Last month we learned Nike accuses StockX of knowingly selling fake Jordans. Beginning earlier this year, the now-amended lawsuit has been filed, with Nike suing the market for the release of an NFT series of Nike shoes, alleging that the “stock market of things” is using the company’s trademark without permission or approval.
As the lawsuit progresses, conspiracy theorists in the sneaker world have engaged in wacky reasoning as to why the sneaker brand ultimately took up litigation with the resale market. One is that Nike is quietly building the foundation for its own internal aftermarket platform.
While I’m not aware that any of these hypotheses qualify as the “real” reason for the lawsuit, the concept of a Nike-owned resale marketplace specifically for Nike products is extremely intriguing. Not only is it highly beneficial to the brand and consumers, but it has the potential to significantly disrupt the secondary sneaker market.
Sneaker brands can exist without resale markets – and have been for over 50 years. However, it’s safe to say that the explosion of the sneaker industry over the past six to seven years would have been much less robust without Flight Club, Stadium Goods, GOAT and StockX. Yet these markets cannot exist without sneaker brands, and sneaker brands are still able to easily impact their business in two ways: flooding the market with products, then driving down demand for footwear, or establish their own secondary market.
Nike has almost all the necessary elements in place to launch its own aftermarket that could bring great benefits both to the brand itself and to consumers, from the warehouses to the team that would build this technology.
In May 2019, Nike branded itself as a technology company with the development of Nike Fit, a scanning solution to find the best fit of Nike app users’ shoes. The product was developed by Intervex, a Tel Aviv-based startup. Nike then purchased the company and expanded its digital talent, providing highly specialized staff to add market to the digital product line, from workout apps to SNKRS and the Nike app.
A Nike-owned resale marketplace could be an extension of the Nike app as a place to buy and sell second-hand or unused, resold Nike sneakers and apparel. Functionally, it would be more like GOAT or eBay than Stadium Goods or StockX, which only allow unworn sneakers.
How it could benefit Nike
Establishing this secondary market benefits the brand itself in multiple ways, the biggest being in data. “They already know that to some degree, but they would get more data on what actually makes a hype sneaker,” Gerald Flores, former Sole Collector editor and senior creative strategist at Bleacher Report, told me. “That’s what makes the sneaker valuable, what drives resale. Is it just numbers and there are only 75 pairs or is it because it’s made by this specific designer or athlete or is it on this silhouette?”
With the majority of profits from products being made during the initial sale, this data could help them better understand how much to produce or re-release and refine trending products for optimal initial sales, as well as backtrack on products that sit still.
As an example, if we look at early Yeezy releases, the Kanye West and Adidas collaboration sold quickly and sometimes for over $1,000 on the resale market. In 2017, West and Adidas decided to release larger series of shoes, allowing more people to buy them at retail and lowering resale demand. Although new versions still sometimes sell out, the resale value is significantly lower and sits just above the retail price.
As the owner of the market, Nike would have solid data to do so across multiple silhouettes and have a foothold in the resale market without completely killing demand for their sneakers by saturating the market.
With Nike having a reputation for telling premium stories in sneakers, this could easily be turned into brand avenues around sustainability, wrapping Nike Refurbished and Nike Grind into a more hype-driven and nearly empty space. of mission. Plus, it could offer places to tie Nike’s historical storytelling to viral moments that drive the hype and resale that resale platforms don’t.
They are completely missing out on a multi-billion dollar industry that might not be viable without them.
As StockX told TechCrunch in its EC-1 (TechCrunch+ subscription required), it’s not often an actual event or pop culture moment that moves the needle in the market, there are a few times, Nike products in particular have seen a huge increase in traffic and transactions on the platform. The broadcast of Michael Jordan’s documentary “The Last Dance“, Meena Harris’ husband wearing Dior Jordan 1s at Joe Biden’s presidential inauguration and Kobe Bryant‘s untimely and unexpected passing have all caused significant volatility in the market.
Jordan sales were up 40% and StockX saw increases in all OG Jordans after the document was released. Dior Jordans saw a 200% increase in auctions on the platform, and Kobe Bryant sneakers that cost around $750 on the resale market were listed at $12,000.
I’m sure there are no consumers crying that Nike misses out on those organic increases in revenue or storytelling opportunities that StockX reaps the benefits of; however, smart and successful companies will only let others enjoy it with little benefit to themselves for so long.
Much like Instagram trying to switch to an in-app shopping or Twitter looking for ways to monetize beyond ads, Nike may indirectly benefit from the hype built around its products on these resale platforms, but they miss the mark entirely. a multi-billion dollar industry that may not be sustainable without them.
Leveraging the data could allow them to generate more revenue during the initial release and reduce the demand for resale shoes. Nor does Nike need to profit from resale transaction fees as much as the resale marketplaces themselves. Nike could potentially have lower transaction fees than all other marketplaces.
What this means for consumers
Flores can see some initial potential backlash from the sneaker community if Nike were to announce its own exclusive resale market: they might wonder if Nike will simply mark trending items as sold out and list them on a website themselves. resale platform, he says. Or it could discourage consumers whose brand would continually benefit throughout the shoe’s life cycle.
“I think they’re gonna get mad for a second and then they’ll get over it, and they’re still gonna try to get something on SNKRS next weekend,” he says. Despite the utterly unsavory experience of procuring high-temperature products through Nike’s SNKRS app, users keep coming back again and again, release after release.
Without Nike needing to approach this market primarily for financial gain as much as to better control and understand their place in the market, consumers will also benefit. Total resale prices could drop in a brand-owned marketplace for buyers due to lower reseller fees.
With Nike’s existing warehouse network, shipping costs could also be reduced from other resale platforms. Even resellers would earn more on every transaction made on a Nike marketplace if the brand opted for a lower percentage than StockX, Stadium Goods or GOAT or opted for a flat fee for every transaction, regardless of resale value.
Who would you trust more to sell you authentic sneakers for resale – a platform that needs to find out or the brand that released the shoe?
But the biggest benefit for buyers and resellers in a Nike-owned marketplace would be authentication. “You would know it’s 100% authentic and you’re not getting a counterfeit pair of shoes,” Flores said.
While StockX told TechCrunch it has a 99.5% success rate for its authentication, that 0.5% still creates questions or mistrust from the community. They had to develop a checklist of over 100 points for their authenticators that constantly evolves for each brand and each silhouette, and other reselling platforms must each meet this challenge without the help or partnership of the brands.
StockX CEO Scott Cutler spoke to Squawk Box CNBC earlier this month to disparage Nike’s manufacturing and reinforce his team’s authentication practices. “Last year alone, we rejected 41,000 items that were Nike products with a manufacturing defect,” he said. “So we not only look for counterfeit products, but products that meet our higher authentication standards.”
Who would you trust the most to sell you authentic sneakers for resale? A platform that has to find out or the brand that released the shoe? The lawsuit coming to fruition adds further legitimacy to buyers’ and sellers’ fears that the platform is selling counterfeits.
How’s it going to disrupt space
“I think it will be a blow to other resale markets that are out there,” Flores said. “First, they eliminate the broker in the middle and the authentication makes them more reliable than buying on a StockX or any other market anytime.”
In addition to building the confidence of existing Nike buyers, it may also attract Nike consumers unfamiliar with the resale world due to their reach through other Nike digital spaces.
“Nine out of 10 times I buy directly from the Nike app. I use the Nike running app, I obviously use SNKRS and I use the Nike Training app,” Flores said. ‘there is a benefit to the consumer in that everything is in the same ecosystem.’
Whether or not Nike wants to establish itself as the only place to resell Nike gear, there’s no denying that platforms like GOAT, StockX, and eBay stand to lose a lot of business.
Every year, StockX releases a snapshot of the previous year in numbers. In 2021, four of the top five sneaker silhouettes sold on the platform were Nike and Jordan Brand. The two brands also held the top two spots for the most popular sneaker brands on the platform in 2021 and 2020.
While retailers like Foot Locker and FarFetch buying into the space through GOAT and Stadium Goods, respectively, seem like a smart move as retailers (and especially sneaker retailers) step foot in the door of the market for resale, it has not changed the consumer experience. A brand-owned secondary market — and Nike in particular — is the biggest disruptor since the commodification of resale sneakers pushed the sneaker industry into a $79 billion industry.