$800 Sneakers
My research department sent me “The Key to Selling an $800 Sneaker” from the Wall Street Journal. Personally, I’m not in the market for any of those, but I thought the article said a few interesting things.
The first interesting thing is that there is such a thing as an $800 pair of sneakers. Even more interesting is that Saks Fifth Avenue, according to the article, will have 200 sneaker models priced above $700 this fall.
Now what do I do? I mean, part of me is laughing hysterically at the fact that this product exists and that somebody is apparently, actually, buying it. But part of me respects the guy (Jon Buscemi) who created and figured out how to market it. Jon, 39, started out as a stockbroker and along the way spent some time at DC Shoes. I doubt he has any plans to sell his sneaks at JC Penney.
In fact, he barely plans to sell them at all and is specifically creating a brand known for its scarcity. 400 pairs a year ago lead to 4,000 pairs in January and currently 8,000 pairs are being sent to 50 retailers.
As you know, I’m a big believer in controlled, even mysterious, distribution as a way to differentiate your product. I’ve always thought that if you create your market buzz right (which the article suggests Jon has done) and limit distribution, you can make your product special. And it has the added benefit of making a high price a good thing- even a point of differentiation.
The question, of course, is what happens after 8,000 pair? Is there appropriate distribution for 50,000 pair and will it let you hold your price point? Are the customers who buy one pair interested in a second even if it’s a different style? Can you ever lower the price without letting your core customer down? If you stop growing to maintain the exclusivity, can you continue the market hype? Will the brand become meaningful enough that you can sell other high end products under it?
Before we get too excited (actually, I’m pretty calm) remember this isn’t really that different from what any other new brand goes through in our industry. A successful brand always has to figure out how fast to grow, where to distribute, and how to price the product. This sneaker has our attention because of sheer absurdity of its price. Also because we wish we could figure out how to sell a pair of sneakers (or anything else) for that price.
If you want to get some perspective, go see what Jon Buscemi sneakers are selling for on Ebay. Clearly some people have bought the sneakers with the idea of selling them for a profit. Also interesting are some which claim to be “new in box” but are priced below retail. The article does mention the Chinese are already ripping them off.
One smart thing Jon has done is to pick a target market with a lot of disposable income. Thanks to our friendly Federal Reserve, asset prices have blown through the roof (who says there’s no inflation) and those at the top of the income scale (more the top 0.1% than the top 1%) who own most of those assets can’t spend it all. I wouldn’t be surprised if he can identify almost every potential customer he has.
Well, is there anything really different here or is this just another new brand that’s started in an unusual market niche? I’ll make a note to see what’s happened three months from now. In the meantime, read the article and see what perspective you can get about managing your brand.
Thanx for the perspective Jeff , very insightful and thought provoking as always . I really enjoyed the questions as a mental exercise but what it might come down to is the great W.C.Field’s quote – ” there’s a sucker born every minute ” EH ? 🙂
Hope you are well ;
Best , Rob
Hi Rob,
I guess if you’ve got more money than you know what to do with, you can buy this sort of thing just for fun, and I’ve got no problem with that. What would worry me is if people who don’t have money to throw away are buying these things because somehow they think it distinguishes them, makes them “cool” or somehow feel better about themselves.
J.
Hey Jeff-
One of my clients is a retailer in Los Angeles. They sell $2,000 runway shoes all day, and sell $800 sneakers to people that are looking for a “lower priced” shoe.
There’s a market here for the mass affluent, as truly wealthy people don’t spend their money on this kind of consumerism.
This is not new. Although not to this extreme maybe, Olukai did something similar in sandals when they introduced a sandal that retailed for $120 when the market was basically between $20 and $45. I am an equity partner and board member of a quality hat company called Melin whose hats retail between $180 and $1,000 when a basic dum dum New Ear retails for $50. There is a strata of people who will pay for quality and exclusivity. If you hook up with the right taste makers those who care about such things will flock to your product. Gucci, Prada and Luis Vuitton case in point. If you are Usher, JZ or Justin Timberlake these types of products help you stand out. Once they start wearing it, those (again) who care have to attach themselves to these brands. It’s that simple. The hard part is getting to those who influence and get them to wear your product. But once there it’s like printing money in the back room. Sounds simple and sometimes it is. Sometimes it isn’t.
Howdy YKW,
Yeah, I know it’s not new, but there was the article, it was interesting and, as you point out, there are some interesting questions to be asked along the lines of “Now what do we do?” You’re right about the influencers, as the article points out. Does your brand stand on its own once they move on to “THE NEXT COOL THING?”
Thanks for the comment,
J.
I have a pair of BUSCEMIs. They are amazing and I love them just as much as my wife loves her GUCCI purse.
That said, they make NO rational sense at all, but that is what every consumer product does that isn’t purchased at the 99 Cent store or Wal-Mart. Anyone think a 1992 Geo Metro doesn’t get you from Point A to Point B the same as an AMG Mercedes SL65? Inspire with the luxury model but then sell C-Classes to the masses to make money.
Action Sports has done the same thing for years – think DCShoeCo “special editions” in wooden crates like wine cases or signed limited edition skatedecks.
The first $1,000 denim jeans were sold in 2006 (http://www.forbes.com/2006/12/07/expensive-jeans-denim-forbeslife-cx_hp_1208expensivejeans.html) so you knew the first $1,000 sneakers were coming soon.
Hi Abe,
I know stupidly expensive products aren’t new. Others (see below) have pointed it out. What I’m intrigued by is the difference between a brand that makes a really expensive product as more or less a marketing stunt and somebody like Buscemi who starts at the top end of the market. Seems to me the management of the brand is different and I asked some questions around that in the article. I like your Mercedes Benz example, but I think they took decades before they started to produce cars like the C Class. And remember why they did it; competition from Lexus and Acura among others and problems with quality issues that tarnished their reputation. I don’t know this, but I’d also speculate that they kind of found themselves in the dreaded middle ground, somewhere above a General Motors product and below Ferrari and Lamborghini. With competition, their sweet spot in the market kind of vanished.
So I say congratulations to John Buscemi and ask, “Now what?” As I asked You Know Who, “Does your brand stand on its own once they move on to “THE NEXT COOL THING?”
Thanks for the comment,
J.
Interesting to note: Jon Buscemi is also partners in Greats Footwear (http://greats.com/). $59-$159 Made-in-Italy sneakers sold direct to keep the price down. So he’s definitely hitting both sides of the pricing spectrum.
Hi W,
Thanks for the info. I looked at the website and the YouTube video. I’d love to hear more about why they think Greats is disruptive. They know way more about sneakers than I ever will, but when they said that the typical time line for new product was (I think they said) 18 to 24 months, I was surprised. Certainly to the extent other companies are on that time line and they can do four months from conception to in store, they have a huge advantage. I’d also love to learn how the Buscemi name is helping the lower priced product and where it will be distributed.
Thanks for the update.
J.