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  • This is the Air Jordan 3 Black Cement.

  • This might be the most important sneaker in history.

  • First released in 1988,

  • this is the shoe that started Nike marketing as we know it.

  • This is the shoe that propelled the entire Air Jordan lineage,

  • and perhaps saved Nike.

  • The Air Jordan 3 Black Cement did for sneakers

  • what the iPhone did for phones.

  • It's been re-released four times.

  • Every celebrity's been seen wearing it.

  • There's a site about what to wear with the Black Cement.

  • It's been right under your nose for decades

  • and you never looked down.

  • And right about now,

  • most of you are probably thinking, "Sneakers?"

  • (Laughter)

  • Yes.

  • Yes, sneakers.

  • Some extraordinary things about sneakers

  • and data

  • and Nike

  • and how they're all related, possibly, to the future of all online commerce.

  • In 2011,

  • the last time the Jordan 3 Black Cement was released,

  • at a retail of 160 dollars,

  • it sold out globally in minutes.

  • And that's because people were camped outside of sneaker stores

  • for days before it went on sale.

  • And just minutes after that,

  • thousands of those pairs were on eBay for two and three times retail.

  • In fact, there's over 1,000 pairs on eBay right now, four years later.

  • But here's the thing:

  • this happens every single Saturday.

  • Every week there's another release or two or three,

  • and every shoe has a story

  • as rich and compelling as the Jordan 3 Black Cement.

  • This is Nike building the marketplace for sneakerheads --

  • people who collect sneakers --

  • and my daughter.

  • (Laughter)

  • That's an "I love Dad" T-shirt.

  • For the brands, sneakerheads are a very important demographic.

  • These are the tastemakers; these are the Apple fanboys.

  • Because who else is going to buy

  • a pair of $8,000 Back to the Future sneakers?

  • (Laughter)

  • Yeah, 8,000 dollars.

  • And while that's obviously the anomaly,

  • the resell sneaker market is definitely not.

  • Thirty years in the making,

  • what started as an underground culture

  • of a few people who like sneakers just a bit too much --

  • (Laughter)

  • Now we have sneaker addictions.

  • In a market where in the past 12 months,

  • there have been over nine million pairs of shoes

  • resold in the United States alone,

  • at a value of 1.2 billion dollars.

  • And that's a conservative estimate --

  • I should know, I am a sneakerhead.

  • This is my collection.

  • In the pantheon of great collections, mine doesn't even register.

  • I have about 250 pairs, but trust me, I am small-time.

  • People have thousands.

  • I'm a very typical 37-year-old sneakerhead.

  • I grew up playing basketball when Michael Jordan played,

  • I always wanted Air Jordans,

  • my mother would never buy me Air Jordans,

  • as soon as I got some money I bought Air Jordans --

  • literally, we all have the exact same story.

  • But here's where mine diverged.

  • After starting three companies, I took a job as a strategy consultant,

  • when I very quickly realized that I didn't know the first thing about data.

  • But I learned, because I had to,

  • and I liked it.

  • So I thought, I wonder if I could get ahold of some sneaker data,

  • just to play with for my own amusement.

  • The goal was to develop a price guide,

  • a real data-driven view of the market.

  • And four years later, we're analyzing over 25 million transactions,

  • providing real-time analytics on thousands of sneakers.

  • Now sneakerheads check prices while camping out for releases.

  • Others have used the data to validate insurance claims.

  • And the top investment banks in the world

  • now use resell data to analyze the retail footwear industry.

  • And here's the best part:

  • sneakerheads have sneaker portfolios.

  • (Laughter)

  • Sneakerheads can track the value of their collection over time,

  • compare it to others,

  • and have access to the same analytics you might

  • for your online brokerage account.

  • So sneakerhead Dan builds his collection and identifies which 352 are his.

  • He can see it's worth 103,000 dollars --

  • frankly, a modest collection.

  • At the asset level, he can see gain-loss by shoe.

  • Here he's made over 600 dollars on one pair.

  • I have one of those.

  • (Laughter)

  • So an unregulated 1.2 billion dollar industry

  • that thrives as much on the street as it does online,

  • and has spawned fundamental financial services for sneakers?

  • At some point I asked myself what's really going on in the market,

  • and two comparisons started to emerge.

  • Are sneakers more like stocks or drugs?

  • (Laughter)

  • In fact, one guy emailed to say

  • he thought his 15-year-old son was selling drugs

  • and later found out he was selling sneakers.

  • (Laughter)

  • And now they use the data to do it together.

  • And that's because sneakers are an investment opportunity

  • where none other exists.

  • And I don't just mean the kid selling sneakers instead of drugs.

  • How about all kids?

  • You have to be 18 to play the stock market.

  • I sold chewing gum in sixth grade,

  • Blow Pops in ninth grade

  • and collected baseball cards through high school.

  • The cards are long dead,

  • and the candy market's usually quite local.

  • For a lot of people, sneakers are a legal and accessible investment opportunity --

  • a democratized stock market,

  • but also unregulated.

  • Which is why the story you're probably most familiar with

  • is people killing each other for sneakers.

  • And while that definitely happens and is tragic,

  • it's not nearly the epidemic some media would have you believe.

  • In fact, it's a very small piece of a much bigger and better story.

  • So sneakers have clear similarities

  • to both the stock exchange and the illegal drug trade,

  • but perhaps the most fundamental is the existence of a central actor.

  • Someone is making the rules.

  • In the case of sneakers, that someone is Nike.

  • Let me walk you through some numbers.

  • The resell market, we know, is $1.2 billion.

  • Nike, including Jordan brand,

  • accounts for 96 percent of all shoes sold on the secondary market.

  • Just complete domination.

  • Sneakerheads love Jordans.

  • And profit on the secondary market is about a third.

  • That means that sneakerheads made 380 million dollars

  • selling Nikes last year.

  • Let's jump to retail for a second.

  • Skechers, earlier this year,

  • became the number two footwear brand in the country,

  • surpassing Adidas -- this was a big deal.

  • And in the 12 months ending in June,

  • Skechers's net income was 209 million dollars.

  • That means that Nike's customers

  • make almost twice as much profit as their closest competitor.

  • That --

  • (Laughter)

  • How is that even possible?

  • The sneaker market is just supply and demand,

  • but Nike's gotten very good at using supply -- limited sneakers --

  • and the distribution of those sneakers to their own benefit.

  • So it's really just supply.

  • Sneakerheads joke that as long as it's limited and Nike, they'll buy it.

  • Shoes that sell for 8,000 dollars do so because they're very rare.

  • It's no different than any other collectible market,

  • only this isn't a market at all.

  • It's a false construct created by Nike --

  • ingeniously created by Nike, in the most positive sense -- to sell more shoes.

  • And in the process,

  • it provided tens of thousands of people with life-long passions,

  • myself included.

  • If Nike wanted to kill the resell market, they could do so tomorrow,

  • all they have to do is release more shoes.

  • But we certainly don't want them to, nor is it in their best interest.

  • That's because unlike Apple, who will sell an iPhone to anyone who wants one,

  • Nike doesn't make their money by just selling $200 sneakers.

  • They sell millions of shoes to millions of people for 60 dollars.

  • And sneakerheads are the ones who drive the marketing

  • and the hype and the PR and the brand cachet,

  • and enable Nike to sell millions of $60 sneakers.

  • It's marketing.

  • It's marketing the likes of which has never been seen before --

  • this isn't in any textbook.

  • For 15 years Nike has propped up an artificial commodities market,

  • with a Facebook-level hyped IPO every single weekend.

  • Drive by any Footlocker at 8am on a Saturday morning,

  • and there will be a line down the street and around the block,

  • and sometimes those kids have been waiting there all week.

  • You know those crazy iPhone lines you see on the news every other year?

  • Nike lines happen 104 times more often.

  • So Nike sets the rules.

  • And they do so by controlling supply and distribution.

  • But once a pair leaves the retail channel, it's the Wild West.

  • There are very few -- if any -- legal, unregulated markets of this size.

  • So Nike is definitely not the stock exchange.

  • In fact, there is no central exchange.

  • By last count, there were 48 different online markets that I know of.

  • Some are eBay clones, some are mobile markets,

  • and then you have consignment shops and brick-and-mortar stores,

  • and sneaker conventions, and reseller sites,

  • and Facebook and Instagram and Twitter --

  • literally, anywhere sneakerheads come into contact with each other,

  • shoes will be bought and sold.

  • But that means no efficiencies, no transparency,

  • sometimes not even authenticity.

  • Can you imagine if that's how stocks were bought?

  • What if the way to buy a share of Apple stock

  • was to search over 100 places online and off,

  • including every time you walk down the street

  • just hoping to pass someone wearing some Apple stock?

  • Never knowing who had the best price,

  • or even if the stock you were looking at was real.

  • That would surely make you say:

  • [WTF?]

  • Of course that's not how we buy stock.

  • But what if that's not how we need to buy sneakers either?

  • What if the inverse is true,

  • and what if we could buy sneakers

  • exactly the same way as we buy stock?

  • And what if it wasn't just sneakers, but any similar product,

  • like watches and handbags and women's shoes,

  • and any collectible, any seasonal item and any markdown item?

  • What if there was a stock market for commerce?

  • A stock market of things.

  • And not only could you buy in a much more educated and efficient manner,

  • but you could engage in all the sophisticated financial transactions

  • you can with the stock market.

  • Shorts and options and futures

  • and well, maybe you see where this is going.

  • Maybe you want to invest in a stock market of things.

  • Because if you had invested in a pair of Air Jordan 3 Black Cement in 2011,

  • you could either be wearing them onstage,

  • (Laughter)

  • or have earned 162 percent on your money --

  • double the S&P and 20 percent more than Apple.

  • (Laughter)

  • And that's why we're talking about sneakers.

  • Thank you.

  • (Applause)

This is the Air Jordan 3 Black Cement.

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B1 TED nike market sneaker stock jordan

【TED】The secret sneaker market — and why it matters | Josh Luber

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