Investing

Can You Really Get Rich From Reselling Sneakers?

Of all the things you might spend $25,000 on—college tuition, a new car—a single pair of shoes probably didn’t make it onto your list. (And we endorse that decision.) Yet, back in 2017, that’s exactly what someone paid for a rare sample of a Chanel, Pharrell Williams and Adidas sneaker collaboration. That’s more than a 2,000-percent markup from its non-sample price tag of $1,160 and a 90,000-percent jump from the $28.50 materials and labor cost.

While shoes this pricey are definitely the exception—the average sneaker costs around $58—the shoe resale market has been hot for years. And now, even big retailers want a cut. Earlier this month, Foot Locker invested $100 million into resale marketplace GOAT.

Big money-making potential continues to attract individual resellers, too. By standing in line for a few hours (or days) to buy just-released sneakers to flip, so-called “sneakerheads” can double, triple or even quadruple their money. Benjamin “Kickz” Kapelushnik, for one, turned his sneaker-selling hobby into a $1 million business—all before he turned 17.

Cha-ching! Sign me up.

Not so fast. There are also plenty of ways to lose here. The shoes that most frequently command high returns—known as “deadstock”—are never worn, in pristine condition and stored in original boxes. Any damage can dramatically reduce the sale price, leading some serious collectors to pay for protective, climate-controlled storage space. (Apparently, humidity ruins sneakers.) And don’t forget—reselling marketplaces make money by taking a cut of sellers’ proceeds.

Other factors, like a saturated marketplace, can also devalue your investment. For example, when Kanye West and Adidas drastically increased the number of Adidas Yeezy Boost 350 Triple Whites last fall, the going rate on fashion reseller StockX fell from about $100 above retail to roughly equal to retail prices almost overnight.

Of course, tastes change over time, too, which can further eat into potential returns. Anyone remember when the Beanie Babies bubble burst?

But aren’t all investments risky?

That’s true. And while wild swings in value could happen with individual stocks, too—hey, MoviePass—stock market investors can protect themselves in ways that are difficult for sneakerheads to emulate. (Hint: It’s with broad diversification.)

Individuals can conceivably own a collection of thousands of shoes. But for the average sneakerhead, who earns around $46,000 a year and spends $314 a month on shoes, that kind of diversification could take years, if not a lifetime, to achieve. Most first-run, desirable shoes retail for nearly $200. Without a good diversification mechanism, individual collections are more likely to feel the full brunt of market swings (say, Adidas’ decision to flood the market with Triple Whites).

Related: How Diversified Does Your Portfolio Need to Be?

What’s more, making money from flipping sneakers requires a lot of hustle. To get the peak price on most shoes, you only have a few weeks’ window to resell before demand goes cold, Adam Gage, a sneakerhead and shoe consignment shop owner, told COMPLEX.

Passively investing in the stock market through diversified exchange-traded funds, on the other hand? You can sit back and let it ride. Over the past 90 years, the S&P 500-stock index has seen nearly 10-percent average annual returns. That means your money can double about every seven years. Not quite as sexy as the sneaker game, but your money’s working for you, not the other way around.

Bottom line?

Grab a pair of Air Jordan III Black Cements to wear if you want. Or try your hand at flipping kicks—if you can afford it. But if what you’re really after is steady, consistent growth over the long term, it’s hard to beat the stock market.

Related: Here's Why It Pays to Invest for the Long Term

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