The Bullish Guide To Investing In Streetwear
How much can an Oreo cost? If it has a Supreme logo, over $90,000 on eBay.
Supreme x Oreo is one of the streetwear brand’s latest drops for the 2020 Spring/Summer season. While the retail price was a meager $8, a bidder on eBay was bidding for more than a thousand times its original price.
This is a telling example of how highly coveted streetwear has become. The Google Trends data for the term streetwear in the U.S. also demonstrates the growing interest in it since 2004. The search increased especially steeply around 2015 and has remained high.
How can companies like Supreme drive “hype” like this?
The not-so-secret sauce is the “drop,” a limited release of merchandise. By supplying only small quantities of items and advertising them as so, brands cleverly craft an image of scarcity. This makes people want to buy, increasing the demand for the item and thereby the price as well.
Marketing channels and communities of streetwear enthusiasts – often referred to as “hypebeasts” – also build up the excitement. Some social media communities like The Basement have become places where members can buy and sell sneakers, discuss sneaker news, and in some cases, even share personal stories. Streetwear-focused editorial sites such as Hypebeast and Highsnobiety, as well as traditional fashion media outlets, are also good go-to sources for streetwear news.
Given such popularity in streetwear, one should seriously consider hopping on the bandwagon. Bullish presents three different ways for investing in streetwear: First, buying and reselling streetwear items; second, investing in public companies or following a company that will soon go public; and last but not least, starting your own streetwear company.
Be a “hypebeast” and flip streetwear
One way to make some bucks is literally “copping” (buying) and “flipping” (re-selling) streetwear items. But one must be a dedicated hypebeast who could line up hours (or days!) in front of stores or frantically click to buy online at the exact time of a drop.
But resale platforms do make it easier for hypebeasts to flip their purchases. One of the most popular platforms is StockX, a “stock market” for streetwear. It’s a platform where buyers can place a bid and sellers can place an ask, and there’s a deal if the prices match. According to the Streetwear Impact Report by Strategy& and Hypebeast, 36.5% of the consumers usually go to buy or resell items at StockX. GOAT and Grailed, other retail platforms, were also chosen by 19.3% and 16.3% of consumers, respectively.
Other resellers that are not specific to streetwear, such as eBay or The RealReal, are also options for buying and selling streetwear. Even Sotheby’s, one of the largest luxury goods brokers, hosted a rare-sneaker auction last year, where a Canadian investor and collector Miles Nadal broke the world record by buying Nike Waffle Racing Flat Moon Shoe for $437,500.
So how does one actually flip streetwear on these platforms and make some bucks? If you’re wondering, StockX has a guide for you.
First, more than 70% of StockX orders sell for at least its original retail price, so chances of losing money are relatively slim. But there are factors – such as supply, brand, collaboration or size – that determine how profitable resale could be. StockX points to supply as the most important factor. Items that are released in small quantities will likely be resold for higher prices.
There were some brands and series with trends to be aware of. Nike SB had the highest premiums on StockX among major groupings, reselling for 1.95 times retail price on average. In fact, a pair of Nike SB Low London was sold for 83 times the retail price (~$14,000).
Surprisingly, however, Jordans showed disappointing gains on average. While certain Jordans sold for as high as $18,257 on StockX, some others sold for way below retail value. This somewhat contradicts the general perception that Jordans would be popular resale options.
Also, collaboration items weren’t guaranteed an expensive resale on StockX. For example, Nike x Off-White, resold for nearly four times the retail price on average. But Adidas x Yeezy had a relatively low retail premium, only reselling for 1.65 times the retail price on average.
Still, high-profile collaborations are worth noting. According to a report by The RealReal, a consignment store that Bullish recently profiled, the average resale value for streetwear increased 160% in the past decade, thanks partly to collaborations. Supreme was the top brand with the strongest resale value on The RealReal from the past decade – and the Supreme x Louis Vuitton Box Logo Hoodie was its best-value item.
Here’s another burgeoning feature to look out for: sustainability. Nicole Zizi, founder of the eco-conscious streetwear brand NICOLE ZÏZI STUDIO, said investors should consider the material and the manufacturing process behind the fashion item. Following the vegan food and fake meat movement Bullish reported on, the demand for sustainable clothing is on the rise.
“Clothes, I think that’s the next market that is coming within that eco, vegan world,” Zizi said.
Plus, in order to produce sustainably, manufacturers produce small quantities at once. This, in turn, makes the apparel more exclusive. It’s “like a piece of art in some form,” Zizi said. “Instead of it depreciating over time, it will more likely gain value.”
A lot of these items are difficult to get your hands on. In order to ‘cop’ these highly popular items, you should be on top of your information game. There are plenty of social media accounts that post about the newest drops, such as whatdropsnext Instagram account, Sneaker Shouts™ Twitter account and Streetwear Reddit thread.
Invest in public companies or be on the lookout for an IPO
Here’s a way to take your share of the streetwear market with less effort – buy shares of public streetwear or retailer companies.
For example, Nike is an American public company, and you could easily buy shares with investment services like Robinhood or Fidelity. Nike has been doing fairly well lately, with revenue increasing 10% to reach $10.3 billion and earnings per share jumping 35% in fiscal 2020 second quarter. While the novel coronavirus may throw unexpected obstacles, Nike’s established styles and innovative marketing initiatives are few reasons to think it will continue to fare well.
Farfetch, an online luxury goods retailer, is also a public company. It acquired New Guards Group, the parent company of Off-White, for a grand sum of $675 million. It also acquired Stadium Goods, a pre-owned goods retailer. These acquisitions may turn out to be good or bad for the company; some investors worry about the mounting losses and unnecessarily diversified business lines. But the acquisitions allow Farfetch to take a greater share of the market, which could be beneficial long-term.
Many of the prominent streetwear brands are currently private, often solely owned by the founder(s) or with few investors. Examples include Supreme, as well as Stussy and Fear of God. This is on-brand with the nature of streetwear existing in a niche space, but it’s also subject to change, given that half of Supreme’s equity was bought by the private equity firm Carlyle Group.
StockX, currently private, is also a key player in this field. Founded in 2016, StockX was valued at $1 billion by mid-2019. The company recently introduced a new CEO, who told CNBC that going public is the company’s objective. While there is no definitive IPO set for horizon, this could be a company to keep your eyes peeled for.
Last but not least, some well-known companies in the streetwear and the broader apparel industries went public overseas. For instance, the luxury goods LVMH group is based in Paris. Hypebeast went public in Hong Kong. There still are some ways to still tap into these companies, but it’s certainly tougher to do so for U.S. investors.
Our bottom-line take: Whichever company you decide to buy stocks of, do your research to understand the risks and consider diversifying.
Start your own streetwear company
While creating a startup may sound daunting, it’s relatively easy to launch a streetwear company if you have a strong passion and a smart way to position your product and/or attract your target audience. There are plenty of fascinating startups in the industry that began out of sheer enthusiasm.
NICOLE ZÏZI STUDIO is one example. Nicole Zizi, an artist and a designer, began to develop her startup idea when she learned that fashion was one of the top polluters. At the same time, she wanted to address the black and brown communities that she’s part of, where streetwear is the dominant type of apparel.
In order to do so, Zizi bootstrapped her startup – meaning she began with very little capital. She raised money organically – through word of mouth, social media, and a pop-up shop she set up to showcase her clothes. She also saved up before she started the business with freelance and fashion jobs.
“It was a great industry to tap into while it was still developing – to create a new concept while it’s still growing,” Zizi said. “We are really in an evolutionary phase in seeing where streetwear is going to go. And I’m excited that my brand can be part of this new phase of streetwear.”
Another example of a mission-driven streetwear company is Classie New York, a startup that strives to upend today’s “corporate” streetwear market. Jonathan Lin, the founder, said his company began from a casual conversation with a friend. Lin, a student majoring in Media & Communications Design, and his friend who studied finance, joked about creating a streetwear brand. Then they began to seriously think of brand concepts and funding.
Their first collection, launched on June 1, 2019, was a “complete fail,” as Lin described. Classie released too many supplies. But it was a learning moment for the founders, who took away the importance of scarcity. Lin first saw success during his most recent collection “Blush,” in which he produced just 16 items – and sold out in a few days. He restocked 20 more, which also sold out.
Lin says his company would be worth around $8000 to $10000 dollars in value, based on his past sales, current inventory and equipment, and the amount of time and money they invested.
Zizi and Lin both say the StreetwearStartup subreddit helped them grow their brands. “It’s super helpful to see what others think about your concept or design,” Lin said in an email. “We’ve also driven a lot of sales from this subreddit, and we would be much less successful without the help of the amazing people.”