More and more investors are shifting to alternatives to generate income. But what can new investors turn to and what are the pitfalls to avoid?
On Workday Afternoon, Claressa Monteiro spoke to Richard Xia, CEO and Co-Founder of Novelship to find out more about sneakers as an investment and how one can dive into the sneaker scene.
Claressa Monteiro: Could you start by sharing about Novelship?
Richard Xia: We are Asia's fastest-growing online marketplace for authentic limited edition sneakers, apparel, and collectibles. We started mainly with sneakers - and it is where our strength lies in - but ever since last year, we started getting into apparel and collectibles as well.
Claressa: What should we know about sneakers as an investment?
Richard: While sneakers started off as mainly practical footwear, they have now become part of a huge global market - valued at about US$300 billion (S$403 billion).
This is a huge industry by itself that is mainly driven by an increasing global demand. And because of this huge increase [in the sneaker scene], a secondary market has also emerged. This time, related to limited-edition sneakers. This [new] market is also estimated to be worth US$30 billion by the year 2030.
This industry is also filled with plenty of passionate individuals - also known as sneakerheads - who can easily tell you the story behind each pair of sneakers.
As a result, there is a very strong collector value behind each pair, and when coupled with the fact that a lot of these sneakers do not get re-released, an investment market forms.
These collector values can also go up and down depending on market sentiment and the overarching demand and supply trend.
Claressa: If I were to buy a limited edition pair of sneakers from one of the big brands, can I expect the value of the pair to appreciate after 10 years?
Richard: As with all investment opportunities, it really depends. Not all limited edition shoes do well, and not all limited editions shoes have long-term holding value.
Everything depends on factors such as the sneaker itself, historical patterns, the number of shoes released relative to the demand, and various long-term trends.
These all play an important role in deciding if the particular pair of sneakers is going to be a good investment opportunity or not.
Claressa: Could you explain some of the pitfalls a novice [alternative] investor should look out for?
Richard: First, this market is a very fast-moving market. On our website, we see new releases, from various brands, either weekly, bi-weekly, monthly, or annually. We see a lot of new releases every single year.
Hence, you would find [investing] difficult if you were to get into the market without any prior knowledge of sneakers. For any novice looking at [owning] sneakers as an alternative asset, my recommendations would be to get into the sneaker space and understand the sneaker culture.
Ask yourself these questions: What kind of culture is driving the different pairs of sneakers? What kind of historical patterns can be seen? What are the silhouettes and colourways relevant for each country?
For example, in Singapore, the colour black is valued higher than in most other countries, whereas the colour red is the one that is valued highly in Japan. So, there are differences based on cultural nuances [that should be observed].
Claressa: How can we get started and what would classify as a safe entry point [when attempting to own a pair]?
#1 Always ensure authenticity
Make sure that you are getting your sneakers directly from either the source, someone that you really trust or a marketplace like ours because we have authenticators who ensure that everything is authentic.
Bear in mind that if your sneakers are not authentic, they would have no resale value.
#2 Do plenty of research
Ensure you conduct plenty of research and dive into the sneaker space. Keep track of a silhouette/brand/series that you [personally] are interested in.
This will give you a natural incentive to find out the latest releases or new colourways for that particular series. Once you follow up on this new information, you would then be able to make better investment choices.
Claressa: How much money are we talking about here [for investment sneakers]?
Richard: On our marketplace, the average trading value has been hovering between $350 to $400. So, something between $200 to $400 would be a safe entry point as there will be more people who can afford it - making it relatively easier for you to resell the pair.
You must understand that if a sneaker is very expensive - say in the thousand [dollars] range - the number of people who can afford it or are willing to buy it [at its price] would be lower. Hence, if you trade between the entry range, you will get maximum liquidity for your asset.
Listen to the full podcast anywhere and enjoy more features on Awedio: SPH's free digital audio streaming service to find out the best ways for maintaining authentic sneakers, along with the ideal duration for holding on to them.
This article was first published in MONEY FM 89.3.