Popular Nike Sneakers Can Be Better Investments Than Stocks

Two weekends ago, the retro release of the Nike Air Max 90′s Infrared colorway was the only thing on my mind on that Saturday morning.

It is a timeless style that any sneakerhead could not afford to miss – that’s right, I still consider myself somewhat of a “sneakerhead” even though I’m not that punk in high school anymore.

Luckily, the local Footaction and Modell’s still had my size in stock and I picked up a few pairs.

This may seem like the obsessive jibberjabber of a compulsive spender deeply immersed in a subculture suffering from a sneaker fetish. But, there is nothing weird about it when it presents a business/investment opportunity.

Economics of “The Shoe Game”
The top echelon of the this subculture includes classic Air Jordans and limited edition Nike sneakers. Like all commodities in the world, they’re part of an economy that is governed by the laws of supply and demand. More and more young kids are being introduced to “the shoe game” and I see everyone trying to be part of the cliques rocking $300 pairs of sneakers. Demand continues to grow and I don’t see any resistance.

Supply decreases as everyone starts to wear their new sneakers. Demand increases as more people adopt this fashionable subculture – and from my personal experience, it becomes an obsession and addiction. The natural effect is a price increase as quantities of the limited sneakers begin to dwindle while the amount of buyers continue to grow.

Any pair of unworn Air Jordan sneakers from the 1990s can easily be worth thousands of dollars (since there aren’t many of them lying around).

Any investor can identify this recipe for a profitable market.

Why Kicks Are More Profitable Than Stocks
My favorite unique property of a popular sneakers is that they have the ability to retain or increase in value despite having been worn and used. Most people feel that it is disgusting to wear shoes already worn by someone else. To the sneakerheads, worn shoes is not a significant issue. On the other hand, condition and appearance is most important. After all, these sneakers are worn to make fashion statements.

If the sneakers are worn but kept in good condition, it is possible to still make a profit after a year or two.

The main reason popular Nike sneakers remain popular is because there is an ever-growing consumer base. If you have the right sneakers, there will always be buyers. The subculture has a loyal following that is passed on to future generations and spreads like wildfire. It is contagious among family members and friends. Soon, everyone is competing with each other to see who has the rarest pair of sneakers among the group.

Although I’m an advocate of frugality, I can’t help but admit that I’m glad that the subculture breeds an addiction that keeps people spending even though they’ll probably never wear the 50 pairs of sneakers in each of their closets. It’s a trait supporting my confidence in sneakers as a great investment opportunity.

Each pair of Air Max 90′s that I bought two weeks ago cost me $94.99. Assuming Nike doesn’t release this classic colorway again in the next two years (and history has told us that it most likely won’t), I can guarantee each pair will sell for at least $130. That is equivalent of a 16.98% annualized return – topping the S&P 500 average return of roughly 9 to 10 percent. But, I wouldn’t be surprised to find myself getting $150 for each (25.66% annualized return).

Disclosure: I do not own any shares of Nike (NKE).

(Photo credit: AchimH)

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