Why A Massive Luxury Retailer Is Betting Big On Sneakers
Whether you’re a brand, an individual who can punch their credit card info in at the speed of light, or a company facilitating the endless buying and reselling of rare kicks, if you're involved in the sneaker business in 2018, you're probably hitting it rich. That’s how it’s starting to feel, at least, as news of sneaker and streetwear companies hitting the jackpot pile on top of one another.
This year alone, StockX took in $44 million in investment money, Grailed grabbed $15 million, and Goat merged with Flight Club while pulling in $60 million. The latest news coming out of the 16-block radius in lower Manhattan where Stadium Goods, Grailed, and Flight Club are all headquartered—Solecon Alley?—is that luxury online retailer Farfetch has acquired sneaker reseller Stadium Goods at a valuation of $250 million.
The news involving Stadium Goods and Farfetch is a good deal more interesting though than Sneaker Company Takes in Large Amount of Cash. Farfetch is one of the most successful online luxury retailers—the company went public late this summer at a valuation of $6.2 billion and is on its way to do over a billion dollars in sales this year—and it’s making a statement: sneakers are a vital part of its future.
Stadium Goods is the best example of the ways luxury and sneakers are now impossible to untangle. Before this Farfetch acquisition, the investment arm of LVMH, the fashion conglomerate that owns Louis Vuitton, Dior, and Celine, put money into Stadium Goods.
“The lines are blurring: it's pretty clear that luxury customers are very, very excited about streetwear and sneakers and streetwear guys are very excited about luxury,” said Stadium Goods co-founder Jed Stiller Wednesday on a call with his co-founder John McPheters and Farfetch CEO José Neves. And while Stiller says the lines are “blurring,” it might be truer to say that now they feel like one single thread. Sneakers are already the fastest growing category on Farfetch, and styles from Gucci and Balenciaga are “already a very big part of Farfetch’s sales,” according to Neves.
By acquiring Stadium Goods, Neves is hoping to get even deeper into the sneaker business.
“This is a market we know well,” Neves said of sneakers. “What we did not have was any presence in the core sneakerhead’s secondary market.” But the relationship between the two is natural, he said. Neves argued that resale items and core styles work best when paired together, where gone-in-seconds collaborations can stoke the fire for the other less-limited styles its sitting right alongside.
For now, customers will find a limited amount of Stadium Goods items on Farfetch, but the selection will continue to grow over time. The key to making this deal work is that Stadium Goods, unlike many of its competitors, actually holds inventory—meaning that instead of waiting for a transaction to take place before a seller ships out their shoes, Stadium Goods buys shoes and pre-authenticates them so they’re ready for shipping as soon as they’re bought. “If you're a luxury customer, think about placing an order and getting a cancellation because actually the shoes do not exist or are not authentic or having to wait a week even if everything goes well,” Neves said. “To me, this model is not scalable for a luxury customer.”
Other sneaker retailers will have to wrestle with the same problem as the market matures. Neves pointed out that retailers like Amazon, or JD.com in China, have seismically shifted shoppers’ expectations: customers can get cranky when presented with anything but two-day shipping. It’s why luxury retailer Mr Porter drives a van around New York to get customers their orders the day...they order them. As sneaker retailers grow into mainstream businesses, they’ll find customers demanding mainstream-grade service. (Despite the fact that all signs seem to point that while two-day shipping might be a great deal for the customer, it’s terrible for the parties involved in making that speedy turnaround possible)
Of course, all of that market predicting relies on the idea that the sneaker business will never stop growing. Fashion is still an industry dominated by fickle trend cycles that can make what’s popular one day irrelevant the next. It’s possible we trade our sneakers in for boat shoes come 2019. Companies like Goat, StockX, and Stadium Goods are all making separate bets about the future of sneakers. Goat, by partnering with Flight Club, is putting its money on hardcore sneakerheads; while StockX is trying to create a stock market of things, of which sneakers are but one part. Stadium Goods, meanwhile, is now all-in on the idea that sneakers are now firmly luxury goods.
“We've seen activity in the space. LVMH invested in us, Virgil Abloh tapped as the creative director for Louis Vuitton, a million other things point in that general direction,” Stiller said. “We see that as something in its relative infancy and will continue to grow moving into the future.”