How To Start A Sneaker Reselling Business
$1.8 million. That’s the price someone paid for the Nike Air Yeezy 1 prototype Kanye West wore at the 2008 Grammy awards!
Reselling sneakers can be big business. There’s a huge market for specific brands and limited edition models. What started as a sneaker enthusiast’s underground movement has become a sizable market and even an investment opportunity. But you need a nose for the right brands, the latest styles, and the capital to buy stock to start with. If you consider yourself a sneakerhead, this may be your opportunity.
The title says it all: a sneaker reselling business … resells sneakers. But, where customers traditionally line up outside a brick-and-mortar store to get hold of a newly released sneaker, your business will operate in the digital space to buy larger quantities of sought-after sneakers and resell them to a secondary market at above retail price. Your business may also specialize in seeking and reselling collector’s items – extremely rare and highly desirable footwear.
This may sound like an exclusive niche market, but it has been growing exponentially in the last decade and has weathered the stress test of the recent economic downturn well. Nike and Adidas remain the most coveted brands in the sneaker reselling market.
GreyJournal, citing research undertaken by Piper and Sandler, notes that in 2021 the industry was worth $10 billion globally, $2 billion in the US. Compare that figure with 2019, when the sneaker resale industry was worth $6 billion globally. That’s an increase of $4 billion in just two years. These figures are also respectable compared to the estimated global sneaker market, which stood at $100 billion in 2019.
This industry is primarily made up of individuals who have typically started reselling sneakers as a side hustle. As a result, there is very little official data available.
According to Cowan Equity research, the resale sneaker market could be worth an eye-watering $30 billion by 2030.
The research institute forecasts growth in digital sales, not just to sneaker enthusiasts but also to a new generation of speculators, who buy rare sneakers as an asset, a commodity in their investment portfolio.
A 2021 survey by Cowen Research states that within a 30-day timeframe, 66% of 18 – 34-year-olds purchased from resale sites – up from 54% the previous year.
Gen Z, roughly anyone born between 1997 and 2012, makes up your largest market segment at present. GenZs have grown up with the internet and social media, are generally tech-savvy, and will soon be the largest consumer group in the US and globally. This segment is perhaps currently more open to flipping sneakers.
You may also consider targeting a more high-end customer segment. If you have been following the sneaker market for some time and have an eye for collector items, consider specializing in this market niche.
Checklist for Starting a Sneaker Reselling Business
Starting a sneaker reselling business can be a profitable endeavor, but it takes more than just acquiring a few pairs of sneakers to get started. There are a few things you’ll need to do in order to get your business up and running, and this checklist will help you make sure you have everything tied up.
Step 1: Write a Business Plan
Writing a business plan is an important step for any business. Even if you aren’t looking for funding, the business plan will help you set goals, research the competition, estimate profitability, and more.
Related: How to write a business plan
Step 2: Name the Business
The name of your business will be the first thing potential customers see. It needs to be catchy and memorable, reflects what your business does, and be available to use.
Related: Tips on naming a business
Step 3: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a sneaker reselling business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select Your Location
While most sneaker reselling businesses will operate out of the owner’s home, a suitable space for inventory is important.
Be sure the space is secure and large enough to store and ship your product.
Step 5: Apply for Business Licenses and Permits
Like any business, a sneaker reselling business owner will likely need to obtain a variety of business licenses and permits to operate. Licensing requirements vary by state and city, so be sure to do your research.
The most common requirements include a local business license and sales tax permit.
Step 6: Acquire Inventory
This is can be one of the more difficult tasks as it can be difficult to get certain brands for new businesses.
They will want to see proof that the business exists, which can come from the entity formation documents, Doing Business As (DBA), or business license.
For shoes that are in high demand, there are normally restrictions on who gets them and in what quantities. Larger and more established businesses tend to get priority, and it’s not uncommon for a new sneaker reselling business to get the brands or quantities they want.
Those businesses that persevere will eventually be rewarded.
Step 7: Find Financing
Fortunately, a sneaker reselling business is very affordable to start. If you don’t have the upfront capital to start your business, you may need to look into financing options. There are many different ways to finance a business, so you’ll need to find the one that works best for you.
Bank funding is one option, but know that they are typically going to want the borrower to have good credit and be able to invest 15-25% of their money towards the total start-up costs.
Step 8: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 9: Get your Marketing Plan in Place
If you’re looking to start a sneaker reselling business, one of the most important things you’ll need to do is to create a marketing strategy.
First, you’ll need to identify your target audience. Are you trying to reach sneakerheads, fashionistas, or athletes? Once you know who you’re trying to reach, you’ll need to decide what type of marketing will be most effective.
One way to reach sneaker lovers is through online forums and social media groups dedicated to the topic. These forums are often full of passionate enthusiasts who are always on the lookout for new brands and retailers to check out. By creating a presence on these platforms and engaging with potential customers, you can let them know about your business and what you have to offer.
You can also use social media platforms like Instagram, Snapchat, and Twitter to showcase your products and reach a wider audience. Hashtags are a great way to connect with potential customers who are interested in specific types of sneakers.
Another way to market your sneaker reselling business is through word-of-mouth. Sneaker culture is all about personal relationships and recommendations from trusted sources. If you have a loyal customer base, they can be some of your best Brand Ambassadors, spreading the word about your business to their friends and followers. You can also encourage customers to leave reviews on popular sneaker retail websites, which can help attract new visitors to your site.
No matter who your target audience is, though, it’s important to create a strong branding strategy. Your brand should be distinctive and easily recognizable so that potential customers will remember your name when they’re looking to buy sneakers.
Step 10: Get Business Insurance
When starting a sneaker resale business, it’s important to make sure you have the right insurance in place to protect your inventory.
The most important type of insurance for a sneaker reseller is business property insurance to cover your inventory in the event of theft or damage. If you are running the business from your personal residence, most homeowners or renter’s policies won’t cover business assets.
If you plan to have a retail store or have employees, consider getting liability insurance to protect yourself in the event that someone sues you for damages.
Step 11: Set up an Accounting System
As a sneaker reselling business, you will need to track inventory, sales, and expenses. An accounting system such as Xero, Quickbooks, or Wave Accounting can help you do all of that.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a sneaker reselling business?
There are several ways to go about setting up a sneaker resale business. Many successful traders have started this as a side hustle, then expanded their reach, stock, and customer base. You can start as big or small as your budget allows!
You might prefer to invest in just a couple of pairs and hold on to them until they have grown in value. If this is the case, the specialized platforms mentioned earlier will be a good option for you as they reach an established target audience. These platforms will typically take a percentage of each sale.
Or you might acquire a higher volume of sneakers when they are first dropped on the market, then resell them. With this scenario, your margin will be smaller, but you will have a higher sales volume.
Either way, you will need startup capital to buy sneakers. But these are pretty much the only costs you will need to budget for. The profit you make reselling your stock will depend on how well you know your fellow sneakerheads.
How much money can you make with a sneaker reselling business?
Unfortunately, this is not an industry backed up by official figures. But google ‘reselling sneakers,’ and you will come across fantastic stories of very successful traders who made $100,000 in the first six months of trading.
While this is achievable, these cases are few and far between. We don’t hear about the many reselling businesses that may not always make a profit or that keep the sneaker trade as a side hustle. An excellent way to gauge the market and the profitability of particular brands is by checking the various industry publications, influencers, and events.
Are there grants to start a sneaker reselling business?
It’s extremely rare to find a grant to start a sneaker reselling business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What skills are needed to run a sneaker reselling business?
Tech Savvy. You will need to know your way around platforms, bots, and eCommerce sites and practices. We recommend you investigate platforms such as stockx, grailed, Stadium Goods, or Goat to understand the opportunities and competitors.
And if you haven’t already, familiarize yourself with software and automation tools such as GaneshBot and Cybersole. For example, most companies now limit the purchase of a new pair of (desirable) sneakers to one pair per customer – understanding that system and how to use it to your advantage will be crucial to your success.
Marketing and Communication skills
Understand how to build a customer base. With your business being online, you will rely on compelling content, good imagery, and product placement across your social media channels. Instagram and TikTok are likely the most valuable platforms for this.
Industry knowledge. This is a crucial part of the business. Determining a specific sneaker’s value and resale value is critical to your business’ success. You’ll also need to stay on top of industry trends and know when a company is launching a new collection or limited edition sneakers.
We recommend you explore mechanisms to ascertain the authenticity of a sneaker and its value. You’ll want to ensure that you spend your money on the right kind of shoe and will achieve a profit reselling it.
What is the NAICS code for a sneaker reselling business?
The NAICS code for a sneaker reselling business is 448210, which is classified as a shoe store.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?
Some name Michael Jordan and Nike as the instigators of the sneaker reselling phenomenon. Whichever way it started, the outlook for the sneaker reselling market is rosy.
If you are a sneaker enthusiast and keep your finger on the streetwear pulse, this business is an excellent opportunity to turn your passion into a profitable undertaking.