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Why the internet dooms the sneaker industry as much as it helps it

Few things simultaneously make life easier and harder than the internet.

Take its effect of flattening the world, for instance. It doesn’t matter if two people are a thousand miles away or sitting in the same room, the internet allows them to send or receive money with the mere tap of a smartphone button. Of course, this also means hackers a world away can even wipe out someone’s life savings in a matter of seconds.

From an e-commerce perspective, the internet allows for the selling of literally anything to anyone. Regarding the sneaker industry, this fact turned a culture predicated on love into one based on business. Because of this, the internet is equally the best, and worst, innovation to happen to sneakers.

Today, hyper sneaker enthusiasts — colloquially referred to as “sneakerheads” — are normally the ones scouring the internet for hyped sneakers with high demand. People make tens of thousands of dollars per month simply reselling shoes, a central reason the sneaker resale market is estimated to be worth roughly $1 billion. An entrepreneurial spirit is well and good until you realize in order for those sneakerheads to make that much money, they have to use the internet to ensure the average person never has a chance at the most coveted of releases.

An ever-changing landscape, even notable founders and creative directors of sneaker stores, apps, and businesses — who’ve also been sneakerheads for decades — admit to how drastically the internet changed sneaker culture. Though explanations may vary, most agree the history of sneaker culture can be divided into two eras: Before and after eBay.

A.E. (After eBay)

Yu-Ming Wu is a sneaker enthusiast of more than 20 years and the type of sneakerhead to buy a pair of Off White Air Jordan 1s at a resale price of $1,300. Why? Because “they are so limited and well designed, and they’re incredible.” He’s also the type of sneakerhead to turn his feverish love of all things sneakers into the biggest sneaker trade show in America — aka SneakerCon — and Stadium Goods, one of the most recognizable sneaker consignment shops in the world. He’s seen the sneaker culture change over the last few decades and attributes the rise of the sneaker resale market in America to eBay, and eBay only.

“It became a global thing where anyone can profit from a pair of sneakers.”

“The world of aftermarket sneakers started in Japan with resale shops that sell you sneakers after they’d been released and are no longer available. That was brought to America probably 15 or 16 years ago. Eventually, the whole sneaker marketplace started on eBay,” Wu told Digital Trends. “It became a global thing where anyone can profit from a pair of sneakers.”

The groundbreaking online auction site — where everything from broken laser pointers to grandmothers is auctioned — launched in 1995 and dramatically changed how people lived. By 2005, more than 720,000 Americans used eBay as a primary or secondary source of income. That year alone saw more than $10 billion in merchandise moved via the site in the first six months.

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Because of this dynamic online marketplace, eBay revolutionized sneaker culture by incentivizing sneaker resale and essentially turning the average person into a business. A typical sneakerhead could turn an overflowing closet into their own online store. Today, eBay boasts more than 165 million active buyers, however, this doesn’t necessarily mean you’ll be able to sell your pair of Air Max 95s quickly.

On eBay, sellers and buyers have feedback scores based on the number of negative, positive, and neutral feedback ratings you receive. Unless you own a rare pair of sneakers in high demand, there’s a higher likelihood you have shoes dozens of other sellers have, meaning your feedback score is important to attract buyers. However, the most valuable currency outside of money is hype.

The hype machine

Social media can be an echo chamber at times, with the same opinion being regurgitated by enough people until everyone feeds into it. While that’s terrible for sharing new ideas, it’s invaluable for generating hype about a product. Take Nike, for instance. It promotes a new shoe it has to its 75 million Instagram followers across the world and then watches millions of sneakerheads share it via their own accounts to entice potential buyers. This helps Nike reap monetary benefits without taking out a single ad in a newspaper. It works, too.

In 2017 alone, sponsored Instagram posts received one billion “likes” globally and Nike saw its highest revenue total in more than a decade.

“If you convince enough people a particular shoe is hot, or you have a certain influencer say something similar, most likely the majority of the internet is going to say that shoe is hot,” said Bernie Gross, co-creative director of footwear boutique Extra Butter, to Digital Trends.

“Anyone who has access or a login to Instagram or a website is essentially our competitors now.”

Gross’ Extra Butter has been a staple in the New York City streetwear scene for more over ten years and Gross perceives the internet’s effect on brick-and-mortar retail locations as a gift and a curse. On one hand, being able to follow how sneakers are being hyped by resellers helps them stay on top of trends and informs them of their inventory.

“You can kind of connect the dots to understand where the trends are going. What trends are down, what are on the rise, and that’s purely by understanding what people are trying to resell,” added Gross.

On the other hand, if Johnny from Wyoming has a big enough following on social media and a collection of rare sneakers, he can move in on Extra Butter’s turf, becoming the primary destination for its customers. Gross told Footwear News in 2017 that, “anyone who has access or a login to Instagram or a website is essentially our competitors now.” This is partly why the store tried to thwart re-sellers in its early years.

Who does “first come, first serve” really serve?

“If you have ‘first come, first serve’ for a Thursday or Friday, some kid who has school or a guy who has a job is pretty much out of luck,” Gross pointed out. “So, we’re trying to even the playing field. Instead of doing it ‘first come, first serve,’ we do raffles which rely on luck.”

A novel idea for a store trying to protect itself against the competition. However, a raffle model places a store like Extra Butter in a frustrating catch-22.

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Keith Nelson Jr./Digital Trends

“There was actually a time for us, as a particular retailer, where we were trying to make things fair and really squash the re-seller business — the bots and all of that stuff, and I think that by us deterring re-sellers, we actually might’ve hindered our in-store business,” Gross explained. “Heavy foot traffic and people actually buying goods is what distinguishes a retail location. When it doesn’t have that energy, it can be perceived that the store isn’t really satiating the want and needs of its consumer.”

In other words, thanks to the internet, in order for a sneaker store to survive against competition, it has to serve its competition. To make matters worse, even if a store does open its doors to re-sellers, it likely won’t translate to anything more than hype.

“These are not shoppers. They’re not customers. There’s no ROI (return on investment),” said Copdate founder Andrew Raisman to Digital Trends. “They’re just people waiting for one thing to happen. As soon as the product is gone, those people leave. There’s no money to make from them.”

Attack of the bots

The immense hype surrounding shoe releases made long lines of sleep-deprived people a rite of passage in sneaker culture. You weren’t a true lover of sneakers if you never waited outside a sneaker store in the cold with only the thoughts of the release to warm you. Typically, those lines led to raucous crowds which often required police intervention and shoes selling out before most of those starving online could even get in the door. Online sneaker releases were meant to reduce those lines and make it easier for everyone. Until a new type of consumer upended the entire industry: Bots.

Put simply, a bot is a computer program that can be set to add products to an online cart and make purchases without anyone being next to a computer. If you’re in Spain and see a pair of sneakers only releasing in-store in the United States, a bot is a saving grace. Their impact is extensive. Not only have they helped college students make tens of thousands of dollars but the average person can find dozens of them online with a simple Google search. For those without bots, these programs are the bane of their attempts at buying shoes.

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Elgin Swift, a 42-year-old sneakerhead of 35 years remembers the frustration he felt when attempting to buy a pair of Yeezy Boosts.

“It’s pretty much every Yeezy release,” Swift admitted to Digital Trends. “I have two iPads open, two iPhones, a MacBook Pro, and an iMac — all waiting for the link to go live and then you instantly get sent to waiting room hell. Three to four hours of the waiting screen, all in vain. Meanwhile, dudes are adding 10 pairs to carts with different bots. It’s not rocket science or hard to figure out.”

The app approach

Adidas and Nike recognized this problem was widespread and, ironically, attempted to thwart bots by making the online retail process more human. Launched in 2015, Adidas’ Confirmed and Nike’s SNKRS app are reservation services which require people to use their mobile phones to reserve shoes online, hopefully reducing the likelihood of the involvement of an automated bot.

“You don’t have to wait in line. You get a notification, you hit cop on the phone, and you get an instant reservation for the shoe.”

When Adidas launched its app, the company explicitly stated, “Adidas Confirmed leverages geo-targeting technology to allow for verification of location while protecting consumers from ‘bots’ that often dilute launches in social spaces like Twitter.” A promising motive but these apps only allow people to reserve sneakers at official Nike or Adidas retail locations. This is where Copdate does them one better.

A reservation app which works with 30 stores in 12 states — like Extra Butter — Copdate provides these stores with the same reservation capabilities as Nike and Adidas, without having to develop and maintain their own app. It works in a similar fashion, as well.

“So, the store releases a product through the app and everybody that subscribes to the store gets a notification saying, ‘Hey the reservation for the Yeezys are now open,’” said Raisman. “If you’re Diddy or Janet Jackson, or you or me, we all have the same shot at getting the shoe. You don’t have to wait in line. You get a notification, you hit cop on the phone, and you get an instant reservation for the shoe.”

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Raisman even claims that for one release, nearly 50,000 people tried to log reservations at the same time via the app. He wouldn’t reveal the full scope of how his team prevents bots and hackers from manipulating Copdate but he did explain how your phone manufacturer is key to making sure you get a fair shot at a reservation.

“Our system revolves heavily upon a unique device identifier. For every phone made in the world, there is a unique identifier, like a fingerprint. It’s not a phone number, email address, or a serial number, it’s an actual piece of DNA, or code, that goes into the device,” Raisman told us. “That number is stored in Apple, Google, and all of these databases. Before we let a user access an event that’s taking place, we first validate the identifier of the device talking to us is legit. If that device identifier is legit, then we ping it with Apple.”

Raisman did jokingly concede, “if someone can hack Apple and fake his number, then he gets the Yeezys. He deserves it.” The funny thing is, the way the sneaker culture is evolving, that might happen sooner than he expects.

The future of sneakers

Despite the changing landscape, the sneaker industry shows no signs of slowing down with the global sports footwear market expected to grow every year until 2023. Of course, part of this continued growth will be predicated on a continued increase in sneaker production from major brands like Nike and Adidas — and there’s nothing suggesting this won’t happen.

For example, Adidas recently launched a new manufacturing factory in 2017 named Speedfactory that’s staffed with robots automating the entire sneaker-making process. Soon enough, it hopes this 21st Century factory will be able to churn out a whopping 500,000 pairs of shoes in a single day. The second largest sportswear maker will need every robot-produced shoe if it’s able to reach its goal of generating more than $5 billion in U.S. sales by 2020, too. That means a whole lot more Yeezy Boosts and thus, a continued flow of people using the internet to resell sneakers — sneakers made by robots or not.

“Reselling is just going to be a part of the whole game,” added Wu. “There’s just no way around it. With anything that’s sought after and that has value, there’s going to be a resale market. People resell Supreme, people resell stamps. That’s why sneaker culture is so robust. It’s all this excitement over something they can’t get themselves.”

What may not survive in the future are traditional sneaker stores that simply offer rows of shoes and apparel as its lone shopping experience. Once go-to locations for the freshest kicks, Finish Line and Footlocker have closed hundreds of stores over the last few years. During this time, online sales saw exponential growth across the same period of time.

“…the weaker retailers who don’t offer anything special won’t have any reason to own a brick and mortar.”

“I think a transition to the online world is going to still be prominent, probably even more than it is now,” Wu continued. “Because of this, it desensitizes the behaviors and attention of a consumer and I think weeds out who are the best retailers. If the behavior basically tells us that people are going to do more online shopping, the weaker retailers who don’t offer anything special won’t have any reason to own a brick and mortar.”

The internet may be helping experienced re-sellers snatch up boxes of limited-edition sneakers before the average consumer but it’s also incubating the next generation of business professionals. At SneakerCon in New York last December, an 18-year-old college student named Matthew told us he’s been reselling sneakers since he became a teenager — and now it’s helping him find his career path in life.

Sneakers

“It’s a good hobby to get involved with because it teaches you a lot about business,” he told Digital Trends. “Now I’m at business school and I’m already using the marketing techniques I developed through Instagram or selling through Facebook. The whole business side definitely comes in handy.”

No matter how you look at the internet’s influence on sneakers, you’ll almost always waver between either praising or criticizing it. You could argue that without the internet, sneaker culture would exist as fragmented regions of fans that not only rarely communicated with each other but who also would never share sneakers. Instead, this connectivity created an international phenomenon which now allows a 10-year-old to be exposed to Chinese sneaker culture. But without the internet, you could also argue more sneakers would be on people’s feet instead of on a shelf.

One thing is for sure, the internet will continue to make a lot of sneakerheads rich, and a lot of average people a bit ticked off.

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