Sneakonomics

16 05 2010

Economics Behind Sneakers

Over the course of the development of the sneaker subculture, the value of a pair of sneakers has changed dramatically; everything from the increased price tags on shelves to sneaker’s perceived worth.  Although the value of sneakers is something of importance (especially in economic hard times) for consumers, it is often overlooked by those who par take in the subculture.  I will attempt to provide a better understanding of the monetary value that composes prices of sneakers in hopes of allowing us to make informed decisions when buying shoes.  Note that when I talk about the value of sneakers it is the value in the secondary market.

One thing that may be peculiar to people outside the sneaker subculture is the term dead stock.  The meaning behind it is to simply leave your sneakers in the box and not wear them.  In a sense, they are preserving the sneaker and keeping them in their original condition.  There are varies reasons why people do this and it has become an interesting question among the community as to individual’s motives.  On one hand, you have people that do this to make a profit on sneakers that are popular and in high demand.  On the other hand, there are those people that have an emotional connection to a pair of sneakers and want to be able to wear the same pair a few years down the line.  Nonetheless, the importance regarding dead stock is that doing so could potentially, and often times do, add value to the sneakers.

Thus, sneakers can accrue or lose value depending on several features such as popularity, attainability, and level of hype (excitement) surrounding a particular pair.  All of these factors working together create the true value of a pair of sneakers, different from the retail value of the sneakers.  Similarly, this runs parallels to stocks.  Further, there is a stock market of sneakers known as the sneaker exchange network, the constant buying and selling of sneakers.  Enthusiasts participate in the network in order to obtain sneakers that they might have missed out on in previous years or were unable to get their hands on when released.  Just to give an idea of how high some of these resell values can get the Air Jordan I in original condition goes for about $3,000.00 on eBay.

The key principals to understanding the sneaker exchange market follow the simple economics of supply and demand.  This, along with the features mentioned earlier, affect the consumer’s willingness to pay in the secondary market.  Also, this addresses why there is a greater emphasis placed among limited edition sneakers as opposed to retail sneakers.  The perceived value of limited edition sneakers is much higher due to its characteristics than retail sneakers.  Conversely, there are factors such as fakes (black market) and the economy that negatively affect the value of a pair of sneakers.  Over saturation of fake sneakers that resemble a popular sneaker can devalue them since the fake ones are prevalent and easily accessible.

Again, there are definite parallels to sneakers and stocks.  So it is easy to see how sneaker enthusiasts regard their sneakers as grails and value them as an investment.  However, we as consumers must be cognoscente of the value of our initial investment when purchasing a pair of sneakers (especially in the secondary market).  Also, we must keep in mind that sneakers are simply just sneakers.  I believe that an individual should not buy sneakers as an “investment” and manipulate the sneaker exchange market just to make a quick buck.  This cheapens the sneaker subculture but more importantly, the individual is better off with the expected rate of return offered in the forms of CDs or mutual funds.  I do think, however, sneakers are an investment in yourself if you are a true enthusiast.  The love for the hobby and common bond among peers are far more valued than the increase of prices in a pair of sneakers.

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