In July 2019, the American marketplace for limited edition sneakers, GOAT, made clear its intention to capitalize on China’s 400 million millennials. The website, one of the biggest platforms for the C2C resale of high-end footwear, announced the launch of a China-specific app, a WeChat Mini Program, a Hong Kong distribution facility, and a Shanghai event featuring NBA stars and deals on their “rarest and most exclusive” sneakers.
It was a move that typifies the recognition among many Western businesses that Chinese consumption of rare apparel and footwear has become as significant as more traditionally established markets. Crucially, the millennial and Gen Z shopping behaviors that are driving this investment have moved away from disposability in favour of occasionally worn, highly priced editions.
Although the market for exclusive sneakers and streetwear began as a DIY subculture in the U.S., its designers and brands have become a serious draw for luxury fashion houses seeking to leverage its credibility. Off-White’s Virgil Abloh has ascended to the head of Louis Vuitton Menswear, Shanghai’s Yeti Out collaborated with Coach, and Kim Jones of Dior Men’s has even worked with KAWS to produce a highly sought-after collection. Similarly, GOAT’s fellow resellers Stadium Goods, which was recently purchased by the online luxury fashion marketplace, Farfetch, while the StockX website was valued in the New York Times at more than $1 billion. With Abloh’s Nike Air Max 90 collaboration currently being sold on StockX for almost nine times their initial price, this is a consumer set willing to invest in the right products.
Streetwear, Sneakers, and Chinese Consumers
The market for these goods is already established in China, where young streetwear enthusiasts have fuelled a demand for exclusivity as part of China’s$9.5 billion athletic footwear market (the world’s second largest). According to figures from Transparency Market Research, the Asian footwear market will continue to expand, with Chinese millennials set to constitute up to 69% of the market by 2021. GOAT’s founder, Eddy Lu, has admitted that China, which is the company’s biggest international market, is vital for growth. “The sneaker community has grown tremendously in China, especially with the rise of basketball and hip-hop culture.” Accordingly, Lu continued, “we believe China is the perfect market to begin our global expansion.” For luxury brands targeting this big-spending set of young sneakerheads, understanding their emergence is key to unlocking their market potential.
Insights from Chinese Sneaker Culture
Sales of luxury goods in China already constitute over a third of the global market, and projectionssuggest that it will reach 44% by 2025. McKinsey’s 2019 assessment of this phenomenon leaves no doubt who will be behind this future rise, making the observation that, “China’s affluent post-1980s generation is fuelling luxury buying right now. They grew up as China emerged as an economic power and are now at the peak of their career and earnings.”
But while the demand for exclusive goods is primed by economic growth and the generational shift to a younger audience, this is only part of the story. According to GOAT’s Lu, their recent $100 million investment from Footlocker will be used to push into the Chinese market with an acute awareness of the need for cultural specificity. To capture the attention of collectors of limited Yeezys and Jordans, brands require a native offering that eschews cookie cutter approaches. Lu commented,”We know China is a unique market and if we use the same strategy as the U.S., we’ll likely fail.” He added, “We are building this product with a local team in order to provide the Chinese consumer with a better, more personalized experience.”
It’s a view shared by StockX’s CEO, Scott Cutler, whose estimate for the billion-dollar company is that “20% of the market is in Asia, with about 11% of that in China.” Cutler suggests, “we already have a material amount of our buyers coming from China,” and although much of this is in English, the future looks different. Cutler reveals, “We’re introducing local payment methods later on this year. We’ve got Alipay and we are working quickly to be able to launch a native, localized language experience. We see tremendous growth (as we’re able to provide localized support and localized payments) in providing a native Chinese experience.”
Cutler is clear that there are several distinct reasons for the growth of this market, and so for the need to cater to young Chinese buyers. Primarily, Cutler observes, the strength of the Chinese economy is at the root of streetwear’s popularity. “Obviously there’s the rise of the stronger consumer in China over the last decade.” But, he continues, “there’s also been a really significant rise in certain brands in sports and fashion. So, the NBA’s an example of a really strong presence in China. After Yao Ming there has been a lot more Chinese who embraced that world and began following players and teams. So, sneakers, in that example, are an outgrowth of sports.” This love for the NBA, which now has 150 million Chinese social media followers, is mirrored in brand popularity for Chinese buyers on StockX, which he ranks in order as “Jordan, Adidas, Nike, Supreme.”
Alex James, founder of the streetwear brand Pleasures, spoke at Shanghai’s Innersect conference of how this broadening of appeal has also been enabled by the way “the government has really loosened up over the years.” According to James, even outside of Shanghai and Hong Kong, the whole scene is driven further by “rappers in the US, K-Pop stars in Korea, rappers in Japan.” For him, spending is now occurring across limited edition, luxury brands, and vintage, because, “people want to mix together different influences and show what they’re into.”
For luxury brands with similar desires to increase their appeal in this market, then an attention to the cultural interests of their target demographic must be considered. Likewise, in addition to the content, consumption of high-end goods is driven by the delivery method. StockX’s Scott Cutler sees the role of social media as crucial. “When we see Chinese influencers would wear a particular brand of shoe and highlight that on social media, we’re able to see a significant and almost immediate demand for that particular sneaker. Then people go out to try and find it; where can I find that shoe, who has that available.” Part of the success of companies like StockX and GOAT then derives from the fact that, as Cutler relates, “those shoes are always available, they’re never sold out.”
What can be learned from the growth of street wear and exclusive footwear is that Chinese Gen Z and millennial buyers respond to brands that offer them limited edition goods in a way that grants them constant access through their own preferred communication channels. Perhaps the final insight though belongs specifically to companies like GOAT and StockX as it concerns the issue of authenticity. According to Pointer Brand Protection’s Fiona Gao, one problem that may have hampered the growth of many luxury brands in China has been the lack of a trusted infrastructure.
Gao suggests, “People know that the supply chain is already compromised by fakes and that limited availability invariably leads to counterfeits. For consumers who really want these exclusive products, this has proved off-putting.” This may be one of the reasons for StockX’s position in Asia according to Cutler. “The fact that we stand in the middle and authenticate drives trust and transparency to a much higher degree, so we’re the first stop for buyers in the marketplace looking for these items.”
Ultimately, the gamble being taken on Chinese expansion by companies like GOAT may succeed for just this reason, and it may also prove profitable for other brands who can learn from their lesson. Gao continues, “for brands to succeed they should see the development of trust-based marketplaces as something to emulate. If they can provide similar guarantees of authenticity at every stage in a product’s lifecycle then they may also be able to increase trust and sales.” Whether luxury brands are ready to offer verification services to resold items is unclear given their desire to limit availability, but the market will be watching closely for how well GOAT, StockX, and others proceed with the marketing of their trusted exclusivity.