Nike Mercurial Superfly 360 7 Elite Fg Acc Mens 5 Black | 10 Realities of Resale Being Shaped by NIKE’s Incredible FY2021 Q1

BEAVERTON, Ore., Sept. 22, 2020 — NIKE, Inc. (NYSE:NKE) today reported fiscal 2021 financial results for its first quarter ended August 31, 2020.

Source: Nike Dunk High "Leopard" Pack

Typically, a company built on growth losing a percentage would cause worry. I’ve been stating since 2015 that Nike’s move towards DTC would pay dividends. That’s not a hard thing to predict. However, what wasn’t in the cards was a pandemic that closed stores in Q4 heading into Nike’s Q1. As stores reopened, the industry resorted to analyzing POS data and in doing so they thought Nike’s momentum would be slowed considerably. I discussed the reality in a post 12 days prior to Nike’s report, by giving the number of sales I attained in resale in 1 month:

10 Reasons COVID-19 Contributed to Correcting Major Issues at Brick & Mortar Sneaker Retail

Nike’s 1% loss this past quarter was still revenue of 10.6 billion. Obviously not a reason to worry. It was a reason to celebrate. Wall Street predicted Nike would only have revenues of 9 Billion. Nike lost a percentage in revenue and still exceeded expectations by over a billion dollars. On this site, I utilize my micro set of data to make predictions and analysis. If you clicked through on the link above, you saw my 1 month sales average. What I have to state is that prior to COVID-19 resale was trending down. I don’t want to get too far ahead, so let me move slower. In March I wrote that:

Nike’s decision to decrease accounts and control the market in a strategic fashion has contributed to a machine that is marching towards 45 Billion in the next few years…nothing disrupts Nike’s momentum.

https://arch-usa.com/nike-inc-impressive-fiscal-2020-third-quarter-results-stops-the-share-price-bleed/

Nothing, not a pandemic brought on by COVID-19, is a match for the fervor around Nike drops. As quarantines came to an end, and even during the quarantine, zoom were buying. Instead of focusing on Nike, it’s important to position this discussion around an industry that is booming, or appears to be booming, resale.

If you follow this site, you know that I’ve found that resale is a great indicator of brand heat. Resale can also be utilized to look at how this “business” is shifting and changing on a daily basis. The only other market where you can look at resale as a parallel to the greater market are video games.  The feedback from resale is more immediate than quarterly POS data; but this is only the case when the data comes from a place that isn’t focused on hyped sneaker releases. My resale is an extension of store visits. I visit stores to research and write posts about marketing and merchandising. As a result, I’m in the stores when markdowns take place and when items become “hot”. It’s the reason, a few years ago, I recognized the rise of Vans as general release Vans hit resale. Business Insider and other sites tend to focus on resale and hype, when the reality is more resale is taking place on low end and clearance items. The sexy part of resale is looking at kids using bots to pick up six pair of Dior 1s, but that does very little for businesses attempting to analyze data and sales patterns.

Nike SB Dunk Low Ben & Jerry's Chunky Dunky
Ben and Jerry’s Chunky Dunky is reselling at 1850% over retail according to StockX.

Hype is an anomaly and to be honest sneakers like Travis Scott’s or Ben and Jerry Dunks have such limited quantities, looking to those releases creates outliers that fail to actually create the micro to macro comparison needed to make predictions or discuss sneaker business.

One thing is for certain, Nike’s dominance is clear and the quarantine and months since businesses have reopened have seen some of the biggest numbers for both resellers and retail. Remember, I wrote earlier this year and in my last book that resale was trending down. COVID-19 has delivered an interesting situation for retail and for resale. Things are good right now, but I’ve seen a similar trend in 2011-2012. That year I did over 550,000 in resale. The spike happened because Amazon began accepting more Seller Central Marketplace accounts. That’s a different discussion. This time around StockX and GOAT have helped to create an easier path to resale, which created a spike, and has contributed to investment dollars flying all around resale. The problem is these investors don’t have a real measuring stick for what’s actually happening. On the surface everything looks great. It would appear that Nike’s growth is a rising tide. It’s not lifting all boats. There are some interesting things taking shape in resale and over the years when things happen in resale (not hyped resale, which isn’t that big) they happen in stores and to the industry. Nike’s CDA is shaping retail and resale and a discussion should be taking place, but it isn’t.

10 Realities of Resale Being Shaped by Nike’s CDA

  1. Buying sneakers to resell has become much more difficult. There is a war taking place and in many instances resellers are defaulting to counterfeits to save face and keep their status as plugs. Many resellers have joined the legion of zoom buying bots to hopefully hit on big releases. Resellers are also calling store managers constantly to check and see if certain shoes are showing up. I said this before, and I’m saying it again, reselling used to be a business. StockX and GOAT have removed the walls around operating a business and that hasn’t been a good thing. Nike RYZ 365 Damesschoen Zwart, said it best, “when everyone is super, no one is.”
  2. Nike’s CDO/CDA has removed the Factory and Clearance Stores as opportunities for resellers to win. At one point resellers were hitting stores and grabbing 30 – 50 pair of kicks a day in some instances. Nike has reigned in their outlet stores and placed buying limits on shoes. Many products are marked as B Grades and the pricing structure at Nike Clearance Stores has shifted to set pricing that ranges from 39.99 to 99.99. Nothing is over 99.99. This is great if a retro hits the store, but that isn’t taking place as often. Instead, RTVs of retros and late shipments of retros are going to the SNKRS app and Nike.com to drive engagement on digital. Gone are the days when Nike would do 20-40% off sales at Clearance stores.
  3. COVID-19 laws have made it clear when a sales lead/Nike athlete is catering to bulk buyers. There aren’t as many zoom and this has removed resellers huddling in one place waiting on Nike athletes to bring goods from the back of house. Store managers are monitoring all aspects of the sales floor. This has pushed resellers out of Nike’s outlet stores and back into malls where these resellers are, as I said in number 1, calling stores and trying to gauge shipments to make it in time. The problem for the reseller now is they are all battling for one shoe, The Air Jordan 1. Nike has used Edit to Amplify and is giving the public what they want. This isn’t good for Nike and it isn’t good for retailers who rely heavily on Nike.
  4. The lack of interest in a variety of styles is hurting third party retail sites. The Air Jordan 1 in every style (high, low, mid) is making GR retro releases irrelevant in GS sizing. Retailers are sitting on more kid’s shoes than they can store. Nike/Jordan Brand has finally caught up on deliveries to stores, but resellers aren’t just battling each other to get a potentially great resale shoe. Resellers are fighting the zoom who actually want the shoes. The regular consumer is winning and that’s a good thing. As quickly as shoes arrive, they are sold. Stores have smart District Managers, managers and auditors who are limiting backdooring, which means that the great shoes where a 30% profit might happen, those shoes aren’t as available.
  5. Footlocker has done an amazing job of controlling their drops via the FLX app. The system is efficient and it isn’t being gamed or tricked because managers are capable of checking their reservations. That’s powerful. Where the FLX system hurts Footlocker stores is that when a shoe is reserved the customer has more time than they’ve ever had to pick up. This can leave sell through on good models slow because all shoes aren’t reserved, but they can’t be sold until after the weekend. In this market Nike drops so many shoes last weekends shoe is old. The retro models typically sell through, but with GS sizing this hurts the retailer. FLX has never had a drop announcement for an adidas shoe since the app updated.
  6. Nike has placed so much emphasis on Retro releases, they’ve diminished the importance of other SKUs. 8-18-2016 on Amazon the Air More Uptempo Olympic GS retro released. The 2016 model resold at 190.00 dollars a pair average. Today, on StockX, the 2020 version of the same shoe has an average resale price of 110.00. Does this hurt Nike? Not at all. Nike gets the same amount on the shoe as they did in 2016, but the resale side of things are dead. It’s not just this model.I can run through a list of men’s shoes from 2015/2016 and compare those resale prices to their counterparts for this year and the result is the same. Nike’s direct to consumer growth gives them larger margins, but for retailers carrying Nike, fewer shoes are selling through.
  7. Nike’s success comes at the expense of other brands in resale. When the wave is high for one brand, another brand suffers. Resale has lost its diversity at the general release side. Remember this isn’t about hype, and as much as I’ve said sales began to slow last year into this year, this time period is equal to my last year sales. What isn’t the same is the style of shoes sold. Last year from 7-1-19 to 9-23-19 I sold $171,151 dollars in footwear. This year 7-1-20 to 9-23-20 my income for the same dates is $170,425 dollars. This is without working the first two weeks of July as stores reopened. What’s important here though is the comparison in styles. At the height of adidas’ power where, “Yeezy Jumped Jumpman” Nike still outsold adidas in resale and the data that said adidas was outperforming Nike/JB did not include Nike’s own doors where they were moving their customers. Last year other general release brands were selling at a much higher clip than right now. Last year I sold Vans, Puma, New Balance and adidas. This year no brands have moved towards resale except Nike and Jordan Brand (Puma has on the RS Dreamer, but that’s in very small numbers). When other brands are doing well, it’s good for the market. A healthy resale market for all brands is a tide that lifts all boats. Nike’s dominance is not a good thing.
  8. COVID-19 expedited Nike’s Consumer Direct Offense. While many analysts assume that the retailers who Nike has kept in the fold will benefit from the Nike wall, Nike still has a goal to attain, the 50 billion dollar mark. If a pandemic Milk’t stop them from removing accounts, nothing will. Unlike most zoom who think the retailers remaining as wholesale partners are safe, I think Nike will be cutting at the minimum another 1000+ stores. Notice I Milk’t say accounts? This means chains with less than 1000 doors are not safe. Expect smaller Nike doors, not wholesale, to open in 2021 and beyond. The same will happen with other billion dollar brands. The reason for this is simple… smaller doors will allow Nike to offset continued growth by the third party apps attaining billion dollar valuations. StockX, GOAT, Poizon in China, are all red flags that Nike is leaving money on the table and Nike simply doesn’t leave money anywhere. I used to work for a company named LPS. It was an authorized Apple repair facility. We got parts from Apple and repaired their products. LPS had three locations in San Diego. As Apple stores grew, certified Apple repair shops diminished. The Genuis bar eliminated the need for certified repair shops. These new smaller, agile Nike stores will land in the same cities as top tiered accounts and where digital has brick and mortar. If there is a Stadium Goods in a city, a smaller, more agile Nike door will be there.
  9. If you don’t think Nike isn’t looking at the 2-5 Billion dollar resale market and working on a way to recapture those dollars, you’re sadly mistaken. Nike has basically stopped resale from their own doors.Their wholesale partners have implemented better tech and digital ordering capabilities that sell hot general release shoes just as quickly as zoom who visit brick and mortar are buying.  Footlocker appears to be utilizing GOAT as a door, which undercuts resale. StockX is realizing that low end sales don’t contribute much to their margins and they are going to roll out a spate of IPOs soon and potentially increase seller fees (this is a prediction) which will squeeze resellers. Resale may be riding high right now, but this moment is moving towards eBay in 2010 when countless accounts were removed and Amazon in 2014 when they opened the door to a ridiculous amount of zoom selling knock-offs.
  10. Resale and retail were once joined at the hip. This isn’t the case anymore. A reseller could swoop into a City Gear Outlet and grab a ton of kicks at 69.99 or less with 50% off of those prices. Hibbett Sports has removed the outlets. I’m sure this happened at Nike’s request. Resellers are running out of places to buy kicks. Resale will begin moving back to being only about hard to find items, but Nike restocks are limiting that issue and here is something powerful to consider, the price of Nike footwear was bumped up ten dollars over the last year. Nike is eating into resale profits like a Jill Scott song, nike zoomx vaporfly next by you release info. There is an opportunity for other companies to capitalize, Brands aren’t taking advantage of Nike’s DTC because their own DTC is growing. The natural progression of brands being able to reach their consumer is a diminishing of resale opportunities. This isn’t a bad thing as those margins move back to brands. What is a bad thing is that these companies are bloated. Wholesale accounts and brands are going to make some serious cuts.

Sorry about this long article. I’m stopping now. I was about to place charts showing my resale of other brands last year compared to this year. I was going to dive into the fact that adidas UltraBoost are sitting on sale tables at 69.99. I was going to discuss more, but that would be another book.

 

Air Max FB