Insider

Nike is facing a reckoning with resale culture after a top exec resigned. But insiders say the company has ‘turned a blind eye’ to the shady industry for years.

Summary List PlacementThe sudden departure of one of Nike's senior executives is calling the company's connection to the resale world into question. Nike's vice president and general manager for its North America division, Ann Hebert, resigned last week after a report highlighted her ties to her son's lucrative sneaker resale...

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Summary List Placement

The sudden departure of one of Nike’s senior executives is calling the company’s connection to the resale world into question.

Nike’s vice president and general manager for its North America division, Ann Hebert, resigned last week after a report highlighted her ties to her son’s lucrative sneaker resale business. Bloomberg Businessweek reported on February 25 that Hebert’s 19-year-old son used her credit card to buy over $100,000 worth of limited-edition sneakers for reselling.

In her role, Hebert managed Nike’s direct to consumer strategy, which included overseeing the SNKRS app, Nike’s channel for high-heat footwear releases. However, whether she provided any assistance to her son’s business is still unclear. 

Beyond the conflict of interest component, these events have highlighted Nike’s ill-defined relationship with the exploding resale market for its products — a market that insiders and experts say has been bolstered and indirectly encouraged by the footwear maker for decades.

Nike did not return a request for comment for this story.

Nike’s relationship with resale

In an ideal world, retail and resale sectors would operate in a siloed yet symbiotic partnership. Footwear makers like Nike would create, market, and distribute their products with a rough equilibrium between supply and demand,  ensuring demand is always slightly higher than supply. Once the product was released, merchandise would take on a life of its own on resale platforms like GOAT and StockX.

However, this relationship is often more convoluted. In many cases, Nike directly contributes to the aftermarket value of certain pairs by purposefully releasing them in quantities well below the expected demand.

A former Nike employee who worked closely with highly coveted footwear until about three years ago told Insider Nike is “very orchestrated” about restricting supply at retail in order to create a booming resale market. “They don’t want to always match supply and demand perfectly on an ongoing basis,” the former employee said.

The most obvious example of this phenomenon can be observed in Nike’s SNKRS app, which officially launched in 2015. While the app was initially intended to be Nike’s easy-to-use, direct-to-consumer pipeline for its sneakerhead consumer base, it’s now best known for the high level of competition between users when it comes to copping a coveted new pair of shoes. On release day for a hyped pair of sneakers, many customers often fail to purchase any pairs at all before Nike sells out, with SNKRS users taking to Twitter to commiserate (and often making the pair of Nikes a trending topic on Twitter). 

snkrs app got em memes 2x1

“The app today is more oriented around hype and just selling, thereby missing the opportunity to surprise and delight the consumer with new services,” Trevor Edwards, Nike’s president from 2013 until 2018 and a key figure involved in the inception of SNKRS, previously told Insider. He added that he sees SNKRS as having mostly “delivered against its objectives.”

The hype-generating power of the app is also not lost on its top leadership today.

“We drop something in the piranha tank and see how fast the piranhas swarm around it,” SNKRS’ general manager Ron Faris told TechCrunch in 2017.

‘Artificial demand’

Limiting the quantity of a product, a common practice in other retail sectors outside of footwear, creates an illusion of exclusivity.

“Sneaker brands benefit from the resale market with the creation of artificial demand,” said Michael Petry, the CEO and founder of footwear brand Courser and former category manager at Adidas. “It’s capitalizing on the idea that people want what they can’t get or can’t have.”

The result is a hyper-competitive market that makes it difficult for the average person to buy certain Nike products at retail. Meanwhile, many sneaker resellers rely on connections with industry insiders, called “plugs,” for leaked details of hyped drops before they happen. Such resources are often used by individual resellers and “cook groups” (members-only forums that charge fees for information about the sneaker resale market) to have an edge over the competition.

These cook groups, while not directly affiliated with Nike, often work with Nike insiders to get exclusive information on upcoming releases.

Dhruv, the founder of a popular cook group, told Insider last year that his group relies on a plug with the Nike SNKRS app who relays advanced information on drops to help them prepare for a release. This system, Dhruv said, helped the group learn about a Fire Red Jordan 5 shock drop a few hours before it went live.

Turning ‘a blind eye’

While Nike employees are technically told to keep sneaker drop information to themselves, two former Nike employees who worked with the brand’s high-heat footwear said that Nike often turned a “blind eye” when it came to people leaking information to cook groups or sneaker forums.

“If the shoe has made it to the resale market, then it’s a win for the shoe,” said a former Nike employee who worked on SNKRS until February of 2021. This employee added that when it came to SNKRS launches, it was standard for internal conversations about new drops to focus heavily on how to create hype for a pair that was dropping. As such, sneaker leaks were almost never viewed negatively internally if it meant more hype around a certain pair.

“As long as it’s starting to build up that experience of, ‘Oh, this is something I really want,’ it’s never a bad thing,” the former SNKRS employee said about leaks.

The February release of the super-hyped Trophy Room x Air Jordan 1 illustrated some of these issues. The shoe marked a collaboration between the Jordan Brand and the Orlando-based store Trophy Room, which was founded in 2016 by Michael Jordan’s son Marcus and was reportedly limited to 12,000 pairs. Images of the shoes leaked on social media in December, with some pairs appearing on the resale market weeks before they officially dropped. According to a Complex report, Trophy Room sold thousands of pairs to resellers for around $1,000 each before the sneaker ever dropped to the public. In a tweet, Marcus blamed the sneaker leaks on Nike’s distribution center in Memphis, which housed the sneakers.

Beyond Nike, it’s not uncommon for high-heat footwear brands to have dubious relationships with their resale market counterparts. Yeezy Mafia, a web forum that offers exclusive leaked information regarding upcoming Yeezy releases, confirmed that it sometimes work directly with Yeezy founder and sole owner Kanye West, the platform’s founder told Insider in a recent interview. However, the details of this partnership are still unclear. 

The latest drama at the Swoosh is just another example of the continual blurring of the lines between retail and resale. According to Bloomberg, Hebert had shared information about her son’s resale business, West Coast Streetwear, with Nike in 2018. After Hebert left the company, Nike told Bloomberg that there were no issues of policy violation or conflicts of interest and Hebert made the decision to resign.

While Hebert may be out, Nike’s ambiguous relationship with resellers remains. And with the sneaker and streetwear resale industry expected to hit $30 billion globally by 2030, the system continues to reward the profiteering reseller while leaving the standard sneaker enthusiast in the dust. 

“True sneaker fans are very frustrated over their inability to get the shoes they want,” NPD sports analyst Matt Powell told Insider in an email. “Brands have got to figure out an alternate method of getting their shoes to true fans.”

SEE ALSO: Inside SNKRS: How a group of Nike employees went ‘unconventional’ to build a chart-topping app that would transform sneaker culture

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