The Business of Reselling Sneakers

A brief article on the sneaker flipping industry from side hustles to big business

The Basics

Imagine taking a trip to the mall for a bit of shopping. It's been a while since you've been to there so your're not looking for anything in particular and just window shopping. As your walking your eye catches a flashy facade of a new shoe store. Curious you decide to check it out. You walk in and you notice that all the shoes are vacuum sealed in plastic. It's odd but you overlook it and start checking out the shoes. You see one you like and it conveniently has a price tag on it, but the price tag blows your mind. On the price tag all you see are triple digits. Astonished by the price you put down the shoe and walk out the store.

You get home and decide to get online to see if you could find that sneaker you were interested in for a reasonable price. A bit of googling and you find out that the shoe you wanted retails for $100 which gets you excited because that's something you can afford. However that shoe you want is sold out everywhere! A bit more googling and you find some online stores selling the shoe at the crazy price you saw at the mall.

It blows you mind that a shoe can be marked up as high as a new car payment, but that's just the nature of the sneaker reselling business... Regular sneakers at insane markups!

Originally released in 2009 at a retail price of $1140. Listed on StockX a popular reselling site

The Players

In the sneaker reselling world their are four player: manufacturers, retailers, buyers, and resellers. Manufacturers make the shoes and list a suggested retail price. Retailers buy a stock of shoes at wholesale prices and sell the shoes at the suggested retail price. Buyers are just the people who want to buy the shoes. Resellers are the the group that gobbles up nearly an entire stock of a limited sneaker and resells them at prices higher than the retail price to buyers who couldn't snag a pair.

In the sneaker community people want to wear rare/limited sneakers that are hard to get. Why? Because limited sneakers typically look really cool (although they're are awful limited models such as the one above), and because they boost someones social status. Having limited sneakers shows people that your fashionable, wealthy, and cool. People who wear limited or cool sneakers will occasionally get compliments. Often times many hypebeast just buy whatever the most controversial sneaker is to standout and have a conversation starter or because they think it looks good.

Three Types of Resellers

When it comes to resellers there are three types: Enterprise resellers, consignment stores, and hustlers.

Enterprise Resellers: They are not the largest group but they're the most successful group because of their direct control on the sneaker market. Most sneakers are made in China and a few other small Asian countries. In China many sneaker factories make both legitimate sneakers and counterfeits. Some counterfeits can be nearly identical to an authentic model but some can be bad knock off's. In any case the markets for legit sneakers and counterfeits in China and abroad is huge! They each have their own billion dollar industries! I could go off topic and talk about the counterfeit industry but right now I'll continue with resellers.

Fair Warning I only know the superficial aspects of this next part but I'll link a video that explains it better. A little context before I get into the nuts and bolts of this section, business in China is dishonest. The people that run the sneaker factories either set aside X amount of stock and resell them illegally on the open market at high prices because they know the market worth of the shoes they make. Or the factories cut illegal deals with wholesale buyers in Hong Kong who then resell the shoes at whatever price they want. Both of these resellers sell their shoes online or they open up their own stores to sell them. Because of their tight connections on the manufacturing, supply, and having access to buyers everywhere they are able to profit in the thousands and even millions. Even though it's illegal the Chinese government gives them a pass. 5:30 talks a snippet of the Chinese connection.

Consignment Stores

Consignment Stores are another group of resellers who resells shoes with a little help. The best way to describe it is to give a few examples. Flightclub is a popular sneaker consignment store that has their own retail stores in LA and NYC and online. Their business model works by having people bring them limited sneakers to their stores and Flightclub will sell the shoes for that person. Flightclub charges a listing fee to the person who brought in the shoes since they're doing the work of selling them. Once a sale is complete Flightclub gets a small cut from that sale and the person who originally brought in the shoes gets the bulk of the profits. Below is the basic business model of another consignment store Sole Out NYC who went out of business. Link to the interview done by Complex.

A lot of time, people will email us with a list, and we'll price out the DS sneakers. But if anything is worn, we need them to bring it in so we can make are fair price based on the condition of the sneaker. Then we check to see if the sneakers are authentic. We check out the insoles, the stitching the tags, everything. If we sell on fake sneaker, our reputation will go down the drain. The split is 85-15, the customer gets 85 percent. They agree the sneaker has to be on consignment for a minimum of 30 days, and then sign all the paperwork, after that, we'll email or call them when the sneaker is sold. They have the opportunity to pick up the money in one lump sum when all the sneakers are sold, or they can pick up the money piece by piece when each of the sneakers they put on consignment are sold.

Most consignment stores operate physical stores, but the three most successful consignment stores in the Western World are online sites StockX, GOAT, Grailed, and Flighclub. All of them but Flightclub have their own shopping apps. Out of the four StockX is the most popular store since they operate like a stock exchange. StockX has goofy graphs and market tickers that show the prices of shoes.

Hustlers

All of these are worth hundreds of thousands

This is a category that I know very well because I used to do this on the side mostly for spending money. For a while I did make money but I quickly realized that it wasn't worth the hassle of continuing. Hustlers are the largest group on this list and there are several ways they make money. I'll start with the most common to the least common.

Online Resellers

Imagine staying up until midnight to buy a limited edition sneaker. You've been watching the countdown clock for hours and making sure you have a solid internet connection, a fully charged laptop, and your credit card in hand. When the countdown clock hits zero you quickly find your shoe size and click add to cart. You eagerly wait to see the payment screen but the page just keep loading and finally it crashes in the span of a 10 seconds. Frantic you try and reload the site but website isn't responding. Now minutes have past and nothing has changed. Finally after 5 minutes the website loads and you see that the shoe you wanted is SOLD OUT!

Release dates are the days when a new shoe is available for purchase online or in-store. They are also the only days resellers work. For online releases a retailer pre-list the shoe on their website with a countdown clock several days in advance. When the countdown clock hits zero anyone can attempt to purchase the shoe. For limited shoes the stock will completely sell out in as little as a minute or an hour typically. Many sneakerheads have been in situations where they were able to cart a limited sneaker but the website froze from too many people accessing the site, so when they're able to reload the website again they find out the shoes they had in their cart are gone and everything is sold out. Website freezes can happen anytime even when a buyer is entering their payment information.

Online resellers have several methods of buying up multiple pairs and nearly the entire

stock of a limited shoe. Pre-2012 having the fastest internet was the best tool to buy a limited pair of sneakers for resell. After 2012 Bots became the best tool to buy multiple pairs of sneakers. Bots are computer programs that are able to manipulate a retailers website so that they can buy multiple pairs of sneakers. Bots automatically add shoes to cart and even automatically check them out. Some bot users sell slots to people who want a limited sneaker but have no chance in getting them. A buyer buys a slot and sends the bot user their credit card information so that they can buy the shoes on the buyers behalf. If the bot user is unable to get the shoes the buyer is refunded and their credit card information is erased. I do not recommend people do this because of the possibility they don't erased your card information and go on a spending spree on your behalf.

AIO Bot (all in one) the green bar was a successful check out

At the time when bots were new it was easy to grab 6 pairs of a limited sneaker and resell them online for a profit of a few hundred and even a few thousand depending on the shoe and how many they were able to get. There are free bots and bots that cost money. The free bots are browser extensions like an adblocker, but they aren't very good. The really good bots are sold online and cost around $100 to $400. However these aren't one time purchases since retailers update the security of their websites to prevent bots from buying all the stock, the bot software developers sell updates for their bots that range from $100 to $200.

Retailers tried to fight back bots by limiting each pair of shoes to one per customer but it didn't stop bots. Retailers then got smart by figuring out that multiple orders came from the same IP address. Retailers would then ban that IP address so a bot user couldn't access the site.

site that sells proxies

It still sort of works but bot users learned that if they had multiple proxies (IP addresses) they could get around being banned from a site. For example if a bot user had 200 proxies loaded into a bot they would have a good chance of getting a limited shoe because they had 200 chances! The site might ban nearly all the proxies but some are able to get through allowing the reseller to scoop up a few pairs. Bot users have to purchase a pack of proxies online so that they can get those sought after sneakers. A pack of 10 gigabit speed proxies might cost $50 or a pack of 500 proxies might cost $600.

In the past I've used bots and have been able to earn some side money. The most I've earned was about $1000 from reselling a few sneakers. However I stopped at the height of the Kanye West Yeezy's sneaker line which lasted from 2015 to 2017. During that period I wasn't able to get a lot of those shoes because my internet wasn't fast enough. So I tired buying proxies and it worked only one time where I was able to get 3 yeezy sneakers. I sold one to a friend for $500 and another pair for $520. I kept the other one for myself but I should have sold them when they were worth $700 in my shoe size.

I stopped reselling because bot updates and proxies are expensive and there is still no guarantee that you would be able to get a limited pair of sneakers even if you have the perfect setup. I've lost a lot of money on buying the tools to buy limited sneakers. But for those who are really savvy with the hustle, they are able to make a few thousand dollars easily. If you check out Twitter or Instagram hustlers will promote their own sneaker stores and negotiate with people on a price for limited sneakers.

Picking

Picking is an odd one that not too many people do. Essentially it's where you go to physical stores to buy some shoes on sale to then resell on your own website or on Ebay. Profits are quite small and it's an inconsistent source of pocket money. In the sneaker community this form of reselling is rare because you have to live near outlet stores where everything is marked down significantly.

Is it Reselling Ethical?

It's definitely not ethical to resell sneakers that consumers really want. Many kids end up saving hundreds of dollars just to buy a pair of shoes that will look cool for a little while. Or they ask their parents to buy them an expensive shoe for Christmas. I do remember winning a raffle some Jordans and I resold the shoes on Ebay for $490 to a mother buying her son a Christmas present. I did walk away with $150 is spending money though. In either case reselling is taking advantage of people which is something I do not like to do. Manufacturers could make more of a limited model but then that shoe wouldn't be limited anymore. That's a problem for them because if a shoe isn't sought after then it would be hard to sell off an entire stock. So manufacturers won't change because they're a business whose job is to make money. The sneaker community doesn't like resellers because they make it hard to enjoy their hobby. Do I feel guilt for being a former reseller. Nope, I definitely liked having some pocket money without working too hard. The only way the reselling market declines is if retailers step up their website security but they don't really need to because their goal is to sell their shoes so as long as the shoes are being sold they don't have to spend money on increased security against resellers.