Why Sneaker Resale Is the Hottest M&A Bet of the Moment

Sneakerheads aren’t the only ones pouring money into the resale market these days — retailers are increasingly investing millions in secondhand marketplaces, making the space one of the industry’s most active targets for mergers and acquisitions.

On Thursday, Foot Locker announced that it would invest $100 million in GOAT Group, the parent company to resale heavy hitters GOAT and Flight Club. The deal is the largest the retailer has made in its 44-year history and comes less than two months after the luxury e-commerce platform Farfetch snapped up sneaker and streetwear marketplace Stadium Goods for $250 million, buying the company from its co-founders and minority owner LVMH Luxury Ventures.

The deal shows how far the space has come in less than half a decade (GOAT and Stadium Goods were founded in 2015; Flight Club, the industry pioneer, was launched in 2005). Once considered a niche interest of die-hard collectors, the sneaker resale market is now worth an estimated $2 billion in the U.S., according to data from StockX, another online marketplace. The primary U.S. sneaker market, meanwhile, is worth $19.6 billion, according to The NPD Group Inc.

For a retailer like Foot Locker, which has weathered seismic changes in the retail environment in recent years including the rise of e-commerce and the decline of a large share of America’s malls, joining forces with a company like GOAT is one way to adapt to the new consumer reality.

Susquehanna Financial LLLP analyst Sam Poser said that retailers are likely taking interest in the space because of its forward-thinking potential. “You have larger companies that need these very young entrepreneurial people that are really tied into the newest, best digital stuff and the way the younger affluent consumers are shopping,” he told FN.

Still, it remains to be seen what Foot Locker’s long-term intentions are: Will it eventually acquire GOAT, like Farfetch did Stadium Goods?

“I think the meteoric growth in resale has slowed, which is why companies are looking to sell now,” said Matt Powell, NPD’s senior sports industry analyst. “No one tracks the sales here, so everything is an estimate. But the big multiples in resale price we have seen appear to be coming down.”

For peer-to-peer marketplaces, then, investments from bigger industry players are a sign the space is reaching maturity. The Foot Locker deal may be an indicator of what’s next, though: The retailer has 3,000 stores across North America, Europe, Asia, Australia and New Zealand. And while it hasn’t disclosed details of its plans for GOAT ahead of its March 1 earnings call and March 28 investor day, there’s a good chance it will be leveraging its physical footprint to bring some elements of the resale experience to its brick-and-mortar locations.

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