How Nike Owns This Unground Marketplace of Secret Sneakerheads, and Why the Action Sports Industry Can Borrow Ideas

Josh Luber, a self-described “sneakerhead” and founder of Campless, a “sneakerhead data” company, held a Ted Talk discussing the secret society of this $6B global industry – the secondary market for sneaker sales.

Luber’s unconventional Ted Talk revealed a very conventional idea about how consumers understand the sneakerhead marketplace, using similarities between the illegal drug trade and, or, the stock exchange to make his point. Similarities reign in “the existence of a central actor,” says Luber. “…someone who is making the rules on trading. In the case of sneakers, that someone is Nike.”

Luber shares that Nike’s customers make almost twice as much profit in the secondary resell market of limited edition sneakers as the company’s closest competitor, Sketchers, does. Last year, Sketchers surpassed Adidas as the number two sneaker brand, just behind Nike of course, netting $209M year-end. In the sneakerhead secondary market – meaning once the limited edition sneakers leave the retail floor, it’s up to the seller as to whether he or she will keep the sneaker in the collection or sell it to the highest bidder – Nike accounts for 96 percent of resell product in an annual $1.2B(illion) secondary market.

That means, according to Luber, approximately $1.2B are exchanged per year on this secondary sneaker market.

The concept is a simple – one of limited supply and demand. According to Luber, Nike has inherently developed this marketplace through a want and need for the consumer to collect these sneakers with a high resale value; this resale being available in an accessible secondary marketplace controlled and constructed by the consumer.

Luber looks at this $6B sneakerhead marketplace as a “democratized commerce” and a “stock market for commerce…a stock market for things.” He uses the example, “If you were to invest in a pair of Air Jordan 3 Black Cement sneakers in 2011 and sold them today, you will have made a 162 percent increase on your money.”

Luber suggests that this artificial market is propped up by the millions of consumers buying the $60 price-point sneakers from Nike and other brands – leaving the niche batch of sneakerhead influencers to propel the marketing and allure of the Nikes, Sketchers, and Adidas using the “Air Jordan 3 Black Cements” of the sneaker-world as bait. Ultimately, Nike then uses these sneakerhead influencers and grassroots brand ambassadors to authentically market a category, resulting in a strong economic influence.

This in itself is jaw-dropping and made us think. Sneakerheads have a similar passion and obsession, a similar following and base, as skateboarders, surfers, snowboarders, etc. So it begs the question – Could action sports use this legal and accessible nature of consumer-driven commerce – a stock exchange of goods – to control our market?

Check our Lubar’s full Ted Talk on The Secret Sneaker Market and Why it Matters. It’s sure to spark some ideas.