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Writing Off Sneaker Resale Markets? The Impact of Adidas Indecision on Unsold Yeezy Inventory

Writing Off Sneaker Resale Markets? The Impact of Adidas Indecision on Unsold Yeezy Inventory
May 10, 2023
Dylan Dittrich

Photo: David Lezcano

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Adidas still doesn't know what to do with half a billion euros in unsold Yeezy product. That was the major headline from last week's first quarter earnings release.

That means resellers and resale marketplaces are left without answers to replace the massive volumes that forged thriving businesses.  

As of the end of the quarter, unsold Yeezy product accounted for approximately €500 million in inventory. That number was actually up €100 million from the end of Q4, meaning even more sneakers cleared production and transitioned into dust-accumulating mode on warehouse shelves. With each day they sit, resellers, marketplaces, and resale stores lose out on profits and seller fees.

Now, very few are crying for those parties. Still, with Yeezy off the table, Nike cracking down harder than ever on bots, and sneaker markets generally hurting over the last year, the reseller corps are shrinking. Many of the significant businesses built during the boom will be no more, as scale and connections win in an arms race.

Take sales on eBay for example. While eBay has long since ceded its foothold atop the sneaker resale market, it still represents significant volume. Over the last 6 months, over $21 million in Yeezy product has been sold from just under 44,000 sellers. In the same 6 months last year, Yeezy sales volume was $42 million from approximately 51,000 sellers. Volume is down 50% on the platform, sellers are down 14%, and the average price is down 19%.

We know from the earnings release that Adidas - at present - will be foregoing €1.2 billion in revenue this year should they abstain from selling any Yeezy product. But how does that translate to resale markets?

For context, a single Yeezy release can generate as much as $7 million in volume on StockX over a 12 month period. At least 20 pairs were rumored to be releasing in just the initial months of 2023. In 2022, there were over 60 Yeezy drops. While certainly not every pair approaches that $7 million annual volume level, even at an average in the low seven-figures on StockX alone, you see how this is no drop in the bucket. Base seller fees range from 8-10%, so the loss in revenue is material to the marketplace as well.

We noted the weakness in average prices above; keep in mind that's the case despite the halt of supply coming to market. Price declines are widespread, Yeezy and beyond. In tandem with the reduced volume, the resale feast is one of far less gluttonous proportions.

That changes the complexion of the retail market, where more sneaker releases are failing to sell out, and resale premiums are shrinking with resellers removed from the demand side of the equation. That's all great news for pure collectors; it's emblematic of the end of the true, frenzied sneaker mania and a return to relative normalcy.

Adidas may pursue the Cosmo Kramer strategy, simply writing off the leftover Yeezy product. Jerry, all these big companies, they write off everything! Alternatively, they could return the product to market and try to sell it. That'll be hard enough as is, but they might find that many consumers and resellers have moved on.

The Yeezy-flipping era was fizzling before Adidas chose to terminate the partnership. With each passing day of indecision, the likelihood of the era's end increases. It's an incredibly delicate and sensitive situation to be sure, and industry observers and analysts might balk at the potential write-off. Maybe they don't recognize the merit of simply ripping off the band-aid, or like Kramer, maybe they don't even know what a write-off is.

As for Adidas? They do, and they're the ones writing it off. Point, Kramer.

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