After teetering on the brink of self-destruction for months, Kanye West - or Ye as he’s now known - has totally derailed over the last few weeks, evolving from a persistent nuisance into a purveyor of downright dangerous and damaging comments. These comments, which are most frequently grounded in complete nonsense shared as facts and truths, have forayed into arenas of overt anti-Semitism, crossing what few lines were left for Ye to cross.
Adidas has placed the Yeezy relationship “under review”, but it seems inevitable that the partnership’s days are numbered. The most fervent - and delusional - Ye supporters will argue that this is precisely what he wanted to achieve with his misbehavior: freedom of the Yeezy brand from the corporate constraints that make him hundreds of millions of dollars annually.
But if these are the lengths to which a person is willing to go just to escape from an incredibly lucrative business arrangement that he agreed to in the first place, what kind of person are we really dealing with?
West has pushed Adidas to its limits for months now, publicly harassing employees and challenging the company to sever ties. So why haven’t they?
The Yeezy partnership has been a massive success for both parties. In 2014, at a time when Adidas was hurting most, the Yeezy line breathed new energy and hype into a company that had seemingly lost any grip on the modern sneakerhead. Suddenly, an Adidas product was just as popular and culturally-relevant as a pair of Jordans.
The business has grown remarkably, and most estimates peg Yeezy as responsible for somewhere between 7-10% of Adidas sales. Importantly, this does not account for any halo effect, which sees the hype from Yeezy products spill over into the sales of Adidas product of a similar aesthetic. That halo effect has been a source of dispute for Ye in recent months, eliciting complaints that Adidas is copying his designs. Of course, those that follow the sneaker space have come to learn that this is one of the main reasons for a collaboration, if not the entire point. Sell limited quantities of a hyped product -> sell much larger quantities of a similar, but less desirable product.
Yeezy products have been so sought-after throughout the partnership that many a full-time job has been quit by those successfully pursuing the business of Yeezy-flipping. With an advantage in sourcing product at retail prices - whether via bots, plugs, or otherwise - resellers had previously been able to generate significant profits selling Yeezys for a healthy premium.
Yeezys had enjoyed a market position as the “it” product, with demand comfortably exceeding supply. In recent years, though, and at West’s own behest, Adidas has taken steps to democratize Yeezy product, frequently restocking popular silhouettes and colorways to ensure that end-buyers could acquire them at more reasonable prices. Those efforts, in tandem with broader, macro softness in the sneaker market, have meant dwindling resale premiums and falling secondary market prices.
Now, as the product’s namesake embraces villainy, it's time to see if people will take further action with their wallets. Fortunately, the sneaker market has matured to a point where market pricing adapts quite quickly to shifts in demand, particularly in more liquid pairs. So we can, in fact, assess how the market is responding to the latest controversy: have Ye’s missteps begun to impact demand for Yeezy products, or has the art dissociated from the artist?
Using data from Alias by the GOAT Group, we evaluated how a rolling average of the last three sales has changed over the last month. We analyzed a sample of 100 different pairs, representing a vast variety of silhouettes and colorways, controlling only to ensure that the pairs sampled did have sufficient sales activity to reflect market movement.
Do we have our answer? Are consumers fleeing Yeezy in droves?
Not really, at least not yet - to both questions.
Over the last month, the value of the 100 pairs sampled has declined 2.03% on average. Nothing to sneeze at, but hardly a definitive statement of protest either. That figure is not significantly dissimilar to what we’ve seen in other brands over the same time period. Nonetheless, cracks are beginning to emerge.
Of the 100 pairs, 68 pairs have lost value, with the vast majority clustering in the range of a small loss. Far more, though, have lost more than 5% than have gained more than 5%, by a ratio of nearly two-to-one.
More importantly, new releases continue to show significant weakness. On average, Yeezy sneakers that have released in the month of October are trading on secondary markets at a 16% discount to their retail price. Keep in mind: it used to be the norm that releases would trade at a significant premium. Now, October’s releases have not been a veritable all-star lineup of Yeezy products, but the weakness can have knock-on effects.
At this point, most Yeezy products continue to sell out, but a greater number of releases selling at discounts on the secondary market will remove resellers from the buying pool at retail. Once products begin to sit and sell for lower resale prices, hype can be difficult to recapture. So in that regard, small, incremental reductions in demand can have a significant impact on bottom lines over time. One potential factor bolstering prices: some market participants might believe this will be the end of production for those products and are considering the impact of diminishing supply.
Ye's grip on further royalties is tenuous, weakened by both the impending dissolution of the Adidas deal and weakening demand. For those that love the product but not the “creator”, there may be opportunity for dissociation. In the wake of a partnership in ruins, Adidas could opt to sell certain products under new names - legal experts in the sneaker world have suggested it’s very likely that Adidas owns the intellectual property.
One thing’s for sure: there will be lawyers.
We’ll know much more about the appetite for Yeezy through the holiday season, with a number of popular colorways set to release in November and December. Keep in mind: lead times for sneakers are very long, meaning these plans were likely set in motion well over a year ago. In the meantime, there are a lot of sneakers out there available to consumers who are not eager to offer any show of support - perceived or otherwise - for the embattled musician.
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