This week, Nike announced that they would be canceling orders placed through automated software on their website or apps. Additionally, people who are considered by Nike to be buying shoes with the intent to resell them may be subject to a variety of new restrictive policies. This includes being denied refunds, being charged restocking fees, and having their accounts suspended. Nike can now impose new limits on how many shoes someone can buy and potentially even deny people access to physical retail stores.
This is the latest in Nike’s public attempts to prevent sneaker botting and sneaker resale.
Nike and Resellers = Montagues and Capulets
For years, Nike has had a love-hate relationship with the sneaker reselling industry. On one hand, so much of the demand for Nike shoes is generated by the hype that comes from the sneaker resale market. When low quantities of highly sought after shoes are being resold, this drives up demand for Nike products in general. If everyone had complete access to massive quantities of Nike shoes, you could argue that the perceived value of the sneakers would decrease and the demand for Nike products would decrease. The scarcity of hot shoes fuels the resale market and increases the overall value of Nike products and the brand in general.
On the flipside, sneaker resellers are making more profit per shoe than Nike. If a pair of hot shoes that Nike sells for retail at $150 can be bought and then sold by a reseller for $500, the reseller is making significant amounts of profit that Nike isn’t accessing. Some executives at Nike are surely looking at the resell revenue with envy, and you’ve seen scandals of Nike executives complicit in secret reselling businesses.
Sneaker botting and reselling can also cause PR problems for Nike. In the most excessive cases of sneaker hype, the vast majority of consumers are unable to access sneaker releases at retail prices. Consumers then have to pay massive markups on online resale marketplaces, especially if they do not have the wealth or personal connections to sneaker resellers. There has been widespread feedback by consumers that botting and reselling is ‘ruining’ sneakers for the average person who just wants to buy a new pair of sneakers online or win a raffle on the SNKRS app.
It’s a delicate balance for Nike.
The Intricate Web of Sneaker Resale
There are different stakeholders within the sneaker resale market - sneaker botters, sneaker resellers, and sneaker resale marketplaces.
Sneaker botters are the people who create, buy, and use sneaker technology that allows them to win raffles, purchase massive quantities of shoes online, and generally have an advantage over other individuals. The people building this software are skilled technologists, who have a clear financial incentive to stay ahead of Nike’s own security and technology teams. Much like how hackers have an incentive to build systems that can hack into banks, the information security game of cat and mouse between sneaker botters and sneaker brands will continue forever. While it’s possible that this latest announcement from Nike can temporarily make life more difficult for sneaker botters, this will not succeed in shutting down the sneaker bot industry.
While many sneaker resellers themselves use bots, others tend to figure out ways to buy shoes themselves or broker deals with retailers and distributors. This announcement could cause a minor disruption in the sneaker resale supply chain, but again likely won’t create major permanent barriers. The people who make a living as sneaker resellers have an incentive to find other ways to procure and sell shoes.
On top of sneaker botters and individual sneaker resellers, there are several multi-billion dollar online sneaker marketplaces around the word whose entire business model is dependent on a healthy sneaker resale industry. Companies like StockX, GOAT, and eBay sell massive quantities of secondhand sneakers every day. If Nike more strictly prohibits sneaker resale, does that put the existence of those marketplaces into jeopardy? Well, if Nike actually threatens the business model of companies like StockX, GOAT, and eBay, they are damaging a major part of the overall footwear industry. And these online sneaker marketplaces would go all the way to the Supreme Court to defend their legal rights to resell products.
Sneaker botters, resellers, and marketplaces are all built on top of the global sneaker resale industry.
Looking Out For The Consumer
So much is contingent on how Nike actually enforces this new policy. A lot of this comes down to how Nike will determine if someone is trying to purchase shoes with the intent to resale. At the discretion of Nike, the overall industry might have to discuss the definition of acceptable or unacceptable reselling.
We previously wrote about the recent Zadeh Kicks scandal, one of the biggest sneaker resale frauds ever. While the scandal didn’t damage the reputation of Nike, it made the idea of sneaker reselling less favorable in the eyes of many consumers. Perhaps in an attempt to distance themselves from supporting the sneaker resale industry, Nike is taking a hard line with this latest announcement.
Someone who has had trouble getting Nike sneakers in the past might read this latest news and react with joy. If the goal of Nike is to make their customers feel better about their chances of getting sneakers, this announcement helps accomplish that PR goal. What that won’t do is shut down the entire sneaker resale market. Secondary markets will always exist - whether they are legal or illegal.
An Increasingly Intense Sneaker Future
The sneaker industry is filled with complex dynamics, of different stakeholders that at any given time oscillate between friend, enemy, and frenemy. You can analyze the decision that Nike made to ‘crack down’ on sneaker botting and resale from several different angles, but it’s my take that this currently does not impact the sneaker resale industry in any major way. It’s a brief message of comfort and encouragement for people who feel slighted or disadvantaged by the increasing intensity of sneaker bots and sneaker reselling. And that makes sense.
Gone are the days when you could just rock up to a Foot Locker and buy the new Air Jordans at retail price. In order to get the hot sneakers you want today – you really need to know and understand the sneaker resale market. As the requisite knowledge to buy and sell sneakers increases, we view it as our role at Neustreet to help break down and educate people on how this world works. The size of the global sneaker resale market is currently around $6 Billion and is expected to grow to $30 Billion by 2030. Unless this new Nike policy is enforced with the intensity of a thousand suns, the growth of sneaker resale will continue.