Are Sneaker Resellers the Next Big Target on the M&A Front?

GOAT Flight Club Partnership
A wall of sneaker selections at Flight Club.
GOAT/Giulia White

It all happened on the same day: Digital sneaker reseller GOAT and brick-and-mortar sneaker consignment store Flight Club announced a merger  to create the “world’s largest sneaker marketplace,” and luxury behemoth LVMH made the decision to back NYC-based sneaker consignment store Stadium Goods for an undisclosed sum.

Fueled by die-hard sneakerheads who don’t think twice about dropping stacks for a coveted limited-edition style, the resale sneaker market is estimated to be a rapidly growing $2 billion industry. (Sneakers as a whole raked in $19.6 billion in the U.S. in 2017, according to a report by market research company NPD Group).

In short, the sneaker reselling game, a once-niche corner of the sneaker business, has suddenly found itself in a very attractive position in the eyes of major players in the retail space — and the two megadeals announced last Thursday are just the latest evidence of how hot the market has become.

“There is a substantial amount of buying, collecting and reselling that goes on in the sneaker market, and it tends to attract true sneaker enthusiasts, which may be a relatively tough demographic for regular sneaker retailers to reach in the same way,” explained Jeff Van Sinderen, senior analyst at B. Riley & Co. “So the resellers are able to reach this arguably more elusive demographic that often wants to see the product in person before purchasing — at least more so than perhaps a less core sneaker enthusiast demographic.  That can be an attractive combination for brands/retailers, especially physical store traffic, within the broader backdrop of general foot traffic declines at retail centers.”

Van Sinderen said he wouldn’t be surprised to see it turn into a larger industry trend, with sneaker resale sites gaining more buzz and retailers wanting in on the action. “There are a limited number of attractive areas to pursue for M&A in the space, and this is one of them,” he said, pointing out that demand within the footwear market tends to be cyclical.

But Matt Powell, sports industry analyst at The NPD Group, believes this demand for resold sneakers will be short-lived. In fact, “the resale market for sneakers is collapsing right now, after the oversaturation of Jordans and increasing numbers of ‘limited’ shoes,” he said. “I do expect the sneaker trend to continue, but it will be more sportswear-focused and less performance-focused.”

Either way, shifts in the resale sneaker market shouldn’t hurt the athletic footwear industry at large, Van Sinderen said.

“It’s less of a concern because most of the resale product is rare, limited quantities or vintage, and it is not really available in the broader marketplace,” he continued. “Further, the trend in active sneaker or sneaker-derivative footwear remains solid, and there are health and fitness elements and style elements that are supporting it. While I would expect some elements to evolve, I anticipate that the positive trend will continue for a while.”