Korea’s sneaker resale market is gaining traction as it becomes increasingly lucrative for buyers and sellers. The $2 billion sneaker resale market is expected to triple in size to $6 billion by 2025, grabbing the attention of companies of all sizes.
Just a few years back, the sneaker resale market was dominated by startups, but now even traditional retail giants such as Lotte Department Store are getting in on the game.
This is not surprising given that the local sneaker resale market is estimated to be worth 500 billion won ($420 million), with full-fledged growth on the horizon. During the first half of 2020, almost 41 billion won ($34.5 million) worth of resale sneakers were traded on Bungaejangter, a second-hand shopping platform, marking a 34% increase from 2019.
The surging interest in the sneaker resale market is largely owing to the trend of footwear giants such as Nike collaborating with celebrities to create limited-edition items. This targets the consumption behavior of the “MZ generation” (encompassing millennials and Generation Z, or those born between 1980 and 2000), which includes opting to wear expensive shoes even if their clothes are modestly priced.
The MZ generation’s shopping habits also feature the “fear of missing out”(FOMO) and attraction to limited items. The sneaker resale market is a channel into the needs and desires of next-generation consumers.
A prime example is the Nike Air Force 1 Para-Noise, a collaboration between Korean singer and fashion icon G-Dragon and Nike. The sneakers trade anywhere from 3 million won ($2,524) to 20 million won ($16,822), depending on the color. The original selling price was 219,000 won ($184).
And now online platform giant Naver, fashion e-commerce platform Musinsa, and conglomerate-owned Lotte Department are joining in the race.
In March, Naver launched an online sneaker resale platform, Kream, through its subsidiary platform SNOW. In July, Musinsa started SoldOut, a limited-edition sneaker e-commerce platform. Recently, Lotte Department announced it was teaming up with Out of Stock, Korea’s first sneaker resale platform, to foray into the sneaker resale business to draw in MZ generation consumers.
Lotte Department’s entry has garnered much attention considering it is one of the largest shopping outlets in Korea – similar to Bloomingdale’s in the US. Earlier in April, the retail giant set up a team dedicated to sneakers as well as a high-end sneaker boutique shop, Sneaker Bar.
On August 7, Lotte Department opened a massive Nike store spanning over 1,122 square meters in its premium section, as the footwear giant only sells limited-edition sneakers in major stores. This is the first time for a domestic department store to house a Nike megastore – almost 7.5 times bigger than the existing store – reflecting Lotte’s commitment to the sneaker business.
The motivation behind tapping into the sneaker resale market is very clear – it is profitable.
“Sneaker reselling has become a new way for the next generation to make profit. They can gain high returns in a much shorter time compared to returns from real estate or the stock market,” said Ho-sup Kan, a professor at Hongik University Fashion & Design.
Consumers may pay a listed price of 200,000 won or 400,000 won for a pair of shoes, but if it is considered to be a limited-edition item then the price may skyrocket tenfold or even hundredfold when resold. Many buyers purchase shoes for investment rather than for wearing.
Such explosive returns are not limited to new shoes. In 1972, Nike created 12 pairs of shoes for the US national track team participating at the Munich Olympics. A pair of these legendary 1972 Nike Waffle Racing Flat “Moon Shoes” sold for $437,500 at Sotheby’s in July 2019, becoming the most expensive shoes ever sold at auction. The shoes were not in wearable condition but fetched the high price due to their investment value.
Reselling is defined as purchasing an item without the intention of using it, but to sell it for a higher price. It is different from refurbishment, where a product with a minor flaw is sold for a lower price, and the second-hand market, wherein used items are sold at low prices.
Resale market players are expected to compete fiercely to secure market share in this highly profitable market. A Musinsa official pointed to the inevitability of head-to-head competition between resale market players given the relative newness of the market.
“The ability to secure hardcore enthusiasts will determine the fate of the domestic sneaker resale market.”
By Ji-Hye Min
<Edited by Danbee Lee>