Are we in a Sneaker Bubble?

yeezys

Being a sneakerhead now for more than 15 years and 5+ years in the business I think I’ve seen quite a bit in terms of the sneaker history and the market.  However, if you asked me 10 years ago whether or not Paris Dunks would ever fetch for 10k+ or even a pair of Nike Yeezy Red October would release for $200 retail and shoot to $5,000 resell within a year or two, I would definitely have said no.  The sneaker market has seen remarkable changes when I was in the game 15 years ago.  Back then shoes were purchased to literally break necks on feet or collection flexes on Nike Talk and My Space, but fast forward today it seems like most only cares how much the sneaker is worth in monetary terms.  I mean, none of us can dictate what the market will do….all we can do is go with what the market.

paris dunk

So the question I’ve been pondering about lately is… are we in a sneaker bubble that could pop like any other market out there.  We can talk about housing, which is a necessity for everyone that have seen massive correction in prices over the years, but then again that’s highly correlated to interest rate movements as well.  BUT sneakers!  You can say it’s a necessity for some, but to most of us it’s a desire/want that probably ranks low in our life priority list.  Given the facts, would we ever see this ever growing bubble pop?  In my opinion, sneakers have progressively become more and more expensive over the years from both a retail and resell standpoint.  Retail prices have probably double since 10 years ago and resell prices…I don’t need to say further as you can see for yourself on StockX prices.   Over the years I haven’t really seen a down trend for sneakers (for Nike and Jordan’s atleast).  The only low in the market that I’ve witness was during the 2009-2013 era, which was also the time I took a long break from sneakers.  This was mostly attributed to Nike SB hype dying and Jordan brand was venturing into “Jordan Brand”, trying to create a separate branding from Nike, which was also the time when they were producing garbage quality pairs.   We also had the infamous time period where in early 2001 where Jordan 1 Royals and Breds were just sitting on discount racks at local foot lockers, but I wouldn’t consider that a really down trend because that’s when “sneaker re-selling” wasn’t really a thing yet.

union jordan 1

Certainly we can argue inflation could help explain the higher price tag on shoes, but we are also living in a time where re-sell prices are moving up much faster than what we are accustomed to seeing in the past.  Take the Union 1 for example.  I was buying pairs for $500-$600 back in November 2018 and in 4 short months, we are now seeing these pairs trend at $900-$1000.  These type of price hikes in this type of magnitude usually take a long time to realize in the past – often times years.  What’s truly happening in the market no one really knows cause there are A LOT of factors that drive prices.  Are we actually seeing the demand from actual consumers that are buying to wear them OR are we just seeing speculators that are buying and stocking today hoping they would go up in price in a few months and flip them for a profit?  I wish I had the answer for this, but if it was the latter then we could be in a sneaker bubble that could pop eventually because when you have a market of pure speculators and if prices don’t keep going up this could trigger a cascading downward trend.   From my perspective, even though I’m biased… I certainly hope it’s the prior where actual customers are buying them to wear because I’m in the business and I do own a fair amount of Nike Shares.  With all said…where do you see this market heading?

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