👟 Sneakers: The Surprising Asset Class Taking Over Investment Portfolios!

Is investing in collectible sneakers from top brands worth it?

Recently, I was scrolling through Facebook (yes, I use Facebook sometimes) and noticed a guy at a sneaker hub selling Jordan shoes for $60k🤯 and it was a worn Nike Jordan shoe. And people were buying without even negotiating much. At that sneaker hub, there were more sellers and buyers who were doing business in old sneaker shoes and selling them for higher profit. So what makes these sneakers from top brands become a popular alternative asset?

What is making their price so high that it is reaching from thousands to even millions of dollars?🧐 Why are people in the Middle East, the USA, UK buying these expensive shoes? For investment purposes or just to show off?👟 Now we think sheikhs just buy anything absurd, when you have a lot of money you buy anything without any value. But “NO” they are investing in an alternative luxury asset.

So what makes people buy these shoes for investment purposes?🤔 So the answer lies in “Fueling FOMO”.😱 Since the release of Air Jordan 1 to the public in 1985. As Jordan’s legend grew, so did the cachet of Air Jordans, which became the longest-continuous signature sneaker line ever. Early Air Jordan models aren’t just iconic because of their cultural significance—they’ve become prized collectibles due to their rarity. Scarcity drives value, especially for Air Jordans worn by Michael Jordan in pivotal games, making them the crown jewels of sneaker collections and a top choice for alternative investments. Like “12 most expensive sneakers ever sold”.😯 Sneaker brands like Nike and adidas use a strategy called “drops” to create scarcity around new releases, driving hype through media and influencers. This tactic often triggers FOMO (fear of missing out), pushing consumers to make impulsive purchases, an extreme example was the “irrational rush for toilet paper during the pandemic.”

The brands are collaborating with influencers and celebrities and other luxury fashion brands like to make it more expensive and rare. like Travis scott, LV etc. The launch of dedicated sneaker resale platforms like StockX, GOAT, and Stadium Goods in 2015 transformed the secondhand market, which now generates around $10 billion annually. Previously, eBay dominated sneaker resales but was disorganised and lacked structure, making it challenging for buyers to navigate. “Provenance is crucial for collectors – not just for art but also for sneakers and trading cards. Data has made sneakers more investible by offering historical price trends, helping collectors make informed decisions rather than relying on emotion. However, the market is still fragmented, with inefficiencies due to unstructured data. For investors, preserving condition is key—store sneakers correctly to retain their value. In the sneaker world, scarcity can often be temporary since manufacturers can always release more after the initial drop. True scarcity usually comes from collaborations with limited production runs. Recently, oversupply by some brands has hurt the resale market, with secondary prices dropping by 25% in 2023 and fewer sneakers trading above retail. It’s a reminder that perceived scarcity is fragile and can dramatically impact value. And while retro Nike and Adidas models continue to make up the majority of primary and secondary market sales, they are losing share to brands once dismissed as “ugly”, such as ASICS, ON and Salomon. These “sportstyle” sneakers are rapidly making inroads among consumers and collectors.

So, would you invest in these scarce sneakers?

If you want to diversify your portfolio after gold, natural resources, high-end art, trading cards(like pokemon), fossil fuels and other resources, you can include sneakers to your scarce assets portfolio.

The advice is when investing in collectibles, the best advice is to buy what you love. The satisfaction of owning should be the primary reward, with any financial gain considered a bonus rather than a guarantee. This mindset helps balance passion and investment risk, ensuring you value the purchase even if it doesn’t yield profits. All of the macroeconomic factors that affect traditional financial markets are incredibly relevant here,” said Dittrich. “Of course, because there are no underlying cash flows, fundamental analysis doesn’t really apply as much to sneakers,” he added. “But what does apply is knowledge of how markets work in understanding investor and consumer psychology and market forces – you know, the things that can shape supply and demand and therefore prices on these markets.” There remain many reasons for investors to be wary when eyeing the sneaker resale market, including limited liquidity, scarcity of supply, high transaction costs, and the risk of price bubbles that can burst with changes in tastes. Still, limited liquidity and market inefficiency can also create opportunities.

So, Would you invest in scarce sneakers and become a sneakerhead?🫵🏻👟