone display them properly?!
To turn a profit, perhaps? Making money is probably somewhere in your thoughts, or you probably wouldn’t be reading this page. However, before starting out with your first purchase, it is essential to define your aims and ambitions before buying your kicks:
Sneakers have the potential to be an enjoyable investment category as well as a profitable one.
As with any specialist subject, a detailed knowledge of the commodity and the market are useful. If you wish to make money, it often pays to swat up on the technical terms.
Is your aim to resell in the near term or to hold for the longer term? These decisions will have a bearing upon both your purchases and your storage/display decisions.
Last but not least, the potential to turn an honest profit is surely tempting?
“Ever since stepping upon gum on the sidewalk, I haven’t stopped my sole-searching…” Anon.
It look like sneakers are here to stay. Museums, high-end fashion brands and exclusive auction houses have all sought to be involved in this booming market. For instance, a partnership between Nike and Louis Vuitton saw Sotheby’s auction 200 pairs of Nike Air Force 1 sneakers designed by Virgil Abloh on 9th February 2022.
Each pair, housed in a Louis Vuitton leather pilot case, surged beyond the original estimate of $10-15,000. Lot 1, the sole (no pun intended) size 5 pair in the sale, sold for an exceptional $352,800. Apparently, size does matter… as the most scarce shoe-size in this sale commanded the highest price!
The numbers are huge! I hear you ask – “There must be a way to spend less?” There are and one way is through fractional investing. Rares is a regulated service, offers fractional ownership, claims that they have outperformed stock market. At the discretion of the platform, the investment is then sold with the proceeds divided by share holding. Otis and Rally are other platforms offering a similar service.
A second alternative to start small is through choosing lesser-known brands or models that have not seen a significant surge of interest in recent years. Craft manufactures like Duke + Dexter or overlooked and out-of-fashion lines from more famous names might provide an avenue.
For a smaller beginning, a thorough knowledge of any collecting category and the time to search through sales and stores will help you to spot a bargain. Can you tell the difference between a rare special-edition and a mass-production model? Keep your eyes peeled as, once you know what to look for, trift stores (“charity shops” for our UK readers) sales and online auctions may provide a viable hunting-ground.
Fakes are a serious risk even for an experienced collector. The authentication services of reputable exchanges, such as Stadium Goods, or dealers provide a reassurance that the product is indeed genuine.
“Fashions comes and goes, style goes on forever,” is the famous phrase. Changing fashions occur even within longer-established collecting categories and sneakers will be no exception. Do your sneakers have the style to last?
It is estimated that 20 billion pairs of shoes are manufactured each year, approximately three for every person on the planet. Most will be made with synthetic fibres and petrochemical plastics. ESG investing it is not!The US Department of the Interior estimates that 300 million pairs of shoes are discarded every year in the United States alone.
For some firms, such as Nothing New, recycled materials are the way forward, while Baabuk approaches the problem by using natural materials. However, the huge wastage of the broader industry may count against the viability of the sneaker in future.
In our image-obsessed world, the fashion choices of the fashionable faces can bring unexpected interest and demand into the products they buy, wear or endorse.
Sneakers were not often made to last. Synthetic materials, including foam, glue and rubber, can deteriorate over time. This will not be a concern to those who decide to swiftly resell the trainers they buy but for those collectors holding on for the long-term, minimising deterioration should be a serious consideration.
The performance of new materials, such as flyleather (ground off-cuts of leather combined with a binder), over the course of time is currently unknown.
Recent geopolitical risks around Russia emphasise that luxury goods require luxurious times. The invasion of Ukraine by the Russian Federation in 2022 has led to a sharp sell-off in fashion companies. Will the prices of rare sneakers will hold in the longer term?
The footwear choices of musicians, sports stars and celebrities influence the popularity of the brands they wear. However, there are also many well-known figures who have a serious passion for collecting sneakers:
Patrick Mahomes, the famous Kansas Chiefs quarterback, is one of the most valuable sports stars of all time.
DJ Khaled is an influential American DJ and record producer.
Mark Wahlberg is a noted Holywood actor whose credits include Martin Scorcese’s detective thriller, The Departed (2006).
Some museums also collect sneakers, lending weight to this new collecting category. London’s V & A holds a notable and comprehensive collection of shoes from across the centuries (and the globe), including many rare trainers.
As exemplified in their policy of Rapid Response Collecting, the museum seeks to collect items ‘in response to major moments in recent history.’ Sneakers appear here to stay in our contemporary world.
However, it is the Bata Shoe Museum (Toronto, Canada) that has perhaps been the most instrumental institution in encouraging a wider interest in sneakers (beyond the sneakerheads themselves). The museum organised the exhibition Out of the Box: The Rise of Sneaker Culture, bringing sneakers to a wide variety of people during a lengthy tour of North America.
The best in quality, rarity or condition. The finest examples hold their value over time and often command the steepest price increases.
Learning about what to look for, different designs, what has potential for a generous return. Reseller Sneaker Invest has produced several publications geared towards the resale market.
There is no point in having a pair of hugely-valuable sneakers starring at you from their glass case if you think they’re hugely-ugly!
Of course, some rare and innovative trainers are expensive. However, some designs have been over-looked by the wider public. Also, choosing smaller, high-quality manufacturers avoids competing with the big money for famous designs. This is a riskier strategy because…
Ultimately, brand visibility has an enormous role in the sneaker market. The large players in this market will probably be the same names which retain prestige (and value) into the future. The resources available to large companies for advertising and promotion assist their visibility and widespread popularity.
The specialist terminology used in the worlds of sneaker design, manufacturing and reselling are industry specific. A few key terms for sneaker anatomy:
Colorway – the particular colour combinations which differentiate different styles within a particular model.
Insole – the soft layer directly under your foot when wearing a shoe.
Midsole – the padded portion of the sneaker under the soft insole which cushions your foot from the hard outsole.
Outsole – the hard-wearing underside of the shoe, where “the rubber meets the road.”
Upper – wrapping over the foot, this part is usually made of fabric or leather (synthetic or natural) and keeps the foot in place.
A few key terms for sneaker investing:
B-Grade – sneakers with manufacturing flaws, potentially allowing for a bargain!
Js – An abbreviation for the ‘Air Jordan’ range by Nike. These are the trainers which made sneakers cool.
NOS – ‘New Old Stock’ for the discoveries of unworn and unsold boxed sneakers at the back of stockrooms.
OBO – ‘Or best offer’ is an abbreviation used by resellers to indicate that a lower offer than list price would be considered.
Sample – a prototype for promotion or trials not subsequently put into production.
GR – ‘General Release’ is the lowest grade of new sneaker, mass-produced for the mass-market.
Sneakers are a hot area of design, collecting and investing. Whether or not this category of investment will continue running this fast remains to be seen. Sustainability within the mass-market players in the industry will be one factor which may have a significant role to play in shaping the future of this lucrative global industry.
Sneaker production is dominated by a few major corporations. However, the wider popularity of sneakers has encouraged new players to enter the market. High-end craftsmanship and design has returned to a field long dominated by mass production. As a result, limited editions and artist collaborations provide new and exciting avenues for collectors.
Firstly, define your parameters then do your research before committing your hard-earned cash!
Nike “Air Jordans” and Adidas “Yezzys” (a collaboration with Kanye West) are two of the most famous ranges today. However, past performance is not a guarantee for future returns.
Selling directly on reselling websites is the most popular way of selling investment sneakers at the moment. However, a profit cannot be guaranteed…
It is a possibility. Fashions come and go, but the focus on athleisure today means they are likely to stay popular for some time.
By finding what it last sold for. having said that, there is no clear price and you may find the exact same sneaker has sold at difference prices on two different websites at virtually the same time!