There is no shortage of online marketplaces where you can buy high-end collectible sneakers for show or investment.
Most people have heard of GOAT, StockX, and even eBay’s more recent expansion into authenticated high-end sneakers. There are other lesser known marketplaces in the space, such as Fight Club, Grailed, and The Edit LDN, which just raised $4.8 million to expand its business.
But is the booming market of reselling high-end or investment-grade sneakers softening and potentially crashing down to earth?
New data from Altan Insights, a research firm that helps alternative asset investors make informed decisions, suggests the sneaker market has weakened.
The company looked at 100 popular sneaker releases on StockX and found a troubling trend, prices dropped an average of 7 percent in 2022.
“Ultimately, declines in value for 2022 clustered around the high-single-digits for most pairs, with large outliers in either direction,” the company’s research brief said.
“[W]eakness was most severe for very recently released sneakers (competing with new retail supply) and sneakers further off the run. Much of the damage was done from the end of Q1 onward, with some stability to end 2022.”
Altan Insights also examined trends at major auction houses, where sneakers have become a regular feature, trying to lure younger affluent youth.
One shocking statistic they researched is that 43% of lots went unsold at December events at Christie’s, Heritage, and Sotheby’s. And only 20% of lots at Christie’s and Sotheby’s performed within or above estimates.
The research firm points to supply & demand imbalances for the recent drop in sneaker values. Altan Insights said that many new releases are sitting at retail and discounted in secondary markets. This affects the resale market of previously released models as supply keeps growing.
Reduced reseller participation in buying sneakers (adding inventory) is yet another factor accelerating the reduced demand in the market, the company said.
Of course, the ultimate blame for a cooling sneaker market are the macroeconomic conditions around the globe, as buyers shift spending from discretionary purchases to everyday items.
Will the Sneaker Market Recover?
Altan Insights believes it will take some time for the market to “deliver positive momentum,” suggesting the market will continue to see lower demand.
If this problem continues too long, it could lead to a crash, since many high-end sneakers are purchased for investment purposes. And just like investors in the stock market, some people may become nervous and start dumping their collections to raise cash.
The same is true for professional sellers that cannot afford to weather the storm. As their inventory value drops and profits diminish, they may need to shed inventory to pay bills. That could make the situation even worse.
This Altan Insights report suggests that sellers who are considering getting into this category may want to take a deep breath first. Eventually, the market will turn around.
However, it appears that the sneaker boom may be on hold for a while, and entering this category now may require a cautious approach.
Still, there could be an opportunity to buy some lots at heavily discounted prices that eventually could turn a nice profit. It likely just won’t be this year.
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