The athletic footwear industry has been booming over the past decade. According to the article “The Profitable Hidden Sneaker Market” by Steinberg, the sneaker industry is likely to reach $95.14 billion by 2025. This expected substantial growth is mainly due to several factors, the design of sneakers which incorporates some latest technologies and new materials, the product promotion which associates with some famous athletes or stars, and etc. However, the focus will not be on the success of the entire athletic footwear industry.
Instead, the limited edition sneaker market is a more interesting segment to discuss and analyze.
The limited releasing sneaker market is not a newly formed market. Since the 1990s, some large sports equipment companies, such as Nike, Adidas and others have started to construct this market deliberately. They limited the quantity supplied of certain sneakers, endowed these sneakers with special identities, and cultivated the frenzy sneaker culture. Until recent years, along with the prosperity of the entire footwear industry, the scale of this limited edition sneaker market starts to grow in a considerably fast pace.
For these limited releasing sneakers, people are usually expected to pay with a higher price due to the fact that the scarcity always drives up the price. However, this market is not determined by the equilibrium supply and demand. Indeed, these scarce sneakers have reasonable prices just as other regular sneakers. For the purpose of getting the general public involved in this sneaker mania, Nike, Adidas and other athletic footwear companies adopt some different selling methods with the price being fixed.
The first selling method is queuing. This method has been used in limited quantity commodity for a long time. Back in days, without the universal use of the internet, in order to enlarge the possibility of getting a pair of limited edition sneakers, on the releasing day, people would arrive the store early, stand in the queue, and wait for hours. Now days, with the invention of online queuing, instead of waiting outside the store, people wait in front of their computer screens. And it does not take them much time to wait because the system can process orders much faster. Overall, under this queuing rule, people make choices to sacrifice their time for the fair pricing. The optimal strategy people should adopt is just to get in the line as soon as they can, which is similar to the Duke basketball ticketing, setting the tent as early as possible.
The second strategy is lottery. This is another method that has been widely used by many athletic footwear companies. For instance, Nike even has an app called SNKRS, which is created specifically for online drawing of limited number sneakers. Under this drawing rule, people are required to enter the draw within a specified period of time. Usually after an hour or two, the draw will be closed and shuffled to generate winners. The entire process does not waste people any time or require to pay any upfront fees. As the result, people who win the lottery will get the sneakers and have positive payoffs. Others who do not get selected will have a payoff of zero since they do not lose anything in participating the drawing. This method is entirely based on people’s luck so the most they can do is just crossing their fingers.
Though these two methods significantly ensure the fair pricing, issues still exist. The most obvious one is caused by resellers, the unfair competition. In online queuing, resellers usually implement queuing bots to compete with real buyers. For the most time, resellers will get these shoes. Same as in the online drawing, resellers will employ drawing bots to take part in the lottery, which does substantially increase.