Last month, we learned Nike is accusing StockX of knowingly selling fake Jordans. Originating earlier this year, the now-amended lawsuit was initiated, with Nike suing the marketplace over their release of an NFT series of Nike shoes, alleging the “stock market of things” is using the company’s trademark without authorization or approval.
As the suit progresses, conspiracy theorists of the sneaker world have engaged in some far-fetched reasoning as to why the sneaker brand has finally entered litigation with the resale marketplace. One of them is that Nike is quietly building the foundation for its own in-house aftermarket platform.
While I don’t know that any of these hypotheses qualify as the “real” reason for the lawsuit, the concept of a Nike-owned resale marketplace specifically for Nike products is extremely intriguing. Not only does it stand to be greatly beneficial for the brand and consumers, it has the potential to substantially disrupt the sneaker aftermarket.
Sneaker brands can exist without the resale marketplaces — and have for upwards of 50 years. However, it’s safe to say the explosion of the sneaker business in the last six to seven years would have been far less robust without the likes of Flight Club, Stadium Goods, GOAT and StockX. Yet, these marketplaces cannot exist without the sneaker brands, and sneaker brands are still in a position to easily impact their businesses in two ways: flood the market with products, subsequently bringing down demand for shoes, or establish their own secondary marketplace.
Nike has nearly all of the necessary pieces in place to launch a secondary marketplace of their own that could bring great benefits to both the brand itself as well as consumers, from warehouses to the team that would build that technology.
In May 2019, Nike called itself a tech company with the development of Nike Fit, a scanning solution to find Nike app users’ best shoe fit. The product was developed by Intervex, a Tel Aviv-based startup. Nike went on to purchase the company and expand their digital talent, thus having highly specialized personnel to add a marketplace to the range of digital products, from workout apps to SNKRS and the Nike app.
A Nike-owned resale marketplace could be an extension of the Nike app as a place to buy and sell used or deadstock, resold Nike sneakers and apparel. Functionally, it would be more similar to GOAT or eBay than Stadium Goods or StockX, which only allow unworn sneakers.
How this could benefit Nike
Establishing this secondary marketplace benefits the brand itself in multiple ways, the greatest being in the data. “They already know to an extent, but they’d be getting more data points on what actually makes a hype sneaker,” Gerald Flores, the former editor in chief of Sole Collector and senior creative strategist at Bleacher Report, told me. “It’s what makes the sneaker valuable, what drives the resale. Is it just purely numbers and there’s only 75 pairs of them or is it because it’s done by this specific designer or this athlete or it’s on this silhouette?”
With the majority of profits off of products being made on the initial sale, this data could help them better understand how much to produce or re-release and fine tune hype products for optimal initial sales, but also dial back on products that just sit.
As an example, if we look back at the initial Yeezy releases, the Kanye West and Adidas collab sold out quickly and at times for upwards of $1,000 on the resale market. In 2017, West and Adidas decided to release larger runs of the shoes, thus allowing for more people to purchase them at retail and drive the resale demand down. While new releases still sell out sometimes, the resale value is significantly less and hovers just above retail.
By Nike owning the marketplace, they’d have hard data to do this across multiple silhouettes and have footing in the resale market without completely killing the demand for their sneakers by saturating the market.
With Nike having a reputation for superior storytelling in the sneaker space, this could easily be spun into avenues for branding around sustainability, enveloping Nike Refurbished and Nike Grind into a space that’s been more focused on hype and nearly void of mission. Additionally, it could afford places to tie historical Nike storytelling into viral moments that drive hype and drive reselling that the resale platforms aren’t doing.
They’re wholly missing out on a multibillion-dollar industry that may not be sustainable without them.
While StockX told TechCrunch in their EC-1 (TechCrunch+ subscription required) it isn’t often a real-life event or pop culture moment moves the needle in the marketplace, there are a few times Nike products in particular saw a huge uptick of traffic and transactions on the platform. The airing of the Michael Jordan documentary “The Last Dance,” Meena Harris’s husband wearing Dior Jordan 1s to Joe Biden’s presidential inauguration and the untimely and unexpected passing of Kobe Bryant all caused substantial volatility in the marketplace.
Jordan sales increased 40% and StockX saw increases across every OG Jordan following the release of the doc. The Dior Jordans saw a 200% increase in bids on the platform, and Kobe Bryant sneakers that were going for around $750 on the resale market were being listed at $12,000.
I’m sure there aren’t any consumers crying for Nike missing out on these organic surges of revenue or storytelling opportunities that StockX is reaping the benefits of; however, smart and successful companies are only going to let others profit off them with little benefit for themselves for so long.
Much like Instagram trying to pivot to a shopping app or Twitter looking for ways to monetize beyond ads, Nike may tangentially benefit from the hype built around their products on these resale platforms, but they’re wholly missing out on a multibillion-dollar industry that may not be sustainable without them.
Leveraging the data could afford them more revenue on the initial release and less demand for the shoes at resale. Nike also doesn’t need to profit as much from resale transactions fees as the actual resale marketplaces themselves. Nike could potentially have lower transaction fees than all of the other marketplaces.
What this means for consumers
Flores can see some potential initial blowback from the sneaker community if Nike were to announce their own proprietary resale marketplace: They might wonder if Nike will simply mark hype items as sold out and list them themselves on a resale platform, he says. Or it could turn off consumers that the brand would stand to continually profit throughout the lifecycle of the shoe.
“I think they’ll get mad for a second and then they’ll get over it, and they’re still going to try to get something on SNKRS the next weekend,” he says. Despite the altogether unsavory experience of getting ahold of high-heat products via Nike’s SNKRS app, users come back over and over again, release after release.
Without Nike needing to approach this marketplace primarily for financial gain as much as it is to gain more control and understanding of their place in the market, consumers also stand to benefit. Total resale prices could come down on a brand-owned marketplace for the shoppers on account of lower reseller fees.
With Nike’s existing warehouse network, shipping costs could also be lowered from other resale platforms. Even resellers stand to make more on each transaction done on a Nike marketplace if the brand opted for a smaller percentage than that of StockX, Stadium Goods or GOAT or opted for flat fee for every transaction regardless of the resale value.
Which would you trust more to sell you authentic sneakers for resale — a platform that has to figure it out or the brand that released the shoe?
But the greatest benefit for both buyers and resellers on a Nike-owned marketplace would be the authentication. “You would know that it’s 100% authentic and you’re not getting a counterfeit pair of shoes,” Flores said.
While StockX told TechCrunch they have a 99.5% success rate for their authentication, that .5% still creates questions or distrust from the community. They have had to develop a 100-plus point checklist for their authenticators that is constantly evolving for each brand and each silhouette, and other resale platforms each have to take on this challenge without help or partnership from the brands.
StockX’s CEO Scott Cutler took to Squawk Box CNBC earlier this month to disparage Nike’s manufacturing and reinforce his team’s authentication practices. “Last year alone we had 41,000 items that were rejected that were Nike products that showed a manufacturing defect,” he said. “So, we’re looking for not only fake products but products that meet our higher authentication standards.”
Which would you trust more to sell you authentic sneakers for resale? A platform that has to figure it out or the brand that released the shoe? The lawsuit coming to fruition adds even more legitimacy to buyers’ and sellers’ fears that the platform is selling fakes.
How it stands to disrupt the space
“I think it will be a big blow for the other resale markets that are out there,” Flores said. “First, they’re cutting out the broker in the middle and the authentication stands to make them more trustworthy than buying from a StockX or other marketplace any day.”
In addition to building trust from existing Nike shoppers, it may also bring Nike consumers unfamiliar with the resale world into it because of their reach through other digital Nike spaces.
“Nine times out of 10, I buy straight from the Nike app. I use the Nike running app, I obviously use SNKRS and I use the Nike Training app,” Flores said. “I think there’s benefit for the consumer in that it’s all within the same ecosystem.”
Whether or not Nike would — or could — establish themselves as the only place to resell Nike gear, it’s undeniable that platforms like GOAT, StockX and eBay would stand to lose a great deal of business.
Every year, StockX releases a snapshot of the prior year by the numbers. In 2021, four out of the top five sneaker silhouettes sold on the platform were Nike and Jordan Brand. Both brands also held the top two slots for most popular sneaker brands on the platform in 2021 and in 2020.
While retailers like Foot Locker and FarFetch buying into the space via GOAT and Stadium Goods, respectively, seems like a smart move as retailers (and specifically sneaker retailers) get their foot in the door of the resale market, it hasn’t changed anything from the consumer’s experience. A brand-owned — and specifically a Nike-owned — secondary marketplace stands to be the biggest disruptor since the commodification of reselling sneakers pushed the sneaker industry it into a $79 billion industry.
This article was originally published on TechCrunch.com. Read More on their website.