The biggest sneaker enthusiasts—so-called “sneakerheads”—began transforming sneakers into collectible, hype-mongering items in the 80s, bolstered in part by the popularization of basketball and the rise of now classic brands like Nike and Adidas.

1) As retailers capitalize on the growing secondary sneaker market, they will need to gird their businesses in the values of the sneakerhead subculture to succeed in the long term.

A increasingly large portion of the sneaker industry is the secondary market, which functions much like streetwear’s resale market, reselling sneakers for an inflated price (distribution). Sneakerheads collect shoes for status, aesthetics, and as an expression of loyalty to certain brands and resellers have existed for years in an unofficial capacity. Much like streetwear aficionados, many sneakerheads denounce the use of bots in the resale market, which turns collecting into a transaction rather than a ceremonious act. “Flippers,” for instance, buy up limited-edition sneakers to make money—not because they’re avid collectors themselves, creating more barriers to devoted collectors. They also bemoan the effects of the burgeoning sneaker industry.

While the secondary market has remained largely unofficial, retailers are now beginning to capitalize on it (evolution). In February 2018, the online sneaker marketplace GOAT merged with the sneaker consignment retailer Flight Club; GOAT will provide Flight Club a mobile footprint and technology, and Flight Club will bring retailing expertise to GOAT. That same month, LVMH Luxury Ventures—LVMH’s investment branch—invested in Stadium Goods, an ecommerce platform founded in 2015 for buying and selling sneakers. Stadium Goods then opened up shop at Nordstrom’s first standalone men’s store in Manhattan in April 2018, which the sneaker company’s CEO and co-founder John McPheters mentioned was a “happy marriage” that will “clean up” the resale market—in May 2018, it announced it would sell on Farfetch, the luxury ecommerce site, where a pair of Air Jordans was marked up to $40,000, in addition to its commerce operations at its own store and website, Tmall, eBay and Amazon. Even Zappos launched a retail concept called The_ONES in 2017, offering a curated selection of classic sneakers both online and in pop-ups. Overall, the secondary market is now valued at more than $1 billion.The spiraling of the sneaker industry from a decentralized system of aficionados to an increasingly monopolized and corporate entity points to the cultural value of sneakers—one that trailblazing influencers and brands have pushed forward so far that it has grown into an uncontrollable beast. The perseverance of consumer channels like Beers’ will be integral in conserving a space for the sneaker community to dictate how the culture will grow—groups that are already criticizing the buyers who seize shoes with the help of bots (distribution).

While these retailers are tapping into a fervent consumer base and in some ways working to grow the sneaker industry, they will have to strike a delicate balance between controlling it to make a profit and allowing sneakerheads to steer it—the latter will be vital to maintaining the culture in the long term and for the business of sneakers to scale effectively. It’s likely that over time, as retailers like Flight Club, GOAT and Stadium Goods increasingly dominate the sneaker space, these online communities will serve both as a way to conserve the founding values of the sneakerhead culture and as a way to voice criticism. While brands and retailers can certainly contribute to a culture, their success depends on the authenticity of their mission, business model and products—only then will it feed a virtuous cycle. Capitalizing on and wielding authority over a market could erode the “treasure hunt” aspect of sneaker collecting for avid collectors, devaluing and diluting the sneakerhead community as subculture.

Die-hard sneakerheads, for example, are known to keep their shoes meticulously clean—a ritual that most modern-day sneaker wearers do not respect. Social media also sparks heated debate—as one sneakerhead commented on Complex, “sneaker culture has been trash since instagram got big. Instagram killed sneaker collecting. [It] flourishes at its best as a subculture.”

The value of sneakerheads

Amid the officialization of the secondary sneaker sphere, sneakerheads are simultaneously bolstering and overseeing the community with their own social channels (distribution). These forums provide a place for consumers to discuss products, ask questions, offer recommendations and reviews, and warn about scams. Like the beauty buffs in the cosmetics sphere who are increasingly flocking to skincare-related Slack channels and subreddits (/r/SkincareAddiction attracts more than 450,000 unique visitors, including consumers, chemists and beauty bloggers to help interpret purported product benefits) sneakerheads log on to blogs and YouTube.

Complex, a magazine that focuses on youth culture (streetwear, sneakerheads and hip hop, among other topics), has an entire tab on its site devoted to sneakers, as well as a popular YouTube show hosted by Joe La Puma, the Director of Content Strategy, who goes sneaker shopping at Stadium Goods with various celebrities. Sneakerheads also have a new star in Tiffany Beers, who recently began preaching her vast sneaker design knowledge on her own YouTube channel. The accessibility and authenticity of Beers channel provides consumers a chance to gain real insight into the products from her 13 years as Nike’s “senior innovator”—a position she left in August 2017. While other sneaker reviewers create “unboxing” videos and gauge the “coolness” of a new shoe design, Beers shares bona fide expertise on function, design and manufacturing.

Outlets like Beers’ are crucial to the future of sneaker culture, especially now that consumers want to know the ins and outs of what they buy more than ever, but don’t always receive useful information from the brands themselves. Especially for the brands that favor using elusive language and PR jargon to describe and market their products, the more consumers take it upon themselves to create online reviews—and as former employees like Beers share their input—brands need to step up to take responsibility for what they produce and sell, even if it’s just a live Instagram video. Doing so will both protect and enhance brand equity—and can also buffer a company from incidents that have the potential to unravel years of work.

2) Nike dominates the sneaker market, but must prioritize consumer interests over business ventures to maintain this authority.

When it comes to the sneaker industry as a whole, Nike continues to hold a coveted position, less as a company than as a cultural hegemon. Known for its performance-driven and innovative designs, the company made $34.4 billion in 2017 revenue. Its slogan, “Just Do It,” is practically universally known, and its classic styles like Nike’s Air Jordans and Air Force 1s are cultural icons that every sneaker brand wants to emulate and every sneakerhead wants to collect.

Much like Ralph Lauren, Nike’s claim to fame stemmed from unanticipated influences. The Cortez, Nike’s first track shoe, debuted in 1964, less than a decade after the company was founded. In the “sampling” tradition of hip hop and streetwear, the original model was a facsimile of an Onitsuka Tiger shoe, known today as the Corsair. By the 1980s, it grew into a sign of allegiance among gangs, and only began to shed this association after the end of the Los Angeles Riots in 1992. Since then, it has transitioned into nearly a ubiquitous style, from the shoe’s cameo in “Forrest Gump” to the pages of Vogue, from the feet of Farrah Fawcett to Kendrick Lamar (accessibility).

Over time, Nike, along with other brands like Adidas and Asics, put sneakers on the map as a standalone industry, which today is worth more than $55 billion. Thanks to the casualization of apparel and the growth—though now slowing—of the activewear and athleisure industry, the sneaker market continues to grow. Whereas sales of running shoes dropped 7% and training sales fell 15% in 2017, sales of leisure models rose 17%, ranking in $9.6 billion.

Innovation and evolution

As with other businesses that champion cultures, Nike is attempting to strike the balance between growing the sneaker culture and maintaining a prominent—and lucrative—place in it (scalability). It continues to create new models that improve shoe performance and sustainable manufacturing: Nike Epic React Flyknit features a harder rubber on the toe and heel to protect runners from the harsh effects of pavement and it has recently begun to use 3D printing to streamline its supply chain. The company also founded the Nike Explore Team Sport Research Lab in 1980 and released a sustainable development manifesto in 2016, outlining plans to minimize its environmental footprint and transform manufacturing through sustainable technology and labor. Though Nike doesn’t release its R&D expenditures, industry experts estimate that the company has spent more than $2.5 billion on the sector in the last five years.

With the rise of competitor Adidas, whose sales (though much smaller than Nike’s) are gaining speed and reaching younger demographics, Nike is striving to reach new audiences. In March 2018, it released Unlaced, a line of sneakers—including classics like the Air Force 1s—with unisex sizing targeted specifically at female sneakerheads and in May, it collaborated with Virgil Abloh, the founder of Off-White, to create dip-dye Nike Vapormax shoes. Nike has also built out its plus-size athletic wear and other inclusive styles like the sport Hijab, reacting to the need for more diversity in the sneaker and sport apparel industry as a whole. These moves are helpful to grow the sports apparel industry, while simultaneously serving the company’s financial needs. In early 2018, Nike announced that some of these initiatives are part of its strategy to grow the business from $6.6 billion to $11 billion by 2020.

While the sneaker industry continues to grow, Nike’s cachet will be determined by its sensitivity to shifts in sneaker culture and consumer needs (evolution). Similar to the Ralph Lauren re-release of Stadium and Snow Beach, Nike began selling an early version of the Cortez model in 2017 to celebrate the shoe’s 45th anniversary. One metric to gauge an item or a brand’s cultural weight is how readily it attracts controversy, and the Cortez re-release sent reverberating repercussions Nike’s way. For some, its entry into the mainstream is long-awaited. But for others, more widespread adoption of the Cortez diminishes its rich history. As Isack Fadlon, the owner of the sneaker store Sportie L.A., put it: “The Cortez put Nike on the map in an organic way… Now they’re trying to push and manufacture the excitement around the shoe, and it doesn’t feel as authentic as it once was” (authenticity).

Company culture

But at times, critics argue that the financial goals behind some of Nike’s initiatives are too transparent to masquerade as anything socially-minded. Most recently, concerns about the company’s internal “boys club” atmosphere are surfacing and affecting consumer opinions of the brand. Since March 2018, 11 male senior executives departed or announced they would leave Nike, followed by reports of employees about the company’s toxic workplace environment.

Though Nike’s reputation dipped in the light of the news, consumers still value the brand; likely, Nike was protected by its long history and elevated status in the athletic industry, as well as its subsequent promotion of women to top-level positions. Still, as more brands downplay their corporate nature and highlight their ideational side, dissonance between the values a company professes to consumers and what values the company governs with behind the scenes can destabilize consumer perception (authenticity). Particularly as more shoppers want to know who made their their products, how they were manufactured, and what employees think about the brand, transparency—and coherency—between the internal company culture and consumer-facing marketing will become a greater impact on consumption habits (evolution). At a time when Nike hopes to regain and grow its market share, it needs to internalize these values—otherwise it will erode its brand equity as consumers view projects like Unlaced as a money-making ploys rather than an inclusive and progressive ventures. Though it remains a preeminent force in the sneaker industry as an innovator, to keep holding the reins, Nike needs to serve consumers and employees more than its own business interests.