Podcast Summary
Sneakers as Investment: Sneakers are not a reliable or prudent investment despite potential financial gain for collectors due to inconsistent returns and risks different from traditional assets
While sneakers can be a source of enjoyment and potential financial gain for collectors, they should not be considered a legitimate or prudent investment in the same way as traditional financial assets like stocks or bonds. Sneakers, like art or collectible items, can go up in value, but academic studies suggest the returns are not reliable or consistent. FT's Rob Armstrong, who is known for his interest in sneakers, likens collecting sneakers to having a fun and affordable hobby, but warns against confusing it with investing. The secondary sneaker market, projected to be worth $6 billion by next year, is driven by collectors and resellers, but the risks and potential returns are not the same as traditional investments. So, while sneakers can be a source of enjoyment and potentially financial gain, they should not be considered a reliable or prudent investment.
Sneaker Market Profits, Transaction Costs: The sneaker market offers potential profits, but high transaction fees can impact earnings. Keeping sneakers unworn can increase their value.
The sneaker market can offer significant returns, but high transaction fees can eat into potential profits. Rob Armstrong discussed the growing market and his love for Japanese sneaker brand Moonstar. Meanwhile, Howie Schwartz shared how his son's sneaker reselling led him to establish Always Legit, a sneaker investment platform. Schwartz revealed that his son, who started buying and selling sneakers at a young age, realized the value in keeping them unworn. Their experiences illustrate the potential for profits in the sneaker market, but also the importance of considering transaction costs.
Sneaker Market Growth: The sneaker market, both primary and secondary, has grown significantly since 2017, with malls now featuring both types of retailers and secondary sales happening online, at events, or in-store resale shops. Nike benefits from the secondary market as it creates hype and demand for their products, driving primary sales.
The sneaker market, specifically the secondary market, was in its infancy during a visit to SneakerCon in 2017. The event, which felt like a primitive stock exchange with individuals haggling over sneakers, showcased the inefficiencies and high demand of the gray market, which was valued at $1 billion at the time. The market has since grown, with primary sneakers coming from retailers and secondary sales happening online, at events, or in-store resale shops. Even malls now feature both primary and secondary sneaker retailers. For sneaker manufacturers like Nike, the secondary market is important as it creates hype and demand for their products, driving primary sales even though they do not financially participate in the secondary market. My personal interest in this world began with accompanying my son to sneaker conventions, but it became a business with Always Legit, a platform dedicated to authenticating and selling authentic sneakers.
Sneaker Investing: Always Legit is a platform that offers investors an opportunity to invest in sneakers as an alternative asset class, handling the entire process and managing portfolios with a 90% data-driven approach, targeting both quick flips and long-term holds, and tapping into the growing market value of sneakers.
Always Legit is revolutionizing the investment world by offering a unique opportunity to invest in sneakers as an alternative asset class. The company, which started two years ago, identified the sneaker market's inefficiencies and applied expertise in sneaker reselling, financial management, risk management, AI, and technology to create an investment platform. Always Legit handles the entire process from sourcing and authenticating sneakers to marketing and sales, making it a one-stop solution for investors. The primary investors include high net worth individuals, retired professional athletes, and those interested in alternative assets. Always Legit manages the investors' portfolios, making purchasing decisions, and determines when to sell. The platform is 90% data-driven, similar to a quantitative hedge fund, with 50% of the portfolio consisting of quick flips and 50% of longer-term holds. New brands like New Balance, ASICS, and even Crocs are gaining attention in the secondary market, with assets ranging from under $5,000 to over $35,000 per pair. The high demand and scarcity of sneakers, combined with their collectability, make them valuable investments, just like fine wine. The sneaker market is expected to grow as millennials and Gen Z inherit wealth and seek to invest in identity and passion rather than traditional financial instruments.
Sneaker Investing Risks: Sneaker investing offers potential returns of 20% or more but comes with authentication and restock risks. Authentication involves verifying the authenticity of sneakers due to increasing counterfeit production, while restock risk relates to unpredictable supply and demand dynamics.
Investing in sneakers can yield attractive returns, with some annualized net returns targeting 20% or more. However, it comes with risks, primarily authentication and restock risk. Authentication is a significant concern due to the increasing sophistication of counterfeit sneakers, making it challenging to differentiate between real and fake ones. Experts, like professional glue sniffers, are employed to ensure the authenticity of the sneakers. Restock risk refers to the unpredictability of supply and demand dynamics in the secondary market, which can impact the value of the investment. Despite these risks, younger collectors can still access the market by purchasing sneakers at retail or attending events, making it an accessible and culturally engaging investment opportunity.
Limited-edition sneakers investing: Limited-edition sneakers can be risky and volatile investments due to fashion trends and cultural relevance. Consider investing in them as a small portion of a larger, diversified portfolio to minimize potential losses.
Investing in limited-edition sneakers, like those from collaborations with artists or musicians, can be risky and volatile, much like other alternative investments such as wine, art, or crypto. Historically, such collaborations have limited restocks and high demand, making them valuable and desirable. However, their value can fluctuate greatly depending on fashion trends and cultural relevance. Therefore, it's recommended to consider investing in such items as a small portion of a larger, diversified portfolio to minimize potential losses from big swings in valuation. Additionally, be aware of the fees associated with trading in these alternative investments. Overall, while investing in sneakers can be exciting and potentially profitable, it's important to approach it with caution and careful consideration.