American sports brand Nike launched the fragment x Travis Scott x Nike Air Jordan 1 (Air Jordan 1) sneaker on July 29. The shoe sold in China for $247, but after a round of flipping in the shoe trading platform, the highest price reached $10,819, exceeding the list price by more than 40 times. This unusual market phenomenon aroused public concern.
China’s sports shoes trading platform Dewu stated on Sept. 21 that $10, 819 was just the seller’s setting and that no transactions at that price took place. The platform removed the listing.
However, according to JMedia, a Chinese business media, Air Jorden 1 transactions occurred over 1,100 times, and the average price of the high-top models did exceed $1,546, with the best-selling shoe sizes going for more than $4,637.
Air Jordan 1 is co-branded by a collaboration between American rap musician Travis Scott, Japanese “godfather of fashion" Fujiwara Hiroshi, and Nike brand Air Jordan. Co-branding goods is a marketing model in which brands work together to support each other, create impact, and compete in the marketplace, and is very popular with luxury fashion brands.
Capital Intervention in the Sports Shoe Market
In the late 1980s, the NBA was broadcast in China, and in the 1990s, the Japanese anime “Slum Dunk” caught on among Chinese students, and then in the 2000s, Chinese sports stars joined the NBA league. By then, some Chinese fans had started collecting basketball shoes.In the 2010s, with the popularity of hip-hop culture in western countries, Chinese actors began to show off their sneakers in public and “sneaker culture” exploded in China.
Brand products distributors tend to sell in limited quantities to create “hunger marketing.” To get the desired sneakers, fans queue in front of the stores in the early morning or even overnight.
This situation resulted in the scalper’s ticket touting. Scalper in China refers to a person who makes money by buying and reselling; but today’s scalper is not a street hawker, the person often has the power of capital behind them.
In November 2018, an AJ co-branded shoe went on sale in Kunming, Yunnan Province in southwest China. A scalper flew in from northeast China and hired 50 people to queue up by paying them 200 yuan (around $31) each. Finally, the scalper, through his numerical advantage, bought 21 of the 26 pairs of shoes on sale in Kunming after 24 hours of queuing, reported China’s state-owned media First Financial.
Once capital intervenes, it is even more difficult to buy brand shoes. When a shoe is sold out, the scalpers are happy because there are fans who will spare no money to obtain a pair. In Sept. 2017 AJ collaborated with the international luxury fashion brand Off-White to design a sneaker called OWAJ1, which sold from $230 to $1860 in a short time.
Seeing the profitability, some fans also joined in and became “retail investors” in shoe speculation. In China, stock speculation is capped at 10 percent per day, but there is no limit for shoe speculation, which can be multiplied several times in a day.
Shoe Trading Platform Becomes ‘Stock Exchange’
In 2015, Hupu, a Chinese online forum that focuses on sports, created an interactive community called Du (meaning toxic) specifically for sports shoes. The community was initially designed to provide trendy fashion to young people. It was named Du because it supposedly has an “addictive” connotation.In August 2017, Hupu officially launched its independent app Du (the predecessor of Dewu), and the Du app soon became the largest platform for discussion and trading of hip shoes. In addition to Du, several other shoe trading platforms have emerged in China.
Meanwhile, knock-off shoes triggered a demand for authentication. To ensure the fairness of the transaction, each platform provides an authentication service. That is, the seller puts the shoes on the platform, and the buyer pays the platform to confirm its purchase intention, the seller then mails the shoes to the platform for authentication. The platform confirms the authenticity of the shoes before shipping them to the buyer and takes a percentage of the sale for the handling fee.
To improve the efficiency of the transaction, each trading platform has successively put online the hosting function. In other words, the retailer can deposit the sold shoes in the platform’s warehouse, and the platform will keep them for the retailer and can directly put them on the shelves. In this way, the retailer can achieve instant purchase and sale, the sneakers simply do not need to be sent, and can easily realize numerous transactions. This provides the greatest convenience for shoe speculation, and the trading platform has thus become a kind of “stock exchange.”
‘In the End, We All Lose Money’
In 2019, a small climax appeared in the shoe speculation industry in China. Searching for news on related topics back then, the article titles were astonishing. For example, “13-year-old boy, earns 3,000 yuan [$465] a day from a pair of shoes,” “Speculating on shoes to achieve wealth freedom, the 95s generations earn a million [$155,000] a month, “A shortcut to earn a suite a night is to enter a shoe exchange,” and so on.But in recent years, more negative news about shoe speculating has appeared. In April, a TMTPost article titled “Self-Report of Shoe Speculators” cited the experiences of five shoe speculators.
In the article, Xiao Kang, a 1995-born sneaker entrepreneur, said, “Speculation on shoes is the same as speculation on futures, something like gambling.
“We made an order a month or two in advance, we can’t guess which pair of shoes will explode, nor can we guess which stars will wear them, it’s a blind order.
“Big profits depend on luck; big losses are fate.”
“According to my observation, the speculators of shoes, in the end, basically are losing money,” Xiao said. “The speculation of shoes is very dependent on the capital turnover, stockpiling a few thousand pairs would cost millions, so once the price of shoes fall, it is a big loss.”
But those who can make money are usually not afraid of losses, Xiao said, “because they are backed with a lot of capital.”
Another 90s-born, Li Dong, has been a shoe speculator for seven years. Li stocked thousands of pairs of imported shoe brands in his warehouse, but didn’t expect the Xinjiang cotton incident in March, after which Chinese consumers boycotted overseas brands, and no one would buy them.
“If I handle the goods at low prices, my seven years of work is in vain,” Li said.
Li said, in this line, it is difficult to establish a sense of security; speculation on shoes is a very unsustainable economic model.
Another famous story is about Liu Cookie (nickname), a 90s-born shoe speculator in Chengdu, Sichuan Province, who fled despite $1.59 million in unpaid debts in July 2019. Police later arrested him.
“Everyone, same as I, would have thought that we are not the one who loses out in the end,” Liu told a Chengdu local media.
“I would like to say to all shoe speculators, especially young ones, don’t gamble with your youth as I did,” Liu said.
