Sneakernomics: The Hype Model is broken.

I’ve written about how the sneaker game has changed post pandemic and post Donahoe.? But the way we do business has fundamentally changed as well.

For decades, the sneaker business in the US was built on hype and scarcity. Unrequited demand created interest in a handful of styles and brands. Jordan brand was built into a multibillion-dollar behemoth almost entirely on scarcity.

But during the pandemic that model collapsed.? Nike pushed too much Jordan product (and other key franchises) into the market.? Sell through slowed. Resale multiples collapsed.? I don’t think we can ever get back to where we were in terms of sales, and maybe we shouldn’t try.

A recent example is the holiday Jordan 11 release, traditional the largest Jordan release of the year.? Historically this shoe has sold out on release day.? This year not so much.? I’m hearing reports that sales were off as much as a third from last year’s results.? When I last looked at resale, the shoe was selling for 20% BELOW MSRP. Retailers still have sizes available weeks after the release. All of this would have been unheard of before the pandemic.

This is not to say that some limited release shoes are not working. But the ones that are working are tiny in comparison to the Jordan juggernaut. Small collaborations will always find an audience, but we can no longer count on drops for big growth.

What is working in sneakers is fashion.? Think about what has worked well in sneakers over the last few years: Birkenstock. Crocs. Hoka. On. Samba.? Why have these worked where others have not?? Fashion.? Influencers declared these styles as “cool” and consumers, particularly women, flocked to buy them. While there were shortages of some of these styles, the shortages were not the artificial nature of drops.

One of the keys to this new business model is that it is very female driven. As opposed to drop culture where the brand determined the style, the female sneaker shopper listened to her cohort and decided what to buy.? Brands that try to claim they have the next “it” shoes are likely to fail. The consumer decides, not the brand.

This shift in model means that brands and retailers must listen more closely than ever to what is happening in social media and then respond quickly and decisively.? Brands must be much more strategic in their go-to-market plans.

Managing the marketplace has never been more important. Selling out is not a bad thing as long as it is organic and not manufactured. ?

Brands and retailers must develop a consumer centric distribution strategy, not the outdated channel-based strategy that was simply a drive-through strategy. Brands must understand who their customer is and where they shop (and it may not be where the brand thought they shopped).?

Availability is a key concept here. If the fashion product is not available, the consumer will seek it elsewhere or buy something else.

Retailers will want to develop a more multi-branded strategy that is not just based on fighting for allocations.? Retailers must also understand their consumer better and listen to what they are saying. I see the proper response here as a multi brand, well merchandised, constantly challenged environment.

The game just got a whole lot harder. But the brands and retailers who can execute against this new model can thrive.

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