This Is the Next Big Wave in the Sneaker Industry — and It Isn't Resale As the global sneaker resale market has catapulted into a $6 billion industry, investors have lined up to fund businesses commoditizing sneakers, but there's a flaw in the model: It works against the very consumers the industry was built to serve.

By Dejan Pralica

Opinions expressed by Entrepreneur contributors are their own.

Dan Kitwood | Getty Images

Before marketplaces like StockX and GOAT made it possible to find coveted kicks at a click, there were chat groups, in-store lineups and in-person meetups — where sneakerheads would get together to pick up a pair of the latest Jordans while bonding over their shared passion.

The experience was personal — driven by people who took comfort in knowing who their shoes were going to and had an appreciation for where they came from. Whether it was through an overnight campout for a limited release or a meetup at the mall to make a trade, friendships were often made in the process.

Of course, it wasn't all perfect. There were problems with the peer-to-peer model back then. Finding a size 11 shoe in the exact style or colorway you wanted, for instance, might take weeks. And shoes weren't promptly shipped to your door with certified authentication neatly attached. In fact, counterfeit shoes were commonplace on traditional online marketplaces.

But as the global sneaker resale market has catapulted into a $6 billion industry, the once community-driven culture of buying and selling sneakers has changed from a social experience among like-minded collectors to one of faceless transactions that more often than not are driven by profit.

While investors have lined up to fund the businesses behind the sneaker resell boom, many fail to see a fundamental flaw in the model: Commoditizing sneakers works against the very consumers the industry was built to serve.

At the peak of the pandemic, resell prices rocketed as high as 54% above retail, fueling a growing frustration among sneakerheads who were tired of taking "Ls" (losses) to resellers who've monopolized the market. And the nostalgia that once tied sneaker loyalists to the brands they covet can only go so far without a fair shot at buying them. That's why the next big boom in the sneaker industry isn't resale — it's customer experience.

Related: How This Founder Is Kicking Up Innovation in the Sneaker Market

Commercialization can't thrive without culture

You may think it's the shoes, but people are the most important component in sneaker culture. For decades, the industry has thrived off sneakerheads feeling a sense of belonging in an inclusive community built on a mutual appreciation for sneakers and the rich history that surrounds them, and, of course, the trickle-down effect to everyone from high-fashion tastemakers to the everyday consumer who wants to feel on-trend.

The importance of community is not isolated to the sneaker industry. Businesses that put community first have been proven to reap tangible benefits — from online advocacy and brand loyalty to self-organized events. But it's the intangible benefits strong communities bring that brands shouldn't ignore.

Humans are wired to fundamentally crave a sense of connectedness and belonging. As our worlds between social and commerce collide, increasingly consumers are expecting the businesses they support to provide a sense of community that connects them with like-minded peers.

But as sneakers have risen into their own unregulated asset class — one that often yields better returns than stocks or crypto — the people driving sneaker culture have taken a back seat to the profits of the resale industry.

Related: How These Entrepreneurs Found Success in an Industry They Knew Nothing About

Sneaker brands risk losing touch with their loyalists

With resellers leveraging bots to automate bulk purchase of releases, it's become harder for retailers to put sneakers on the feet of those who actually want to wear and collect them.

It's the reason brands like Nike are scoring marked lows in perceived fairness among their consumers. Late last year in a leaked internal company address, Nike reported it was at risk of losing its most "sneaker-obsessed customer." With its fairness numbers in the 20s rather than the targeted 80s, the brand aimed to focus on shaping its marketplace to show equity and inclusion to the communities alienated by the resale market. But selling shoes to the most deserving shoppers in a hyped-up resale market is a challenge.

Take the example of Nike's FlyEase, a hands-free sneaker designed with adaptive athletes and accessibility in mind, which was released last February at $120 retail. The shoe sold out within minutes and was reselling for upwards of $600 shortly after on secondary marketplaces. While resellers were widely blamed for profiting off a shoe designed for people with disabilities, consumers also questioned why Nike would release a limited supply of what was meant to be an accessible shoe.

A void in consumer experience is spurring innovation

While legacy brands like Nike and adidas strategize on how to serve consumers who feel pushed out of sneaker culture, a rise in independent brands, creators and smaller companies is spurring innovation in the space. Frustration has even helped lead to a rise in "bootleg" sneaker designs that mimic popular silhouettes and often retail for more than the authentic versions that inspired them.

From emerging sneaker brands that are pushing boundaries in experimentation and design to companies like Rares, KYX World and Tradeblock, which are innovating on the consumer experience — the next wave in the sneaker industry will be birthed by businesses that put the interests of sneakerheads first. It is, after all, that group that is funding the resell market and being taken advantage of in the process.

Related: How the Little Swiss Brand 'On' Broke Every Rule to Become the Fastest-Growing Sneaker Brand in the U.S.

And as new models in the sneaker space emerge, resell sites and the exorbitant prices they come with are losing their luster. Not only do sneaker loyalists want fairness and inclusivity, but there's also a growing desire to build back the personal connections that once defined the culture, which has started to fade in the era of faceless transactions.

We're nearing a tipping point in consumer frustration in the sneaker world, but when a system is broken, innovation always emerges. It's an exciting period in the industry as players both old and new look to bring creative experience and connection back to the culture. Those who succeed in building community-first models will get the "W" (win) in the long run.

Dejan Pralica

Entrepreneur Leadership Network Contributor

Co-founder and CEO of SoleSavy

Dejan Pralica is the co-founder and CEO of SoleSavy, one of the world’s largest paid sneaker communities, and co-founder of KicksDeals.

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