Shoe Game: The Sneaker Economy


The sneaker market is bigger than you think.

Sneakers and athletic shoes in general have been big players in the sports retail industry over the past fiscal quarters. From Nike and On Running to Adidas and Lululemon, the industry plays an important role in the global sportswear market.

Statista’s recently released report on the athletic footwear market states that the “global athletic footwear market” reached $127.3 billion in 2021.

However, according to the same report, the market is only expected to grow at a rate of 4.9%. For context, global airport operations are expected to grow at a rate of 47%, according to IBIS estimates.

Since 2010, Nike’s share of revenue from the footwear segment has grown from 11% to 28% of total revenue, representing a compound annual growth rate of 8.42%, which is not exactly ” roaring”.

Nike’s main competitors by market capitalization showed less growth. Over the past decade, Adidas (market cap of $41.77 billion) and Puma (market cap of $11.93 billion) have had proportionately lower revenues attributable to footwear sales and slower growth than the Swoosh.

  • Adidas CAGR: 5.48%
  • Puma CAGR: 5.98%
  • Percentage of Adidas 2021 revenue from footwear: 12.84%
  • Percentage of Puma 2021 revenue from footwear: 3.58%

Like many other consumer discretionary markets, this one has been significantly impacted by COVID-related supply issues. In December, Nike executives announcement that temporary factory closures in Vietnam reduced inventory production by 130 million units.

Today, rising costs make obtaining and producing enough products a recurring problem. Rising oil costs affecting synthetic production, ongoing supply chain issues in China and rising labor costs all reduced the ability to generate margins.

  • Historically, the production processes of sports companies were based in China and Vietnam. For Nike, this represents more than 70% of total footwear production.
  • The spread of the Omicron variant resulted in a serious slowdown in shipments.
  • According to supply chain data firm FourKites, shipping and trucking volume out of Shanghai has fallen 26% and 19% respectively since March 12.

Whether or not the industry’s slowing growth is a long-term change — or simply the confluence of a series of unfortunate logistics-related events — is debatable. But the sneaker economy extends beyond ordinary retail.

Slow growth in one area can create opportunities for growth in others.

Sneakers as alternative assets

And when sneakers are more than sneakers?

You can’t even really call “sneakerheads” a subculture at this point. The current U.S. sneaker resale market is estimated at $2 billion, but is expected to explode 15 times to reach $30 billion by 2030. One of the main reasons: appreciation in value. Sneakers are increasingly seen as an alternative asset.

  • Alternative assets can be broadly defined as those that fall outside the traditional definition of stocks, bonds, or currency investments.
  • For several years, we have been witnessing a “democratization” of access to investments in traditional alternative assets: start-ups, investment funds, real estate.
  • The most recent trend is access to cultural investments – new asset classes like sneakers.

Platforms such as Alt, SNKRS, Rally Rd, Otis, and GOAT not only allow individuals to purchase a new class of assets in an organized fashion, but also allow fractional ownership of those same assets.

At the end of 2021, Sotheby’s reported that 55% of the auction house’s new customers came from sneaker auctions.

Earlier in 2021, resale marketplace app GOAT raised $195 million in venture funding at a valuation of $3.7 billion. The company claimed $2 billion in sales on the platform from mid-2020 through July 2021, with sneaker sales doubling.

Like GOAT, resale platform StockX was able to raise capital at a valuation of $3.8 billion with prospects for an IPO later this year.

When Clout goes digital

NFTs also have a real-world use case in the sneaker economy. Nike, Adidas, and Under Armor are well-established brands that developed early strategies to capitalize on this.

Nike took a big step in that direction in December when it acquired RTFKT, a startup that creates NFTs of sneakers and other collectibles. Nike has also infiltrated the metaverse with its involvement in Roblox and building its own digital economy.

Adidas sold around $23 million worth of its “Into The Metaverse” NFT within hours.

As it stands, brands don’t get a discount every time a sneaker is resold. This changes with NFTs. With NFTs, royalty structures can be integrated into a blockchain. Virtual sneaker creator RTFKT is taking a 10% discount for its digital sneakers on every secondary market sale – it’s part of the code.

As sneakers grow in popularity as assets, NFT sneakers combine economic incentives and a fall culture to produce new revenue streams for the footwear industry.

One step forward

Asics recently teamed up with the company Web3 STEP to launch a new line of NFT sneakers that allow owners to earn crypto on the move – aptly called “move to earn.”

Like play to win, the move to win model rewards users with native cryptocurrency for their step count, which is tracked by a GPS-enabled mobile app.

As far-fetched as the concept may seem, the company is successful.

  • According to CoinDesk, STEPN earned $26 million in the first quarter of 2022.
  • According to Chief Commercial Officer Shiti Manghani, the company had 100,000 daily active users as of mid-March, with more than one million total downloads.
  • The company has also raised $5 million from Sequoia Capital and others.

Play-to-Earn games such as “Axie Infinity” received outsized attention in 2021. Fitness-focused companies like STEPN seem to be emerging next.

The whole sneaker game is changing before our eyes.


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