How To Make a $200 Sneaker Worth $8000

Called the sneaker riots, the response to the re-release of the Air Jordan Retro 11s was like the Pigeon Dump. For both of these limited edition events, the lines were long and the supply was low. Many of those who could buy one or two pair resold them on eBay for double, triple or more. Now also for the new LeBrons that retailed for $250, sneakerheads hoped to get $900.

Where are we going? To how Nike differentiates itself.

Shooting for High Prices

On eBay, the Nike limited edition market totals close to $200 million annually. Below you are looking at average secondary market prices. The Lebron 10 What the MVP, originally a $200 pair of sneakers averages more than $2000 on eBay. Astonishingly, for the $250 Air Yeezy designed by Kanye West, 24 people paid more than $8000.

From FiveThirtyEight

Fascinated that a size 13 could add value, I’ve included a graph about sneaker size from a sneakerhead website:

Marketing Power

With more than $200 million to be made in the secondary sneaker market, observers ask, “why?” Why would Nike forfeit so much money? After all, to diminish the scarcity, it could add to supply. But you can also see how limited edition hype generates “social signaling,” a cool image and less discounting.

Our Bottom Line: Oligopolistic Competition

The markets in which oligopolies like Nike compete are composed of few sellers and millions of buyers. While those sellers have price making power and huge production capability, many of them face the challenge of product differentiation. Isn’t Nike saying, “We are different” through their limited editions?