Sneakers As An Alternative Asset Class, Part III

THE COWEN INSIGHT

The theme of sneaker resale is creating new markets and services. It also highlights the durability of established brands and the secular growth of the sneaker category. Our proprietary data shows a growing addressable market for sneakers in primary and secondary markets. We see some parallels between sneaker resale and NFTs as blockchain creates exciting new opportunities across the consumer sector.

REINFORCING THE BULLISH CATEGORY FOR SNEAKER RESALE

Our proprietary work confirms sneaker resale remains one of the most permanent trends in Consumer as transient pandemic spending patterns fade into 2023 – and we are further reinforcing the bullish category calls we have made since 2019. Sneaker resale is significantly outperforming the broader E-commerce ecosystem, which is decelerating into early 2022. Strength is fueled by the usual players in both sneaker retail and online sneaker resale. Our market sizing reaffirms sneaker resale can reach $30B globally by FY30 (16% CAGR). The durability of a leading sneaker company’s consumer direct offense and ability to fuel the sneaker resale ecosystem highlights near-sector-best growth. Returning both potential and meaningful upside in shares following recent pullback.

PARLELLES BETWEEN SNEAKERS AND NFTs

We see parallels between the rapidly scaling sneaker resale markets and NFT trading and investing. Many NFTs have zero intrinsic value (PV of future discounted cash flows), speculative characteristics, and potential regulatory issues. However, some can retain and create significant value in a variety of forms, including ownership/membership in a network. Similar to sneaker resale, which saw a host of skeptics in its early days, a select few NFT brands and platforms have scaled by creating utility, community, and connections to the physical world. Billions of dollars’ worth of physical assets are likely to have links to digital assets in the future, and we expect blockchain's role in resale and consumer branded goods to expand exponentially within Web3.

SURVEY DATA

We surveyed 2,500 U.S consumers to analyze growth in sneaker resale and NFT engagement along with demographics of NFT owners and traders. Our data suggests sneaker resale is likely growing 30% to 40% y/y on top of ~100%+ growth since 2020. 27% of men ages 18-34 have purchased an NFT, while 33% of the same cohort (men ages 18-34) have purchased something in a virtual world; these metrics likely have meaningful upside as Web3 develops.