It seems like it was just yesterday when we all feared that Covid-19 would put us all in a deep recession and consumer spending on sneakers will fall off the cliff – well fast forward to today….none of that happened. Even during this 2-3 month stretch with the higher US dollar, prices remained relatively stable and showed no sign of slowing down. As much as I hate to believe the stock market is where it should be right now (near our all time high again) given the unemployment rate, I still worry about our future. BUT I must say it’s nice to see people are still spending money on sneakers given the uncertainty.
As I discussed a few months ago when there was a ton of uncertainly in the market which resulted in a higher US dollar, we are now seeing the US dollar trending back to the norm of where it was pre-crisis. I mentioned that with a high US dollar, it will limit certain buyers from buying because of the higher exchange rate. The rate at it’s high relative to the CAD dollar was close to 1.45. Today we are trading at around 1.34, which is about 8% lower from it’s peak. In other words, for a $1,000 USD sneaker would have costed me $1,450 CAD to purchase 2 months ago. If I were to buy the same sneaker, it would cost me only $1,340 CAD with all else equal. So what does this mean for sneaker prices if the USD would continue to fall?
Well as USD drops, it would mean buying power of other currencies are increasing and this means foreign buyers are more likely to make purchases again. I mean why not? The same sneaker you wanted to buy for $1,000 USD is now $120 cheaper than it was 2 months ago. It definitely feels like a good enough discount with all else equal. I emphasize all else equal BECAUSE the market also moves efficiently with changes in currency and it ALWAYS does, but in my opinion it is lagged when it comes to sneakers. I’m certainly not the only one that looks at the exchange rate when buying and selling sneakers on StockX or any other platforms denominated in USD. In fact, I made a large chunk of my money back in the day because the exchange rate was 1:1 and over the years the money I spent buying sneakers I made 30% just from currency with all else equal.
With an improving US economy means less and less people will hold USD as a safehaven asset and the demand for the USD will fall which will lead to a lower US Dollar. A falling USD relative to other currencies will result in increase foreign buying power and with higher buying power will gradually lead to higher demand for sneakers. With a fixed and limited supply of certain sneakers, this may lead to higher prices with increased demand. Please keep in mind this is all theoretical from a economic standpoint, but it makes sense because with a lower dollar means I’m more open to buying sneakers/buyouts now as they are relatively cheaper compared to 2 months ago. The last 2-3 months I have been ultra focused in SELLING sneakers because I wanted that USD dollar as it was favourable for me from a Canadian margin standpoint and I have been turning down a lot of buyouts for the exact same reason. As the USD moves back to a more favourable point, I will slowly pick up buying. In the meantime, I’m still a net seller 🙂
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