Recession Gives Rise To Hand-Me-Down Inc. And Sneakerheads (#GotBitcoin)
The garage sale is becoming big business as The RealReal and other upstarts feast on the emerging appeal of secondhand clothes, shoes and accessories. Recession Gives Rise To Hand-Me-Down Inc. And Sneakerheads (#GotBitcoin)
Thrift Shopping Is Going Mainstream
It used to be that shopping for secondhand goods meant sifting through piles of clothes and “Everything $1” bins at the local Goodwill or a neighbor’s garage sale. For many, it meant scrolling through postings on one of the first online marketplaces, eBay Inc.
“Following the recession, there was a mind-set shift when it came to acquiring used goods,” said Oliver Chen, an analyst tracking retail trends at Cowen & Co. “Now, it’s considered a smart bargain. Being fashionable is about getting value for your dollar.”
For many consumers, the opposite was true just over a decade ago. Jessie Char, 32 years old, said shopping at thrift stores wasn’t cool when she was growing up. “It was the Abercrombie & Fitch era,” said Ms. Char, an event planner in San Francisco. “Vintage clothes were frowned upon by the popular kids.”
Today, about half of Ms. Char’s wardrobe is second hand. She said she scours a new crop of websites that are making it easier than ever for people to buy and sell used merchandise such as The RealReal Inc., Poshmark Inc. and thredUP Inc. as well as thrift stores such as Crossroads Trading Co., with about 37 locations, for bargains.
She recently bought a Prada Cahier belt bag for $945 on The RealReal. A similar version of the bag is currently selling at Neiman Marcus for $1,790. Neiman Marcus Group Ltd. made its own foray into the market for what it calls “preloved” handbags and accessories this year when it took a minority stake in Fashionphile LLC.
The RealReal, which resells luxury apparel, shoes, handbags and jewelry, went public in June and now commands a market value of nearly $1.3 billion, larger than that of Abercrombie & Fitch Co. It expects to sell nearly $1 billion of goods this year, though its net loss widened in the most recent quarter.
ThredUP and Poshmark offer used goods from a wider array of brands, including J.Crew and Gucci. Poshmark is planning an initial public offering as soon as this fall, people familiar with the situation said. StockX is the place where sneakerheads go for their latest fix of vintage athletic shoes and streetwear.
These companies are borrowing a page from the car industry, which turned the process of buying secondhand automobiles from agonizing to relatively painless by offering leases on preowned vehicles. The dealers do all the vetting, taking out the uncertainty much the way The RealReal and other secondhand marketplaces authenticate products they sell.
As these sites soar in popularity, it remains to be seen whether they can make money from reselling fashionable clothes and other items. The cost of cleaning and vetting goods is considerable, as is sourcing, industry executives said. Rather than products flowing from overseas factories in large batches, they are coming from people’s closets, often one at a time.
And the secondary market isn’t immune to the pressures facing stores that sell new goods. Discounting by department stores depressed prices of secondhand goods sold by The RealReal in its most recent quarter, according to Julie Wainwright, The RealReal’s chief executive.
The sale of secondhand goods—or recommerce—accounts for a tiny fraction of the $3.8 trillion in U.S. retail sales, but it is growing fast. Sales of secondhand goods are expected to more than double to $51 billion by 2023, up from $24 billion last year, according to GlobalData PLC, which prepared the research for thredUP.
Fifty-six million U.S. women bought secondhand products in 2018, up from 44 million who did so in 2017, according to the report. Shoppers ages 18 to 37 are driving the shift. A third of Generation Z and more than a quarter of millennials will make secondhand purchases this year, the report predicts.
It isn’t just women who are getting into the act. Most of the resale sites also buy and sell used men’s clothing in addition to the plethora of men’s suit- and tuxedo-rental services that have popped up.
Rent The Runway and other rental business are benefiting from similar changes in consumer behavior, including a desire for newness on the part of young selfie-posing shoppers who don’t want to be seen in the same outfit twice. Consumers on average buy 60% more clothing today than they did 15 years ago, but keep the items only half as long, according to McKinsey & Co.
That has resulted in more waste. Nearly 60% of the more than 100 billion garments produced annually end up in incinerators or landfills within years of being made, McKinsey estimates. The production of one kilogram of fabric generates an average of 23 kilograms of greenhouse gases, the consulting firm says, making the fashion industry a big polluter.
“I used to buy the $15 fast-fashion shirt that fell apart after I washed it a few times, until I realized how wasteful that was,” said Jessica Fletcher, a 25-year-old project engineer, who lives in St. Louis, Mo. She started buying used clothes after she graduated from college. “It was a good way to get better quality at a quarter of the cost.”
Shoppers at the high end have become more bargain conscious, too, particularly as prices for luxury goods have soared over the past 15 years, placing many items out of reach, even for the affluent. McKinsey estimates that prices of fine watches and jewelry have nearly doubled since 2005, while the price of Louis Vuitton’s Speedy 30 handbag has increased 19% a year since 2016.
“I can afford to buy new clothes, but I like buying them used, because it lets me try different styles without spending a lot of money,” said Kuromi Hendrix, 28. Ms. Hendrix, who lives in Boston and works as an IT specialist, recently scored a Tadashi skirt for $12.99 on thredUP. The resale site estimates the original price was around $107.
As more shoppers buy used products, they are spending less at traditional chains, from fast-fashion retailers to department stores. Some established players are fighting back by launching or expanding their own resale programs, including Macy’s Inc. and Levi Strauss & Co.
GlobalData predicts that sales of secondhand merchandise will exceed those of fast fashion within a decade. And at the high end, used goods will account for 9% of the global luxury market by 2021, up from 7% last year, according to Boston Consulting Group.
The technology that created the boom in online shopping has turned the local thrift store into a mainstream phenomenon by providing consumers with more confidence that their purchases are authentic and making it easier for them to browse at times that better fit their schedules.
“You can shop for secondhand goods in a way that you never could before,” said James Reinhart, thredUP’s founder and chief executive.
When Hannah Stephenson, a 36-year-old writer, needed to update her wardrobe for a new job, she didn’t have time to sift through piles of clothes at her local Goodwill. Instead, she browsed thredUP’s website in the evening while she lounged on her couch.
“I’d rather buy second hand than go to a mall, because you can find more unique items,” said Ms. Stephenson, who lives in Columbus, Ohio.
Buying is only part of the equation. A growing number of shoppers also sell their clothes and accessories on secondhand websites and in thrift shops, creating a virtuous circle that clears out their closets so they can buy more.
According to a survey of 12,000 luxury consumers by Boston Consulting Group, one-third of respondents said they sold items to empty their wardrobe and finance new purchases. At The RealReal, 53% of consignors were also buyers as of March, according to securities filings.
“This is a trend that is not going away,” said Sarah Willersdorf, a Boston Consulting Group partner.
On Second Thought, Traditional Retailers Make Room for Used Clothes
Venerable names like Macy’s, J.C. Penney and Stage Stores embrace thrifting in push to jump-start sales and lure younger, environmentally conscious shoppers.
Some of the country’s biggest retail names are following online startups into the cult of thrifting, casting aside long-held fears that selling secondhand goods would cannibalize the market for new goods.
Macy’s Inc. and J.C. Penney Co. this past week unveiled partnerships with resale marketplace thredUp Inc. to sell used clothes and accessories in some of their stores. Outdoor brand Patagonia plans to open a temporary store in Boulder, Colo., this fall dedicated to selling pre-owned goods, its first such location.
Thrifting is gaining traction as shoppers have grown more bargain conscious and concerned about the environmental impact of fashion, particularly the throwaway clothing model popularized by fast-fashion chains.
“We looked deeply at Generation Z consumers, and recommerce came up over and over again,” Macy’s Chief Executive Jeff Gennette said in an interview, referring to the burgeoning resale market. “It’s not a downside that something has been preowned.”
Thorsten Weber, chief merchandising officer of Stage Stores Inc., which has thredUp shops in about 45 of its department stores, said traditional retailers are just beginning to wake up to the impact of resale. “Just like off price became a disrupter, resale will be a disrupter,” he said. “It will be a force in the industry.”
Other chains, including Bloomingdale’s, which is owned by Macy’s, Urban Outfitters Inc. and Ann Taylor, are taking a slightly different approach by launching services that let shoppers rent clothes instead of buying them. Customers can even rent home décor at West Elm, which has partnered with Rent The Runway Inc. for the program.
“Customers are looking at dead inventory in their closets,” Mr. Gennette said. “They may wear an item once or twice, but why do they have to own it?” And if they can save a garment from going into a landfill, so much the better, he added.
For traditional retailers, many of whom are struggling with sluggish sales as shoppers buy more online, resale and rental is a way to bring younger customers in the door.
Phil Graves, Patagonia’s director of corporate development, said shoppers who buy used clothes from the outdoor brand are typically a decade younger than those who purchase new gear from the chain.
Patagonia began selling used goods in 2017 under its Worn Wear label, although it has provided repairs of existing gear since the 1970s. Shoppers can send back used items by mail or drop them off at one of the retailer’s 34 U.S. stores. In return, they get a credit of up to $100 that they can use on future purchases.
This fall Patagonia will launch Recrafted, a line made from old clothing and other gear that couldn’t be resold in their current state. The items are refashioned into new garments, including jackets, bags and vests.
Resale is still a small business for most traditional retailers, but it is growing fast. At Eileen Fisher Inc., which pioneered resale a decade ago, it accounts for about 1% of sales. Sales of Levi Strauss & Co.’s authorized vintage garments have tripled since the line was introduced in 2017, but are still a tiny fraction of overall sales, said Jonathan Cheung, Levi’s senior vice president for design innovation.
Many traditional chains, particularly luxury brands, continue to sit on the sidelines, worried that a booming secondary market will depress demand for new goods.
“If you’ve sold new cars your whole life and all of a sudden you’re going to start selling used cars, the immediate fear is, what if all the customers just buy used cars?” said Andy Ruben, the CEO of Yerdle Recommerce, which operates resale programs for brands. “The reality is that people who want used items are going to find them anyway.”
That is what has been happening with Michael Kors handbags, said John Idol, chief executive of parent company Capri Holdings Ltd.
“There’s no question that resell in North America impacted the Michael Kors accessories business,” Mr. Idol recently told analysts. “There is a substantial amount of product that is resold on numerous websites. We don’t sell to those companies directly. But you can find our product on there.”
Nevertheless, Mr. Idol said Michael Kors isn’t rushing to launch a resale business of its own. “We’ll be very slow” in evaluating these new opportunities, he said.
One issue keeping traditional retailers at bay is sourcing. Old-school chains are set up to sell thousands of the same item, not thousands of one-of-a-kind pieces that need to be vetted and cleaned.
“It’s not that easy to find the goods,” Levi’s Mr. Cheung said.
Mr. Cheung said employees scour thrift shops, yard sales, websites and vintage dealers for jeans from the 1980s and 1990s that Levi resells in its eight flagship stores.
“There has been a change in the perception of vintage goods,” Mr. Cheung continued. “When I was growing up, they signified that you couldn’t afford new clothes. Now, it’s a status symbol. It says you’ve made an intelligent and sustainable choice.”
As a fast-fashion retailer and pioneer of the throwaway-clothing trend, H&M isn’t usually top of mind when it comes to sustainability. But the Swedish chain has been working to change that. In 2013, Hennes & Mauritz AB launched a program that lets shoppers drop off used clothes at H&M’s nearly 4,500 stores world-wide.
The items, which can be from any brand, are collected by a recycling company. Roughly 60% are resold through local thrift shops and markets; the rest are turned into other products or fibers for new garments.
Eileen Fisher was one of the first traditional brands to dive into resale in 2009 when it launched a program for employees. It eventually opened it to the public, and resale took off in 2013, when the company posted signs in its stores that read, “We’d like our clothes back, thanks very much,” said Cynthia Power, director of Renew, the brand’s resale and recycle program.
Today, the company sells used clothes in a handful of its 67 Eileen Fisher stores, as well as in two free-standing Renew stores and on its website. Used clothes typically cost about a quarter of the price of new items, Ms. Power said.
Ms. Power said selling used clothes hasn’t hurt sales of new clothes. “It gives customers another reason to come to the store,” she said. “It’s an add-on purchase.”
Sneakerheads Have Turned Jordans And Yeezys Into A Bona Fide Asset Class
When the pandemic presented a buy-low opportunity, one college dropout hit the road and filled his truck with $200,000 worth of kicks.
Last July 30, Joe Hebert woke up early and drove to a small warehouse he’d leased in Eugene, Ore., the track-obsessed college town where Nike Inc. was born. He was expecting an important delivery: 600 pairs of Yeezy Boost 350 Zyon sneakers.
Released by Adidas 12 days earlier, they’d sold out within hours and now commanded more than $100 above retail on the secondary market. Many sneakerheads would have felt lucky to snag a single pair of one of the world’s most sought-after styles.
Adidas AG produces just 40,000 pairs of each Yeezy release, which are priced at $220 retail and sold through its Yeezy Supply website using a digital lottery.
When his shoes arrived, the 19-year-old, who’s known to his customers as West Coast Joe, stacked the hundreds of boxes like poker chips on the sun-drenched pavement outside the warehouse. “It’s easy to get a lot of this style, and they pretty much always sell,” he said, in one of a series of conversations we had last year about his business.
What Hebert meant by “easy” was this: The day these Yeezys were released, he’d awoken at 3 a.m., signed on to the messaging platform Discord, and rousted 15 members of his “cook group,” a term sneaker resellers use to describe their allies in arbitrage.
When the shoes went on sale an hour later, Hebert’s team swarmed the Yeezy Supply website using specialized computer programs such as Cybersole, Kodai, and GaneshBot, each prepped with Hebert’s credit card information and capable of gaming a system meant to limit purchases to one pair per customer. By 6 a.m. the shoes were sold out, and Hebert’s bots had rung up $132,000 on his American Express.
His company, West Coast Streetwear, resold the shoes in almost as little time as it had taken to buy them, clearing $20,000 in profit. “Anything that’s releasing that I know I can make a guaranteed buck on, I’m gonna go full into,” Hebert said. “That’s just my style.”
Flipping sneakers has been a viable business proposition for decades. The demand side emerged as far back as 1985, when Nike dropped the Air Jordan 1, a culture-shifting sneaker that sold faster than the company could manufacture it. The supply side followed soon after, when some retailers began selling the few pairs they could get for more than Nike’s $64.95 suggested retail price.
A year later, the company doubled down, limiting the initial release of the Air Jordan 2 to just 30 stores in 19 cities and adding $40 to the price. The Air Jordan 3, which marked the debut of Tinker Hatfield’s iconic “Jumpman” logo, was so popular that Nike has reissued it countless times without ever really satisfying demand.
The advent of EBay in the mid-1990s brought nonretail sellers into the game, and the market only grew from there. EBay’s annual sneaker trade reached $388 million in 2014, and analysts pegged the broader resale market at $1 billion. Last July, Cowen Inc. estimated the latter figure had grown to $2 billion in North America alone.
The sneaker boom has created opportunities for a new generation of speculator. Hebert and other young resellers are the first to treat footwear as a bona fide asset class, products as worthy of informed valuation and investment as any other commodity. The sneaker market, for them, is a lot like playing the market.
In the hours after siphoning up stock from retailers, they essentially sell short-term futures based on street sentiment. By the time prices plateau, ultra-rare shoes such as the Air Jordan 1 OG Dior—a collaboration between Nike and the Parisian fashion house that was limited to 8,500 pairs—have become “grails” worth $10,000 or more, while more attainable stock has been bundled into tranches and sold on to other resellers at a bulk discount.
Like their new fellow travelers, the day traders of Reddit, sneaker resellers have used community and technology to exploit a system that wasn’t quite ready for them. But unlike the GameStop crowd, they aren’t really making a point along the way; they’re just making a profit.
For these traders, the pandemic offered yet another opportunity. Cowen’s report pointed out that some of the fastest growth in the secondary market came in the months after the Covid-19 crisis began, driven in part by steep discounts from shoe companies that faced double-digit sales declines. “Foot Locker was panicking, and a lot of smaller boutiques were panicking, doing like 50%-off sales,” Hebert said. “Just trying to dump all that stuff.”
Shoppers were avoiding stores and flocking instead to e-commerce platforms such as StockX, where young entrepreneurs like him were offering “deadstock.” The term, once used by retailers to describe unsold, discontinued items gathering dust on store shelves, has been adopted by resellers, who emphasize that the styles are no longer made and the items are still in their original packaging.
Jesse Einhorn, senior economist at StockX, says that May and June were the platform’s two biggest months since its February 2016 launch. It likely got a bump, too, he notes, from ESPN and Netflix’s airing, starting in mid-April, of The Last Dance, a 10-part chronicle of Michael Jordan’s final season with the Chicago Bulls, which drew many older buyers into the market for the first time.
That was also a breakout time for West Coast Streetwear. “I remember the night the stimulus checks hit. My sales tripled,” Hebert said. “In May we did $600,000.” This would have vaulted him into the upper echelons of sneaker resellers at StockX, according to a company spokesperson, who says those are the numbers of “a top-tier power seller.” An opportunity was clearly presenting itself.
The teenager had a problem, though: Supply chain issues were starting to translate into fewer shipments to wholesalers. The shoes he needed were still out there in stores, their prices slashed, but if he wanted to buy the dip, he’d have to get creative.
Hebert’s reselling career started in high school, when he noticed that some Supreme T-shirts he owned were going online for two or three times what he’d paid. The margin traced at least partly to the 2016 launch of StockX, where limited-edition releases from Supreme, Off-White, Palace, and other streetwear brands were finding new life.
The resale site was giving Hebert’s generation its own EBay—a “stock market of things” where transactions were public and items could be valued accordingly. “If you throw out everything else, StockX is a price guide,” says co-founder Josh Luber. “It’s a price guide that moves in real time, looking at supply and demand to understand the value of any particular shoe.”
When Hebert began selling shoes there in 2017, StockX had gone from processing hundreds of transactions per day to tens of thousands. Demand was surging for deadstock sneakers, in part due to the rising popularity of the streetwear brands, which supplemented a booming trade in T-shirts and hoodies with limited-edition shoe collaborations with traditional footwear makers. But it was also thanks to an industry-shifting move by Nike.
The shoe giant’s “Consumer Direct Offense,” announced that year, was focused on driving sales away from brick-and-mortar partners such as Foot Locker Inc. and toward its own stores, mobile apps, and websites.
By the end of the fiscal year ended May 31, 2019, it was clear the move was paying off: Digital sales were up more than a third, and direct-to-consumer sales had climbed to $11.8 billion, almost double what they’d been four years before. (This shift has lately helped insulate Nike from the effects of pandemic-related store closures, according to spokesperson Sandra Carreon-John. “The pandemic has been sort of a stress test that proves our strategy is working,” she says.)
The move toward online sales was a boon for resellers like Hebert, who could use bots to target the most sought-after sneakers and acquire them in far greater quantities than customers could in the days of lining up outside stores. He and his peers operated instead in digital spaces such as Nike’s SNKRS app, which the company made the first place—and sometimes the only place—people could get certain limited-edition shoes.
The app effectively gamified Nike’s engineered-scarcity model, making the experience of buying shoes like spinning a digital roulette wheel. It also turned its most avid customers into digital advertisers for the brand: After a big drop, winners and losers of the app lottery for the latest Jordan or Nike SB Dunk reissue would celebrate or complain on social media, fueling the hype cycle.
The potential to get rich quickly, in an informal setting with little oversight, drew a new breed of extremely online Gen Z trader.
Most were White men, according to Adena Jones, chief executive officer and one of two Black co-founders of Another Lane, which launched its own digital marketplace for kicks last April. Jones and her husband, Chad, raised $160,000 to start their business by selling off shoes from their own collection.
“Part of the reason,” she says, “was to have a voice in this culture that we started.” She’d seen sneaker reselling become highly transactional—“like buying wheat or oil,” in contrast with the approach of her husband, “who has been to the weddings of people he’s sold sneakers to.”
Chad marvels at how quickly things changed: “For 30 years I was boots on the ground, camping out in front of shoe stores. Then all of the sudden this middleman emerged.”
The ultimate middleman was StockX, which came about in part as a stabilizing force. In 2014, when Luber was still an IBM consultant with a sneaker blog, he told the Financial Times that the secondary market for sneakers was “more similar to the illegal drug trade” than a stock exchange. Two years later he launched StockX with an eye to changing that.
He’s succeeded well enough that Einhorn, the senior economist, created a hypothetical index fund of 500 sneakers that he found outperformed the S&P 500 by a few percentage points. “The index of the top 500 increased about 30% since 2018, and about 75% of the sneakers in that portfolio gained resale value,” he says.
As with most assets, some vetting is required. Sellers ship items to a StockX processing center, where they’re authenticated before being shipped on to the buyer. Items are returned to the seller if they’re damaged or used or have missing or substandard packaging. A rigorous inspection helps weed out counterfeits. Other potential provenance issues aren’t accounted for—StockX doesn’t track how sneakers end up on its platform, for example.
Hebert’s biggest score as a young shoe speculator came in January 2020. He’d just dropped out of the University of Oregon midway through his second term and moved back to Portland.
There, he said, he tracked down a man he’d heard about who’d stumbled across an exceptional find in an abandoned storage unit: four pairs of Nike Mags, the futuristic self-lacing shoes worn by Michael J. Fox in 1989’s Back to the Future Part II. Hebert described finding the man and paying $22,000 for the collection, then flipping it for $42,000.
The proceeds went toward a play for a bigger and potentially more lucrative slice of the market: bricks. These shoes, whose nickname evokes both a badly missed shot in basketball and the way they cling, as if weighed down, to store shelves, tend to be less loved than Mags, but they’re much easier to get hold of.
In today’s $60 billion global sneaker market, some releases inevitably fail to sell as projected. Whether the cause is overmanufacturing, underpromotion, or a failure to anticipate trends, the result tends to be the same: a markdown. When that happens, resellers have their bots snap them up in bulk, often before ordinary consumers notice they’re on sale.
In many cases, they’ll use discount codes bought via social media, earning an additional 10% to 40% off orders worth tens or even hundreds of thousands of dollars. On the secondary market, the shoes can reliably earn from 10% to 30% more than the sale price—leading some bricks, paradoxically, to end up reselling for their full retail price or more.
“I’ll give you an example,” Hebert told me. “The Nike VaporMax is considered a brick shoe, because it’s not a hyped Jordan that resells for 50 or a hundred bucks over retail. It usually gets discounted.”
But someone, somewhere always seems to want a pair, he said. And since resellers don’t need to worry about clearing out seasonal stock or meeting quarterly sales targets, they can sell the shoe whenever it’s profitable to do so.
“I’m not dealing with 100%, double-my-money margins usually,” Hebert said. “It’s just a pretty calm 10 to 20 and then moving product as fast as I can”
Before the pandemic-era sneaker surge, Hebert was selling enough bricks to clear $200,000 in revenue most months. They’re a volume business, though, so he’d had to start renting the warehouse in Eugene, which is big enough to accommodate two fire engines. The space became both a hangout spot and the setting for an endless well of Instagram posts designed to make sneakerheads drool.
Eventually, Hebert realized that his growing Instagram following included hundreds of entrepreneurial teens hoping to emulate his success, which led him to a new revenue stream. For $250 per month, they could subscribe to a Discord group, West Bricks, where he shared information on upcoming online releases, such as what sneakers would be discounted, when and where the sale would begin, and how many the retailer would have.
As of late 2020, Hebert counted about 450 subscribers. One of the first to sign up was a 17-year-old Californian, who told me West Bricks had made him more than six figures. He described his primary market as middlemen who would resell the shoes in China—where customers offered top dollar to avoid buying counterfeits—and who would sometimes pay him in rubber-banded stacks of cash that he’d later flaunt on Instagram.
Hebert’s competitors have access to the same bot software and StockX-borne real-time market research as he does. What they don’t have, according to some of his subscribers, is consistent, sound analysis of what shoes to buy, how to get them, and, crucially, how long resellers might expect demand to persist. Hebert declined to talk about his sources of information, but he did say he was lucky to have grown up in Portland, where both Nike and Adidas base their U.S. operations.
“If you know the right people here, this is the city to sell shoes,” he said. The right people “can give you access to stuff that, like, a normal person would not have access to.”
When the Covid boom got under way last year, Hebert found himself confronting the unexpected problem of having more customers than ever but no way of getting his hands on more kicks. For inspiration, he looked to Nike co-founder Phil Knight, who got his start selling another company’s shoes out of the trunk of his car. Like Knight, Hebert would hit the road.
The stock he needed was out there, he knew, languishing in backrooms at the retail outlets fearful American shoppers were avoiding. So he grabbed a pal, bought a 17-foot Ford E-350 box truck at auction, and embarked on a 25-day, 10,000-mile brick hunt. Hebert’s traveling companion was Justin Taliaferro, a friend from high school. The trip “seemed like exactly what we needed to get out of the house during quarantine,” Taliaferro said when I spoke with him months later.
With a map of Nike outlets to guide them, the 19-year-olds headed east from Portland, traveling through Idaho, Utah, and Colorado, focusing on hot spots such as Salt Lake City and Denver, where Nike factory stores are more densely packed than in other metropolitan areas.
“We know that Nikes have the most variety in styles and the best discounts on their more select shoes,” Taliaferro said. Along the way, they dropped in on every Foot Locker, DTLR Villa, and Champs Sports outlet they came across, stopping occasionally at Adidas outlets as well.
Some of the best scores, according to Hebert, came from mom and pop stores, which didn’t have the kinds of restrictive purchase limits that outlet stores for larger brands sometimes place on certain shoes. “There’s kind of a stigma against resellers,” he said. “They even went at us harder now, because these Nike outlets weren’t getting any new inventory.” The mom and pops were more than happy to make dozens of sales at a time.
For the first two weeks, the pair saved money by stopping overnight at truck stops and Walmart parking lots, crashing in their vehicle’s cargo box on two thin sleeping pads and some pillows and blankets. When they reached Louisiana, the bugs and the heat forced them to seek out cheap motel rooms. By the time they escaped the U.S. humidity belt, they barely had enough room in the truck for shoes, let alone sleeping pads.
Back home in Portland, they lifted the steel door and a wall of orange Nike boxes spilled onto the pavement. Hebert had spent more than $200,000 on about 2,000 pairs of shoes, which he hoped would return a profit of around $50,000. “I’m not dealing with 100%, double-my-money margins usually,” he told me. “It’s just a pretty calm 10 to 20 and then moving product as fast as I can.”
After the trip, as supply chains grew less strained, Hebert started diversifying his approach, wholesaling some of his summer brick stock, along with some Jordans and Yeezys, to smaller retailers. He said he thought the West Coast Streetwear brand might be getting big enough to launch its own direct-to-consumer offensive, starting with its own web store. Bypassing StockX would mean fewer fees and fewer returns.
“If I ship them a shoe and the box has a damaged corner or something, they’ll go ahead and charge me 15% of the sale, and then they’ll charge me $14 to ship it back, which is like a double whammy,” Hebert said. “When I’m not working on a high margin it really hurts me, but they don’t do it for every sale, which is kinda weird. I still don’t know the formula, and I’ve been asking for it for a while.”
(A spokesperson for StockX says that if the company receives a damaged or defective product, it charges only the shipping fee. “In certain cases—typically when a product is determined to be inauthentic,” she adds, “we do then charge the seller a minimum of $15 or up to 15% of the transaction amount.”)
He was also taking steps to go beyond selling shoes—which I’d learned, quite by accident, ran in his blood. At one point in late June, after his trip, he’d phoned me, and the number was identified as belonging to Ann Hebert. I looked the name up and discovered there was an Ann Hebert who’d worked at Nike for 25 years and had recently been made its vice president and general manager for North America.
The press release announcing her promotion noted that she would be “instrumental in accelerating our Consumer Direct Offense”—the Nike initiative that had helped fuel the sneaker-resale boom. Hebert later sent me a statement for an American Express corporate card for WCS LLC, to demonstrate West Coast Streetwear’s revenue, and it was in Ann’s name.
When I asked Hebert about the connection later that year, he acknowledged that Ann was his mother and said that, while she’d inspired him as a businessperson, she was so high up at Nike as to be removed from what he does, and that he’d never received inside information such as discount codes from her.
He insisted, though, that she not be mentioned in the article and cut off contact not long after our conversation. (Ann Hebert didn’t reply to emailed questions; Carreon-John, the Nike spokesperson, says Ann disclosed relevant information about WCS LLC to Nike in 2018. “There was no violation of company policy, privileged information or conflicts of interest, nor is there any commercial affiliation between WCS LLC and Nike, including the direct buying or selling of Nike products,” she writes.)
Nike’s marketing and corporate culture are strong enough in Portland that most anyone there can steep in it; the children of company executives, no doubt even more so. But whatever the advantages to growing up with a silver swoosh in one’s mouth, Hebert’s hustle couldn’t be denied. Not to mention, as he pointed out during our last phone call, that he’d started out selling Supreme T-shirts. He also moved plenty of Adidas stock.
In the fall, he’d struck out for even less familiar terrain. When Sony launched its PlayStation 5 console in November, Hebert sensed a looming shortage of stock. “We botted Walmart and Target pretty hard,” he told me. “I ended up with 24 of them and made between $300 and $500 on each one.”
There’d been growing pains outside the family business, though. His bots had initially gobbled up hundreds of PS5 systems, but because he was working in unfamiliar territory he’d made mistakes that resulted in most of his orders getting canceled, leaving him with just the two dozen consoles. “Wish I had prepared more,” he said.
One Couple’s Fight To Stop The ‘Gentrification’ Of Sneaker Collecting
Another Lane’s membership-only platform emphasizes community over the relentless drive for profit.
Chad Jones first learned that sneakers are an asset class when his mother lost her job and they had bills to pay. It was 2001, and the college sophomore put his personal collection of shoes in his trunk to sell them to classmates or anyone else who wanted them. He made enough money to keep his car so he could stay in school. “Now, the rest of the world’s realizing that it’s a major resource as well,” says Jones.
His sneaker habit grew into a full-blown obsession that’s turned into a business with his chief executive officer and wife Adena. Working from their home in Fort Lee, N.J., the couple started resale site Another Lane in early 2020, right at the start of the coronavirus pandemic, and added a membership-only platform in December.
The business is starting to gain prominence among collectors by bringing a semblance of the personal touch back into a booming sector that’s lost its sense of community as kicks become commodities.
“You can sometimes no longer recognize the culture that you grew to know and love,” says Adena. “Sneakers are being treated like wheat and oil.”
Back when Chad was hawking from his trunk, sneaker flipping was already a proven way to make money, but it was mostly done through specialized shops, word-of-mouth, and EBay Inc. These days, the sneaker resale economy has gone fully corporate, and investors have injected millions in funding.
StockX LLC, a streetwear exchange that mimics a stock market, has plans to one day go public. Online reseller GOAT Group has raised nearly $300 million in venture capital funding to supercharge its growth, including an investment from Groupe Artemis, the controlling shareholder of Gucci owner Kering SA. Analysts at Cowen & Co. last year estimated that the sneaker and streetwear resale market has reached more than $2 billion in North America and is growing by 20% each year.
The proliferation of speculators in the industry has bred a cutthroat climate for sneakerheads to navigate. Specialized computer programs used by resellers make it hard for regular shoppers to buy shoes when they’re released online, and those with connections at stores use them to acquire product on the sly.
Lucrative operations to sell “deadstock”—a term to describe unworn styles still in their original packaging—and movement by the sneaker brands toward a model of limited-stock drops have made it difficult for regular shoppers to get their hands on, say, the latest Air Jordan 1s in Carolina blue, which instantly sold out at $170 retail, only to reappear on marketplaces for more than $300.
The Joneses aim to bring fairness back. They speak of the flipping game with exasperation, citing the lengths people go to hustle each other and make a buck. At the big marketplaces, sellers are anonymous—nothing more than an online listing.
“They want to do all the shady business behind the scenes,” says Chad. “We’re here. We want to shine a light on all of that.”
Another Lane prioritizes relationships between buyers and sellers in an effort to make sneaker purchases less transactional and more fun. It’s a membership-based community whose newbie sellers are vetted through an application and must provide references before they’re granted access.
Buyers need only to sign up and users are up 137% since the platform launched four months ago. The site is meant to connect both sides, offering one-on-one chats in which shoppers can ask if a shoe runs small in size, or if they might get a few dollars shaved off the price tag.
Frustration about the resale ecosystem erupted among sneakerheads in March when it was revealed that Joe Hebert, the 19-year-old son of a top Nike Inc executive, was operating a major resale enterprise, using his mother’s credit card. Ann Hebert, the head of Nike’s North America division, subsequently quit her job.
The backlash was serious enough to prompt Nike Chief Executive Officer John Donahoe to address concerns about the integrity of product releases at an all-hands meeting. He told his employees that consumers are questioning whether Nike can be trusted, according to Complex.
Those trust issues go back long before the Hebert saga, with counterfeits and scams rampant on the secondary market—the same problems that come with vintage watches, handbags, and used cars. To the Joneses, there’s a deeper issue at play. It’s the newer, profit-driven influx of sellers over the past 10 years, powered by e-commerce sites that allow transactions with anyone, anywhere, unlike the mom-and-pop stores of old.
It’s like gentrification, says Adena, who grew up in Fort Greene in Brooklyn, N.Y. Long before she became a journalist with ESPN and met Chad, also a Brooklyn native from Crown Heights, at Knicks legend Clyde Frazier’s Manhattan restaurant, she saw her neighborhood becoming harder and harder to recognize. Sneaker culture has followed a similar pattern in going mainstream, she says.
The audience for sneakers has grown immensely from its origins in Black culture to include trend-chasing White kids from the suburbs, says Chad. The problem, he continues, is when the sneaker business shuns those within the community, allowing space only for high-profile athletes or hip-hop artists while ignoring Black kids who want to be a part of it.
White kids influenced by Black culture can find success on YouTube or Instagram, but Black youths find the road a lot tougher. “That’s what we see,” he says. “And we see a problem with that.”
In contemplating the sneaker industry, the Joneses saw few senior executives of footwear companies or celebrated collectors who looked like them. “Our voices were what created this space,” says Adena. “To have our voices and our faces missing from certain spaces is just too much.”
Goat Group, Parent of Sneaker Marketplace, Valued At $3.7 Billion In Latest Funding Round
Company says sales of sneakers during the period doubled on its platform, compared with the previous year.
Goat Group, parent company of an online marketplace for sneakerheads, said it has raised $195 million through private investors to continue its push into international markets.
The latest funding round values the company at $3.7 billion, more than double its valuation when the company raised $100 million in September.
The company also provided detail about its financial performance, saying $2 billion of merchandise was sold on its Goat platform over the past year. Sales of sneakers during the period doubled compared with the previous year.
Goat remains best known as a platform to buy popular or hard-to-find sneakers, and much of its success can be traced to the continued ascendancy of sneaker and streetwear culture. Wealthy shoppers have proved willing to shell out far more than the retail price of popular styles and colorways, fueling a competitive and controversial market for buying and flipping shoes.
The sneaker and streetwear resale market in North America hit more than $2 billion last year, according to Cowen, which estimates that the global market could reach $30 billion by 2030.
Unlike competitors such as StockX LLC and eBay Inc., which are exclusively resell platforms, Goat also sells directly from its more than 350 brand partners, including Gucci, Balenciaga and Alexander McQueen.
In 2019, the company began expanding beyond sneakers into luxury apparel and accessories. Eddy Lu, Goat Group’s chief executive, said in an interview that the retailer has been careful about adding new categories to ensure the marketplace remains in line with the desires of its young customer base.
“We care about authenticity, and that’s why we don’t create all of these verticals,” Mr. Lu said. “We have a point of view on fashion, culture and style.”
The Goat customer base is young, fashionable and comfortable wearing expensive items alongside their secondhand purchases, Mr. Lu said. Of Goat’s 30 million customers, 80% are millennials and Gen Zers.
‘We have a point of view on fashion, culture and style.’
— Eddy Lu, Goat Group CEO
For fashion labels concerned about preserving brand integrity, the Goat marketplace offers access to those shoppers on a more curated platform, he said. “We’re not selling their products next to Nvidia graphics cards and batteries and things like that,” Mr. Lu said.
International markets remain a primary target for growth, Mr. Lu said. Part of the proceeds from the latest funding round will be used to open four additional fulfillment centers this year. Three of those centers will be located in Asia, adding to three existing international facilities. The new facilities will help cut costs associated with international shipping and make shipping speeds more competitive, he said.
The retailer has 13 fulfillment centers across the U.S., Europe and Asia, where it checks the authenticity and quality of resale merchandise before shipping it to customers.
Goat Group, which was founded in 2015, previously raised about $300 million over multiple fundraising rounds, with past investors including D1 Capital Partners LP, Accel, Upfront Ventures and retailer Foot Locker Inc. The latest funding round was led by Park West Asset Management LLC.
Nike Accuses StockX Of Selling Fake Shoes After Reps Bought Counterfeit Sneakers On The Site
Nike sued StockX in February for selling NFTs with Nike’s logo, and has amended the suit to question the online marketplace’s authentication process.
The next battle in the ongoing war between Nike NKE, -0.02% and online marketplace company Stockx is ramping up.
Nike has amended its suit against StockX to include accusations of selling counterfeit merch labeled as “authentic” on its platform. This comes after Nike says it purchased four pairs of fake shoes from StockX over the last few months, including a pair of Air Jordan 1 High OG “Patent Bred” sneakers. A size 11 pair of these shoes sell for around $340 on the secondary market after taxes and fees are applied.
“Those four pairs of counterfeit shoes were all purchased within a short two-month period on StockX’s platform, all had affixed to them StockX’s ‘Verified Authentic’ hangtag, and all came with a paper receipt from StockX in the shoe box stating that the condition of the shoes is ‘100% Authentic,’” Nike claims in the court filing with the Southern District of New York.
StockX sells shoes, apparel and other items from various brands, including but not limited to Nike, Adidas ADS, -0.76% and Under Armour UAA, +6.61%. The merchandise is not owned by StockX at the time of sale; instead the sale is conducted between two individuals who agree on a price, and StockX acts as a middle man to authenticate the product, for a fee.
“We take customer protection extremely seriously, and we’ve invested millions to fight the proliferation of counterfeit products that virtually every global marketplace faces today,” a StockX spokesperson told MarketWatch.
“Nike’s latest filing is not only baseless but also is curious given that their own brand protection team has communicated confidence in our authentication program, and that hundreds of Nike employees – including current senior executives – use StockX to buy and sell products.
This latest tactic amounts to nothing more than a panicked and desperate attempt to resuscitate its losing legal case against our innovative Vault NFT program that revolutionizes the way that consumers can buy, store, and sell collectibles safely, efficiently, and sustainably. Nike’s challenge has no merit and clearly demonstrates their lack of understanding of the modern marketplace.”
Representatives from Nike were not immediately available for comment on the new counterfeit allegations.
Nike initially hit StockX with a trademark-infringement lawsuit in February, accusing the company of violating trademark law by selling non-fungible tokens, aka NFTs, with Nike’s logo. in fact, the “Patent Bred” Air Jordan 1 High OG that Nike claims to have to have bought counterfeits of on StockX’s site, is also one of the eight Vault NFTs that StockX is selling — and its best-selling NFT — which Nike claims infringes on its copyright.
When discussing the trademark portion of the lawsuit, StockX claimed Nike had shown a “fundamental misunderstanding” of NFTs by suing them.
After receiving a $3.8 billion valuation, the Detroit-based sneaker resale platform recently tapped Morgan Stanley MS, -0.38% and Goldman Sachs GS, -0.71% as it prepares to go public at some point in 2022, according to Bloomberg.
Even Thrift Stores Aren’t Immune From Rising Prices
Remember the dollar T-shirt bin? Try $56, for some wares. At Goodwill, the Salvation Army and others, you may have to dig deeper for bargains.
The thrift store is becoming a bit less thrifty.
Shoppers are reporting that prices are inching up at their local thrift stores, which have long been a trusty stopover for a one-dollar T-shirt or five-dollar jacket. Billy Seidel, 33, of South Portland, Maine, a full-time clothing reseller, is baffled by some of the prices at his region’s Goodwill store lately, like a used Carhartt jacket for $50, when a new version retails for about $80.
“Let’s say five, six years ago, everything was a flat line price of 99 cents or $1.99.” Those days, to him, are long gone.
The rise of canny used-clothing resellers has driven some prices up at thrift stores. And with inflation climbing to over 8% since May 2020, even thrift stores are feeling the impact. Nichole Webster-Smith, 30, a clothing reseller in the Seattle area has seen some “substantially overpriced” items in her nearby thrift stores.
She caught the thrifting bug from her mother and began reselling clothes (particularly vintage Patagonia) in recent years. She visits several thrift stores a week in search of gems to flip online. Rising prices have, at times, left her confused as they seem beyond what anyone—even a prospect-hungry reseller—would pay.
Recently, she encountered North Face jackets for as much as $70 (many of the brand’s new jackets sell for a bit over $100) and a vintage Filson duffle bag for $200, “which felt a bit absurd.”
Bill Parrish, senior consultant in donated goods retail for Goodwill Industries International, said that while there has not been a set price increase across the board at the non-profit’s retail locations, each Goodwill organization adjusts its pricing periodically “to ensure that they are in line with the value of the category of items provided.”
Greg Tuck, the assistant national community relations and development secretary at The Salvation Army USA, likewise acknowledged that prices at the charity’s thrift stores were set by each store, and have crept up in some cases.
While thrift stores do not purchase their inventory (it largely comes by way of tax-deductible donations) they still have to pay for operational costs such as staffing, utilities and rent. “We are always trying to make sure that people are earning a livable wage,” said Mr. Tuck.
Still, he stressed that prices at Salvation Army stores are not reaching an untenable level for its core, budget-conscious customers. “We’ve got to make sure that there’s stuff for them that is affordable,” he said. To be clear: those dollar T-shirts and five-dollar jackets will always be there.
Beyond inflationary aftershocks, thrift stores have gotten wise to the fact that there are covetable, profitable gems lurking in their trove of textiles. “Our staff are trained, as much as we can, to identify the high-value things and then we’ll sell them for high value,” said Mr. Tuck.
Salvation Army’s 987 thrift stores fund its 96 nationwide rehab centers. Goodwill uses its proceeds to support child care, financial education and other social services.
In the past few years, thrift stores have honed their ecommerce chops, flipping higher-value goods through sites like eBay and Instagram. The Salvation Army of Atlanta, for example, recently sold a vintage Larry Bird T-shirt for $56 and a Billy Reid cardigan for $46 via its eBay page.
“Many of the stores that I personally go to are setting up their own eBay shops and they’re selling stuff online themselves,” said Suzanne Butler, 35, a longtime thrifter and part-time reseller in the Nashville suburbs.
It’s easy to see why a thrift store might want to get in on the resale action. According to a report from the resale start-up ThredUp the second-hand clothing market was at $36 billion in 2021 and is on track to hit $77 billion by 2025.
Used clothes can now fetch gobsmacking prices on the secondary market. In 2020, a 1992 shirt showing the Genie from the movie “Aladdin” sold for $6,000 over social media. A year later, a Grateful Dead T-shirt from 1967 sold at Sotheby’s for $17,640.
These big numbers have helped fuel a secondhand gold rush, with resellers flocking to their local thrift stores in search of a single gem that could pay off that month’s rent.
“There’s more people looking for [vintage]. And so that’s probably taking away some inventory,” said Turner Isenberg, 24, a reseller in Little Rock, Ark, who hunts for vintage varsity jackets, aged T-shirts and military fatigue pants.
As in any market, scarcity drives prices up, so resellers seeking a culprit for elevated prices may want to look in the mirror. But the idiosyncratic thrifting market has many variables. “Not all resellers are created equal,” said Ms. Webster-Smith of the Seattle area.
She may be willing to pay for a pair of Arc’teryx pants, while the young shopper next to her is more interested in a vintage Mariners jersey he can boast about on TikTok. In the thrift store aisles, a deal is really in the eye of the beholder.
A price also hinges on how savvy a store worker is. One employee could know that a pair of Lululemon leggings is worth $40 or so on eBay, while their shiftmate might have never Googled the brand.
This surge of flip-happy prospectors has ignited fears (particularly on Gen-Z favorite social media platforms like TikTok) that thrift stores may get cleaned out of their inventory, leaving frugal shoppers with nowhere to shop. Companies that operate thrift stores dismissed these concerns.
“I don’t think we’ll ever be in a place where we don’t have stuff,” said Mr. Tuck, noting that the Salvation Army received $68 million worth of donations during last year’s Christmas season alone. “Part of our culture in America is that we are consumers and we are replacers, and we just hope that the public always see us as a viable place to make those kinds of donations.”
At Goodwill, clothing makes up about 48% of its sales, a figure that has hardly fluctuated over the years. In other words, resellers aren’t making much of a difference.
The glut of clothing on-hand at thrift stores is often visible. “I was just at Goodwill yesterday and they were rolling out racks and racks,” said Ms. Butler of the Nashville area. “You drive by the donation site, and it’s literally overflowing.”
StockX Denies Nike’s Accusations That It Sells Counterfeit Shoes
Sneaker marketplace StockX LLC denied Nike Inc.’s accusation that it is selling counterfeit shoes, saying the platform has one of the strongest authentication processes in the industry and has devoted millions of dollars to battle the spread of fake products.
The world’s largest sneaker maker claimed in a February lawsuit that StockX is infringing trademarks through a service called Vault NFTS. Nike escalated the battle last month, saying it has purchased counterfeit shoes on the site despite promises that everything sold on the platform is authentic.
StockX fired back on Monday. In a court filing, the company said its authenticators use their own knowledge along with the company’s own artificial intelligence-based technology to ensure all products sold on the site are real.
Nike’s suit is “nothing more than a baseless and misleading attempt to interfere with an innovative and efficient method to trade in current culture,” StockX said. The shoemaker’s allegations “show a fundamental misunderstanding of the various functions NFTs can serve,” StockX said.
“StockX is no different than major e-commerce retailers and marketplaces who use images and descriptions of products to sell physical sneakers and other goods online, and which consumers see (and are not confused by) every single day,” StockX said. “Nike’s suit threatens the legitimate use of NFTs as claim tickets not just by StockX, but by other innovators that also use NFTs to track title to physical goods held in a vault, such as fine art, whiskey, and wine.”
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