While reselling sneakers (or trainers) is hardly a new phenomenon, the advent of online sales has massively expanded the market for second-hand footwear. The Financial Times reckons that trading in sneakers now generates at least $1 billion a year in worldwide sales each year.
Entrepreneurs in China like Lin Li have contributed to the trend. When the Dongbei-native found out that a Nike shop in Kunming had been allocated 26 pairs of a limited-release version of Air Jordans, he travelled all the way to Yunnan to do business, hiring 50 people to camp outside the store overnight. As soon as the doors opened, they pushed and shoved their way in front of the other buyers, grabbing 21 pairs of the highly coveted shoes.
Li soon sold them online for Rmb5,600 a pair (original price Rmb1,299), making nearly Rmb80,000 in profit, he told Caijing.
There’s even a popular local saying: “Those who are in their middle-age play the stock market; those who are in the 20s trade sneakers.”
In part that’s a result of how companies like Nike and Adidas, owners of the sought-after Air Jordan and Yeezy brands respectively, control the release of new shoes. “The brands create artificial scarcity by keeping the supply low to create buzz, increasing demand for their brands. Nike’s Air Jordan has always been a representative of such hunger marketing,” reckons WallStreet.cn.
Now a Chinese company is trying to turn the reselling of sneakers into a billion-dollar business. Poizon, which recently secured funding from Digital Sky Technologies, the Russian firm that has backed Bytedance and Alibaba, is already said to be in the ranks of China’s tech unicorns.
The company – which also counts Hupu, the sports commentary and news portal, as an early investor – is an online marketplace that connects sellers and buyers. Sellers ship their sneakers to Poizon, which goes on to authenticate the product before finding an end buyer (a model it describes as C2B2C). It makes money by taking a commission – somewhere between 7.5% and 9.5% – on every sale. It also charges a small fee for validating the product.
Founded in 2014, Poizon started out in sneaker authentication. Partnering with Hupu, it also operated a discussion platform for sports shoe enthusiasts to trade information about their obsession. In 2016, it added an e-commerce function, directing buyers to its virtual storefront on Taobao. Demand was so strong that it was able to secure financing from Sequoia Capital and Pusi Capital to end its reliance on the Alibaba channel and launch its own online store and mobile app.
Poizon’s monthly gross merchandise value (GMV) reached Rmb200 million ($29.37 million) in the first half of 2018 and Caixin believes that full-year GMV could reach Rmb7 billion this year. The number of monthly active users was more than 1.4 million in March.
“Obviously, as millennials have become the biggest driver of consumption, sales culture has started to change. Meanwhile, the value of sneakers has gone up so much that they have become associated with luxury products. The pie that makes up second-hand sneaker reselling has become a lot bigger,” says Gelonghui, an investment publication.
Poizon now has competitors including Nice, DoNew and UFO. To stand out, it has been adding streetwear items like Supreme hoodies and luxury watches to its product mix. But being the market leader also brings challenges. “Due to the large number of transactions, Poizon has had more problems with complaints and bad press than some of its rivals. Counterfeit goods and inaccurate authentication results, a high commission rate and random cancellation of orders are some of the most common complaints amongst sellers and buyers,” warns Jiemian, a portal.
Some industry insiders caution that Poizon, which has just 17 authenticators (their bios are accessible on the platform), could do more to filter out the fakes. “After this latest round of fundraising, Poizon needs to deal with all the recent complaints about counterfeits. The staff who authenticate the products are humans, not machines, so they will never be 100% accurate. But whether Poizon has kept the number of authenticators low to keep their costs down is a question. With only 17 people authenticating over Rmb200 million worth of products every month, that just seems like an incredible ratio,” TechPlanet, a blogger, surmised.
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