Who doesn’t like 1s? Just from this statement, it’s clear to see that 1s traditionally are the best shoes to purchase/invest in if you want to look at it from a investment standpoint. From an aesthetic standpoint, they are the most timeless silhouette of all Jordan models that hits home to sneakerheads of ALL ages and this is important in maintaining the demand for them. But how much do these shoes really translate to in terms or ROI? In the past, my business model has simply been buying and selling retro sneakers that have been around for atleast 2 years plus. However, after seeing this crazy trend of price hikes in such a short term in new releases, my business model has changed slightly to take advantage of this new trend. After being in business for 5 years and change, I slowly realized that the buy/sell spread will always be there regardless of the year of the release. What triggered me to write this today is couple days ago a client dropped a part of his collection to us to help him move and I was shocked at how much these “newer” release retros have gone up in price over such a short time frame.
As you can tell from the above photo, the client had quite a fair share of DS Jordan 1s. Most of them are from recent retros and none of them were like “super hyped” in terms of desirability after release date. All of them were fairly attainable after the release at a fair price that wasn’t too much higher relative to the retail price. I was told he paid retail for most pairs and resell prices for some after shortly after the release date. I was quoting him on the expected dollar value he will receive after expected sale prices, and I must say….his return is quite impressive. Going strictly off the last sold StockX prices, he was expected to gross approximately $8,300 CAD and factoring the 9% stockX fee and 3% transaction cost, he’s expected to net approximately $7,100 CAD. So how does this translate in terms of returns? Assuming he paid retail for all 16 pairs, he would have paid $3,900 CAD ($3.4k before tax assuming 13% Canada tax). With a cost of $3.9k, he would have yielded a 83% return on his investment over the 3 years. However, we have to be able to compare apples to apples in terms of context in order to really understand how much return we are talking about so we have to annualize this return. Most of these shoes were purchased between 2016-2018 and to be conservative, we’ll assume a 2 year horizon as an average of the release during this period. After annualizing the 83% return, we come to annualized return of 35.3%. I know most of you would say….well most of us don’t get shoes for retail. Of course we have to tell the story for both sides. So with the same analysis assuming a 20% premium (which is approximately the resell spread shortly after release date) over the retail price, you’re still clocking in an annualized return of 23.6%.
So what does 35.3% return mean in real life? Basically, for an investment of $1,000 CAD, you are expected to make $353 per year after all fees. You might think…well $353 isn’t really enough to buy 1 pair of shoe nowadays, but think about what other investments will yield this type of returns. The average annualized total return for S&P 500 index over the past 90 years is 9.8%. Your return of 35.3% is literally 3.6x what the market will give you. $353 seems like peanuts at an absolute scale, but when your investment is in the $50,000 range, this $353 is now equivalent to $17,650 – now that ladies and gentleman is almost enough to buy you a new car over a 2 year horizon. Just keep in mind we all have to start small somewhere and slowly build our wealth. Your dollar return may seem small, but over the years as you re-invest and compound this return, that’s where the real wealth is built.
**One last thing I forgot to mention was the size of the shoe plays a big role in your profit as well. The client was a size 8-9 US and the below analysis was based purely on this size. Your returns will vary based on the size you are referencing**
What strategy should some starting out should use, when it comes to investing/reinvesting in sneakers?
I understand the value in sneakers but unsure on how to properly invest with them.
Learn from past releases and see what they were selling for 1 year ago and try to understand why prices went up or down.