Australia Markets open in 3 hrs 12 mins

Sneakers: The new asset being traded like stocks

The authenticating room for sneakers at Stock X on January 10, 2018 in Detroit, Michigan. StockX experts authenticate items sold through their site. (Photo: JEFF KOWALSKY/AFP/Getty Images)

Some people will line up for days to buy on the latest Apple iPhone, likewise, ‘sneakerheads’ will arrange their day around being online at the right time to get their hands on some of the latest must-have sneakers.

The ‘sneaker craze’ is nothing new, but it has however evolved to become something much more serious than just a hobby.

For some people, like US-based Johan Aguirre, buying and reselling sneakers is practically a full-time occupation - he trades sneakers on shoe reseller platform StockX in the same way a trader would play the stock market.

Aguirre estimates selling US$50,000 (A$70,000) in sneakers last year and turning over US$7,000 (A$9,800) in profit.

“The sales depend on the shoes I list,” Aguirre told LA Times.

“But it can get to the point that I’m selling more than a hundred pairs of shoes a month. It’s almost become a full-time job.”

On sneaker resale websites such as StockXGOATFlight Club and Stadium Goods, shoes are checked for authenticity before being offered for resale.

The executives of resale websites are well aware of the cult craze surrounding sneakers and are even striking exclusive deals with manufacturers for blind auctions that they’re calling ‘sneaker IPOs’, according to the LA Times.

Retail giants feed the frenzy

Retailers are actively paying attention to, and throwing money behind, the global reseller market, where sales are estimated to be as high as US$3 billion, according to US research firm NPD vice president Matt Powell.

February saw Foot Locker invest US$100 million in resale website GOAT, which last year raised $60 million and acquired sneaker sales marketplace Flight Club.

December saw online fashion retailer Farfetch buy Stadium Goods for US$250 million.

But demand for the resold sneakers ultimately comes from the young people around the world who are willing to snap up the shoes the minute they drop.

‘True stock market style dynamics’

As noted by Dylan Dittrich, author of “Sneakonomic Growth: Scarcity, Storytelling, and the Arrival of Sneakers as an Asset Class”, sneaker trading plays by the rules of supply and demand in the same way stocks do.

Dittrich told the LA Times his inspiration for writing his book came after he saw US$100 struck off the asking price of the Sean Wotherspoon Nike Air Max 97/1 that was valued at more than US$600 on StockX after the news broke of a new production run.

“It happened in a day or two, a really quick reaction for something you wouldn’t think would adjust so quickly,” he said.

“I was seeing true stock market style dynamics.”

And like stock prices, they can recover after dipping. The price of the shoe recently soared to US$950 from its original retail price of US$160.

Brands will also manipulate prices by deliberately reducing stock, just as when Adidas scaled back the supply of the Stan Smith Boost for a year and a half, Dittrich noted.

But the sophisticated secondary sneaker market risks also pushing out small-scale sneaker fans who feel priced out of the market.

“It used to be like a scavenger hunt to get it, you know?” 19-year-old university student Maliek Reed told LA Times.

“With these sneaker IPOs, it’s going to get really expensive.”

Make your money work with Yahoo Finance’s daily newsletter. Sign up here and stay on top of the latest money, property and tech news.