MASTER THESIS - HYPEBEASTS & SNEAKERS HOW ARTIFICIAL SCARCITY, HYPE AND DIGITAL MARKETPLACES DRIVE THE SNEAKER CONSUMPTION CULTURE ...
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HYPEBEASTS & SNEAKERS HOW ARTIFICIAL SCARCITY, HYPE AND DIGITAL MARKETPLACES DRIVE THE SNEAKER CONSUMPTION CULTURE Mauritz Beule 12037848 Strategic Management MASTER THESIS Submitted in partial fulfilment of the requirements for the degree in Strategic Management At the Leopold-Franzens-Universität Innsbruck Supervisor: Univ. Prof. Dr. Andrea Hemetsberger Co- Supervisor: MSC Jonathan Schöps Innsbruck, 30.05.2022
Confirmation of Co-Supervision Hypebeasts & Sneakers How artificial scarcity, hype, and digital marketplaces drive the sneaker consumption culture -supervised by MSC BSC BSC Jonathan David Schöps. Mauritz Beule I
Abstract Sneakers are everywhere. While youth and pop culture evolved through social media, fashion and sneakers became status symbols presented in many ways. Music, sports, movies, and gaming involves sneakers, which often are a medium to communicate wealth, status and uniqueness. This thesis shows the current consumer culture in the sneaker industry. It highlights where this culture has changed and shows the view of different consumers. The primary focus of the thesis lies on artificial scarcity which is used as a marketing tool by manufacturers. Further, secondary markets for reselling highly demanded products have risen. In addition, the thesis describes how scarcity creates a hype that leads to an increase in demand. The digitization of the industry and the shift of consumption to the internet and social media play a role here. In addition, this thesis will shed light on the factor of secondary markets. Finally, the thesis describes how these three factors drive the sneaker consumption culture and where differences exist in the communities' perceptions. In order to provide a good thesis on this topic, qualitative research was designed to focus on the consumers' meanings and intentions when participating in the sneaker consumption culture. The research uses qualitative narrative interviews to highlight storytelling and allow the interviewees to describe their meaning of the culture comprehensively. Keywords: hype, consumer culture, scarcity, sneakers II
Table of Contents ABSTRACT ............................................................................................................................. II I. LIST OF FIGURES .......................................................................................................... V II. LIST OF TABLES .......................................................................................................... V 1. INTRODUCTION ............................................................................................................. 1 1.1. PROBLEM STATEMENT .................................................................................................... 2 1.2. RESEARCH GAP & RESEARCH QUESTION ...................................................................... 2 1.3. STRUCTURE OF THE THESIS ............................................................................................. 3 2. THEORETICAL BACKGROUND ................................................................................. 4 2.1. CONSUMER CULTURE....................................................................................................... 4 2.2. CONSPICUOUS CONSUMPTION ......................................................................................... 5 2.3. SCARCITY AND HYPE ....................................................................................................... 7 2.4. COLLABORATIVE CONSUMPTION .................................................................................. 11 2.5. SOCIAL IDENTITY AND SOCIAL MOVEMENT .................................................................. 12 2.6. THE RISE OF THE SNEAKERS ......................................................................................... 13 2.6.1. THE PRESENT SNEAKER BUSINESS................................................................................. 16 2.6.2. DIGITAL SECONDARY MARKETS ................................................................................... 18 2.6.3. BRANDS IN THE FASHION INDUSTRY ............................................................................. 21 2.6.4. THE INFLUENCE OF POP CULTURE ................................................................................. 22 3. METHODOLOGY .......................................................................................................... 24 3.1. RESEARCH DESIGN ........................................................................................................ 24 3.2. QUALITATIVE NARRATIVE INTERVIEWS ....................................................................... 24 3.3. INTERVIEW GUIDELINE ................................................................................................. 25 3.4. SAMPLING STRATEGY & DATA COLLECTION .............................................................. 26 3.5. DATA ANALYSIS ............................................................................................................. 29 III
4. EMPIRICAL FINDINGS ............................................................................................... 30 4.1. BUYING INTENTIONS ...................................................................................................... 33 4.1.1. COLLECTING ................................................................................................................ 35 4.1.2. RESELLING AND INVESTING ......................................................................................... 36 4.2. SCARCITY TURNS INTO HYPE ........................................................................................ 40 4.3. THE INFLUENCE OF SOCIAL MEDIA ............................................................................... 44 4.3.1. FANDOM ....................................................................................................................... 45 4.4. DIGITAL MARKETPLACES .............................................................................................. 47 4.4.1. SECONDARY MARKET PROBLEMATICS .......................................................................... 49 4.5. THE DESTRUCTION OF THE CULTURE? .......................................................................... 51 5. DISCUSSION .................................................................................................................. 53 5.1. COMMUNITY SEPARATION ............................................................................................. 53 5.2. HYPE BUILDING THROUGH SCARCITY AND ICONIZATION............................................. 54 5.3. DESTRUCTION OF THE CULTURE ................................................................................... 55 6. MANAGERIAL IMPLICATIONS AND FUTURE RESEARCH ............................. 56 7. LIMITATIONS ............................................................................................................... 58 III. REFERENCES ........................................................................................................... VII ONLINE REFERENCES: ..........................................................................................................XIII IV. AFFIDAVIT ..............................................................................................................XXX IV
I. List of figures Figure 1: A means-end model of conspicuous consumption, Gierl & Huettl, 2010, p. 226 ..... V Figure 2: Screenshot, SNKRS App, 24.04.2022 ...................................................................... 17 Figure 3: Screenshot, Heatmovement App, 24.04.2022 .......................................................... 17 Figure 4: Nike net revenue, Statista, 2021 ............................................................................... 17 Figure 5: Statista Consumer Market Outlook, Statista, shoez.biz., 2021 ................................. 18 Figure 6: Screenshot, StockX.com, 25.04.2022 ....................................................................... 19 Figure 7: Screenshot, StockX.com, 25.04.2022 ....................................................................... 20 Figure 8: Best seeling brands on StockX, Statista, 2020 ......................................................... 20 Figure 9: Screenshot, YouTube, 28.04.2022 ............................................................................ 40 II. List of tables Table 1: List of interviewees .................................................................................................... 28 Table 2: Sneaker resale prices, StockX Data, 26.04.2022, Images: www.stockx.com ............ 38 V
1. Introduction e (Macklemore & Ryan Lewis, The Heist, 2012). of sneaker culture back in 2012. The excerpt described his connection as a teenager to his sneakers. Air Max, a model of the brand Nike, was fascinating for him to stand out from his environment and prove his coolness. In contrast, his friends settled for fake Adidas shoes and wore four stripes on them, while the original Adidas products had only three. This already ten years old text was a worldwide hit. Even the NBA (National Basketball Association), the most popular basketball league globally, used the song for their marketing. Nevertheless, initially, the song was a critique of the industry and the sneaker culture, driven by the need for status symbols and exclusive products to stand out from the rest (Teicher, 2013). Sneakers have become iconic products in the fashion industry (Denny, 2021). The sneakerheads are highly attached to the various sneakers and the community and strongly identify with the products, the stories, and the brands (Matthews et al., 2021). They also include many collectors who often have a strong connection to a brand, product line, or design (Choi & Kim, 2019). In general, the business is booming. Sneakers can be identified as a part of the general streetwear, which initially served to oppose the typical well-dressed and focused more on casual and comfortable clothes. With influences from the skater or surfer scene, there was a partly rebellious origin in the normalization of casual and sporty clothing sets (Denny, 2021). In February, after the death of the famous designer Virgil Abloh, who founded Off-White, a famous brand often collaborating with established big brands and fashion companies to produce new and limited products that rapidly created a massive demand, the New York Times headlined (Friedman, 2022). However, death did not mean streetwear does not exist anymore, but streetwear and sneakers are no longer a niche element of the fashion industry. Instead, the culture, with the original thought of rebellion and showing the non- conformity with the current standard of fashion, has grown into a multibillion-dollar industry with brands like Nike, Adidas, and even high-fashion brands like Gucci dominating the market (Denny, 2021). 1
1.1. Problem Statement The literature shows that some studies of fashion and sneaker markets have been conducted in the past years . In general, identifying patterns in the consumption of goods has been part of research since Veblen (1899) wrote about conspicuous consumption. The assignment and explanation of different product categories to this theory have often taken place (Bagwell & Bernheim, 1996). In general, several studies have described the effect of scarcity on consumer behavior and the decisions and perspectives regarding price and desire (Suri & Monroe, 2003; Wu & Lee, 2016). Cultural aspects of fashion consumption have also been examined (Brace- Woodman, 2008). In the past years, the sneaker industry has risen, and more research has been conducted, focusing on this emerging market. Matthews et al. (2021) inve sneakerhead Furthermore, another perspective, the collaboration consumption perspective in the secondary markets, has emerged with the research of Slaton & Pookulangara (2021). In this research, the authors point out that understanding collaborative consumption is essential for brands in improving the retail industry's understanding and consumption patterns of consumers from generation Z (1996-2010) and millennials (1980-1995). Still, there is a need for further research on sneaker consumption culture. The industry is developing fast, and new Brands and Products are becoming trendy monthly. However, research is scarce when looking into the sneaker consumption culture and how new factors of influence in the market drive the consumption of sneakers. So, the thesis is designed to research the meaning-making and the attitude of participants inside the sneaker consumer culture. Therefore, this research is intended to investigate how different communities see and reflect on the current state of the culture and define new influences and drivers of sneaker consumption in general. 1.2. Research Gap & Research Question The industry of the Sneaker and Streetwear brands is booming even in the times of the coronavirus. Parallelly, the secondary market for trading these highly demanded goods has also grown and is estimated to reach $51 billion by 2023 (Sorokanich, 2019). This research should provide an in-depth view into the changes in the Sneaker market and display how new influences and a new generation of consumers affect the market. Additionally, there will be new information about the general streetwear market, as sneakers often are seen as a part of the streetwear culture and big sneaker brands like Nike, Adidas, and New Balance participate in 2
both fields. Furthermore, this thesis investigates how scarcity, hype and the rising secondary market affect this industry and the consumer culture. As the younger generations start consuming these goods more frequently and deliberately (Hamari et al., 2016), this thesis wants to investigate why the brands seem to target a younger generation more. Additionally, the thesis provides a current standard of the sneaker industry with an up-to-date stand on marketing mechanisms included in the hype creation. It shows how hype supports the artificial scarcity messages to reach the target groups and how the targeted consumers perceive the hype. Accordingly to the thesis title, the following research question aims to contribute to existing literature and practice. Research Question: The research question contributes to the theory and practice by providing a new perspective on the sneaker consumption culture and a cross-section of consumers and their opinions and attitudes towards the culture. On the practical side, this research should help companies in this industry increase their knowledge about the attitude and meaning-making of consumers participating in the culture. The research is limited to sneaker consumption. However, the patterns will not only apply to sneaker culture but can also be interpreted for other consumer cultures, especially other sectors influenced by scarcity and hype. Furthermore, this thesis aims to give an inside into the secondary markets that have grown massively in the past years (Sorokanich, 2019; Slaton & Pookulangara, 2022). 1.3. Structure of the thesis To give an overview of the thesis, it is separated into six chapters. The first chapter is intended to introduce the reader to the topic and provide a simple statement of the problem and the purpose of the research. The second and upcoming chapter does define the current state of literature about consumption cultures and the fashion industry. Furthermore, this chapter underlines the psychological and sociological patterns that influence people's consumption (Lynn, 1992; Bagwell & Bernheim, 1996). In addition, the second chapter explicitly points out and discusses the issues related to the research question. To the end, the topics of scarcity (Gierl & Huettl, 2010) and the various possible uses of scarcity as a marketing tool (Wu et al., 2012) were highlighted. Furthermore, hype and its connection to scarcity are explained (Stock & Balachander, 2005). 3
The third chapter of this thesis will present the methodology and explain its selection and implementation. Furthermore, the sampling, data collection, and analysis will be explained. Building on this, the fourth chapter presents the thesis findings, which were gained through in- depth interviews, and places them in the context of the existing literature. These findings are then discussed in the fifth chapter, which is further closed by the sixth and final chapter that provides limitations, managerial implications, and suggestions for further research in consumer culture. 2. Theoretical background The sneaker had become a cultural phenomenon, especially in the youth culture, when it made its way from the tracks and gyms to the streets (Denny, 2021). The definition of coolness is a fundamental term in youth culture, as it is stated in the Rap-lyrics opening the thesis, where sneakers are often seen as a means of coolness and a part of cultural identity (Macklemore & Ryan Lewis, The Heist, 2012; Denny, 2021; Swain, 2002). Therefore, this chapter of the master thesis should describe the theory behind the phenomenon of sneakers. Additionally, the consumption patterns of scarce goods and the consumer culture of conspicuous goods are described in this section. This should explain why and how sneakers have become such a widespread good for self-expression in society. Furthermore, the theoretical background is intended to give an updated view of the current industry and the opportunities that brands have and use to operate in the sneaker industry. 2.1. Consumer culture This section is intended to give an overview of the current research on consumer culture, with a particular focus on the intentions and motivations of consumers when purchasing sneakers or comparable goods. Consumer culture theory by Arnould & Thompson (2005) is not a set and unified theory. Instead, it is intended to give a collective perspective on the relationship between consumer actions, the marketplace, and cultural meaning-making. Consumer culture theory investigates the heterogeneity of consuming groups inside a culture (Arnould & Thompson, 2005). Furthermore, consumer culture highlights the interaction inside the communities and the usage of systems to communicate and interact within a culture and the identity shaping process inside the community. It shows how the cultural participants make sense of their surroundings through their lived experiences and the collective meaning of the culture (Arnould & Thompson, 2005; Kozinets, 2001). A cornerstone of consumer culture theory is the research of Levy (1959) who examined the motivations and intentions that lead to specific consumer 4
behaviors. He drew on motivation research to uncover deeper motivations in consumer behavior (Arnould & Thompson, 2018). Additionally, consumer culture theory sees a different perspective than cultural sociology (Alexander & Smith, 2019; Cordero et al., 2008) and differs from this approach by focusing on a meaning-based approach to consumption and rationalist accounts of consumer action (Arnould & Thompson, 2018). Moreover, using consumer culture theory, fan culture has been researched in multiple executions (Jenkins, 2012). 2.2. Conspicuous consumption Thorstein Veblen (1899) argued that wealthy individuals often consume highly conspicuous goods and services to advertise their wealth, thereby achieving greater social status (Bagwell & Bernheim, 1996, p. 349 Veblen effect otivation to consume goods with a higher price but similar functionality (Veblen, 1899). The original approach for Veblen was that individuals want to achieve a certain status and that this can be achieved through the representation of the materialistic. Veblen generally assumes that this consumption of material goods is also signaled to the outside world (Bagwell & Bernheim, 1996). Differences in conspicuous consumption were noted early on. Thus, Veblen (1899) argues that there are two ways in which conspicuous consumption can be motivated. shows the situation where a participant from a higher social class deliberately tries to stand out from the lower classes. represents the case of showing oneself to belong to a higher class through conspicuous consumption and to present oneself at least outwardly higher. (Veblen, 1899). Today, products from luxury fashion brands are a clear example of conspicuous consumption goods, as signaling status is given simply through wearing them in public or by posting pictures on social media. Furthermore, conspicuous consumption goods often are consumed to satisfy social needs (Gierl & Huettl, 2010). This satisfaction can be reached by consuming these conspicuous goods to be envied or respected (Belk, 1985). This again refers to the signal that a conspicuous consumption good entail (Gierl & Huettl, 2010). Further research on this topic has extended the theory and developed three main categories of conspicuous consumption, as visible in Fig 1. There are three different types of conspicuous consumption. 1) Products used as status symbols 2) Products used to express uniqueness compared to friends and colleagues 5
3) Products used to express conformity with exclusive social groups (Gierl & Huettl, 2010, p. 226). Figure 1: A means-end model of conspicuous consumption, Gierl & Huettl, 2010, p. 226 Products used as status symbols are often intended to signal wealth and a high social status (Bagwell & Bernheim, 1996). Cars, jewelry, or luxury fashion are examples of goods used as status symbols. As stated by Veblen (1899), these status symbols are used to signal personal status and used to feign a higher status. Status is often combined with conspicuous consumption in research. Especially in fashion and consumption status is a highly important psychological factor . Status and conspicuous consumption has been researched multiple times and often have been used interchangeably (ibid.). In fashion, mostly luxurious products are consumed to reach and communicate a status. These products are also used to express uniqueness compared to friends and colleagues create a social identity in society. According to the need for uniqueness theory, every individual in a way is searching for uniqueness (Tian et al., 2001). Therefore, one way to express this desire for uniqueness is through consumption patterns when focusing on specific products or brands (Ruvio, 2008). This theory is based on psychological approaches discussing the needs for assimilation and differentiation and how they work simultaneously (ibid.). In the theory of conspicuous consumption, this need can be expressed by choosing special and unique products that are recognized and identified as special by the social surrounding. This can be a way to be looked at as a leader and role model when the products are recognized as fitting, but it also implies a risk of no recognition (Tian et al., 2001). 6
Thirdly, products used to express conformity with a social group are another part of conspicuous consumption (Gierl & Huettl, 2010). Belonging to an exclusive social group can also motivate conspicuous consumption. The sneakerheads, which will be examined later in more detail, can be seen as an exclusive social group in the sneaker industry. There, the consumption of the relevant products is vital to be a part of the group, have an interest in the community and the history of the products, and be well informed (Matthews et al., 2021). Accordingly, not every consumer of sneakers is a part of the sneakerhead community simultaneously. For all three types of motivation, this motivation must be signaled and recognized externally (Veblen, 1899). The visibility of possessing a conspicuous consumption good is required to signal status, conformity with a group or uniqueness (Gierl & Huettl, 2010). Furthermore, the product must deliver the symbolic meaning it is intended to have. Other individuals can identify the product as a conspicuous consumption good and identify the message sent (Gierl & Huettl, 2010; Bagwell & Bernheim, 1996). Thirdly, according to Gierl and Huettl (2010) and scarcity is an essential factor. 2.3. Scarcity and Hype . (Powell, Patriot Act with Hasan Minhaj, 2018). This statement by Matt Powell, an expert in the sneaker industry and consultant of the major sneaker brands, shows very simply what sneaker consumption and artificial scarcity are all about. This section will elaborate more on artificial scarcity and how retailers create hype with marketing efforts. The internet is the door for many people to have everything available at any time on any day. Multiple platforms, individualized advertisements, and discounts make the availability of a product all around the consumer. While availability increases, things can get less special, unique, and rare (Lynn, 1992). Conspicuous consumption in the fashion industry and many that have been produced and sold is a scarce product that is limited in supply, like concert tickets and other special editions of fashion goods (Gierl & Huettl, 2010). The limited-edition products are the most important products when combining conspicuous consumption with scarcity (Gierl & Huettl, 2010; Lynn, 1992; Chae et al., 2020). These are comparable to the products of luxury fashion brands, which also are goods for conspicuous consumption and often are used to signal 7
wealth and status (Bagwell & Bernheim, 1996; Gierl & Huettl, 2010). While limited edition shoes are used by many to signal social status and to express uniqueness, but also express conformity with the groups of people interested in these shoes and can recognize these on the streets (Chae et al., 2020). The scarcity message can change the psychological value given to the product by making the particularity of possession be considered more critical (ibid.). Due to the limited production numbers, these products can be interpreted as a more fitting status symbol, as many cannot buy them. Customer behavior is directly impacted by the scarcity message (Lynn, 1992). Working with this phenomenon, scarcity of products can be a marketing instrument used to l, 2010). This can be recognized in different parts of everyday life. For example, when walking through a mall, it is common to see a e messages of product scarcity. This product scarcity has two different types. There is product scarcity caused by limited supply or by high demand, on the other hand (Verhallen, 1982) message in limited supply, as the product is limited to a certain number (Gierl & Huettl, ibid.). These messages suggest that the consumer only has a short time and one possibility of buying the product. This expires quickly, and then there is no new possibility (Wu et al., 2021). Research has shown that scarce products are more desired because of the desire to stay unique (Snyder & Fromkin, 2012; Ruvio, 2008). The communication of this uniqueness can be reached through possession and showing scarce products, while the perception of the uniqueness of a product often aligns with the scarcity of the product (Tian et al., 2001;Rex A. Wright et al., 2004; Wu et al., 2021), meaning a product often is viewed as unique, when scarcity is communicated. The main principle for brands is to convey this exclusivity through scarcity and intentional communication (Jang et al., 2015). Furthermore, price and perceived quality of a product also correlate (Rao & Monroe, 1989). Chae et al. (2020) found that these limited-edition shoes (LES) can express more self-efficacy than general shoes. Most consumers demonstrate their social status or positions through their consumed shoes. Therefore, consumers of LES want to reveal their self-image by matching the image represented by the shoe with their personal image (Chae et al., 2020; Kim et al., 2016). Furthermore, more people are willing to pay the price premium than people who can buy the 8
goods. This creates even more interest in limited editions (Jang et al., 2015). Conversely, a limited edition only works and is considered unique and desirable if there is a significantly perception is essential in the consumption culture. The study supports Lynn (1992), who invented the Scarcity-Expensiveness-Desirability model that suggests that people believe scarce products do cost more and highlights that impa (Wu et al., 2012, p. 272). As these recognizable effects are used as a marketing tool by brands, research also demonstrates a threat to this powerful presentation of scarcity (Kristofferson et al., 2016). It becomes clear that consumers can see a danger in other consumers, resulting in competition. Such a phenomenon can be seen, for example, in Black Friday promotions that include special offers (ibid.). Furthermore, these methods can also be seen in the sneaker industry. In campouts, for example, consumers wait for days or weeks in front of a store to buy a particularly hyped product. Scarce sneakers are not easy to buy. The retailers have multiple mechanisms to provide a fair chance for the consumers. The most important way to get shoes from most brands is through a Raffle system. This system works like the lottery, where highly demanded products are not buyable for everyone in the online store, but the raffle chooses random people to buy (Denny, 2021). People who are not lucky can try another online store that sells a small number of pairs, but many can leave the website without a successful buy. These shoes can now only be purchased on secondary markets like StockX, eBay, or other platforms, or the consumer needs to wait for a restock. Using scarcity messages can be a marketing tool to increase awareness of the product and implement more products of the same category (Gierl & Huettl, 2010). In the sneaker business, this was most visible when Adidas decided to stop producing the Stan Smith Sneaker in 2011 (Denny, 2021). In 2014, when the Sneaker was re-released with multiple special editions, including the famous Artist Pharrell Williams into the Design, the demand was huge again, and the marketing campaign was a success. By actively holding the shoe back for some time, an interest in it was built when it became available again (Luber J. , 2016). Today, in 2022, the shoe does not have this high demand anymore, but the lifecycle of the enormous demand, the increase in quantity of a highly demanded product will not credibly convince uninformed consumers that the seller is a high- (Stock & Balachander, 2005, p. 1190) The term hype is a commonly used term in social media and often is used when talking about something rapidly increasing in popularity and demand. Hype, however, is not a new 9
phenomenon in the consumer goods industry. A well-known example, dating back 20 years, describes the process of hype and its use as a marketing tool. The PlayStation 2 from Sony was an extremely in-demand console. On the one hand, because it reflected technical progress, but on the other hand, a communicated shortage of parts meant that it could not be produced as quickly as necessary. This shortage created even more extreme demand for the product. (Stock & Balachander, 2005). and Balachander (2005) call them. For example, the electric car manufacturer Tesla launched a after the car was unveiled, more than 200,000 pre-orders were placed, each with a pre-payment of $1,000 (Schröder, 2016). After a short time, there were 300,000 pre-orders. Although it was known that the production does not have this capacity, one analyst even said that many would have to wait several years for their car (ibid.). So, the question also arose for researchers why companies like Sony did not increase their capacities when their products were resold for more than twice as much (Stock & Balachander, 2005). Bagwell & Riordan (1991) first stated that high prices signal product quality to consumers, especially to uninformed consumers. Additionally young and male consumers tend to be more likely to engage in conspicuous consumption . This indicates the potential marketing focus by the sneaker retailers on young and uninformed consumers. The young individuals seem to perceive a higher benefit of possessing conspicuous consumption goods and are more likely to signal status through consumption. As already described, not only fashion is a popular medium, but also cars, watches, or other sometimes expensive and rare items. Additionally, to the price, scarcity implies a quality signal to uninformed consumers (Stock & Balachander, 2005). This scarcity signals quality to uninformed consumers, who are relatively new to the market in the Sneakers industry. This is where hype fits in. The dimensions of information spread through social media help generate hype and reach many uninformed consumers. Additionally, as stated before, Rao & Monroe (1989) found that the perceived quality of a product is correlated with the price a product is given, especially when there is no motivation to inform about the product details (Suri & Monroe, 2003). Rui et al. (2011) studied the effect of social media postings on movie sales, specifically on Twitter. They examined the total number of tweets and the positive tweets about the film. It became clear that these Tweets can influence and that Tweets from people with more followers 10
have a significantly higher effect than those with fewer followers. As this study only focuses on Twitter, Instagram is a more important social media platform for young people and Sneakerfans. For Germany, statistics from 2021 show that 79% of people from 14 to 29 years old use Instagram. Twitter, in comparison, is used by 9% of the 14 29-year-old Germans (Beisch & Koch, 2021). So, Hype can be created on social media focusing on relatively uninformed consumers who perceive quality and exclusivity differently than well-informed consumers. In 1899 Thorstein Veblen recognized the now-famous Veblen effect, which occurs here with hyped shoes. Consumers want to buy a significantly more expensive product, although the functionality of products of the same type with a lower price is indistinguishable (Bagwell & Bernheim, 1996). As already described in the subsection of conspicuous consumption, hyped products, in this case, sneakers, where consumers are willing to pay a higher price, are conspicuous consumption goods and do not possess a higher functionality (ibid.). These goods are used to enhance the status and the material display of wealth (Veblen, 1899). Most research on the desire for uniqueness has been done in western societies. Additionally, there are different cultural interpretations of expressing uniqueness and the desire for social status (Wu et al., 2021; Lynn, 1992). 2.4. Collaborative consumption Collaborative consumption is a relatively new approach in consumer research (Slaton & Pookulangara, 2022). Collaborative consumption in the fashion industry includes the resale of new or already used products, primarily visible on secondary markets (Slaton & Pookulangara, 2022; thredUP, 2019). Furthermore, collaborative consumption is the sharing of resources, which most but not exclusively takes place via digital marketplaces and online communication (Barnes & Mattsson, 2016). Moreover, it is mainly an alternative to the usual purchase at a retail store and is often referred to as the sharing economy (Belk, 2014; Slaton & Pookulangara, 2022). The collaborative idea in fashion consumption has massively increased in the past years based on the need to update the personal style and the increase in interest in sustainability, especially in the generation Z and the Millenials generation (Slaton & Pookulangara, 2022; thredUP, 2019; thredUP, 2021). The rise of secondary markets has been fueled by the improvement of digital infrastructure and consumption options. Furthermore, the secondary markets have been driven by the increasing interest in questioning one's own social and ecological influence because sharing is an eco-friendlier consumption 11
approach (Hamari et al., 2016b; Slaton & Pookulangara, 2022). Approaches like renting services for clothing influenced by the collaborative consumption approach have been started in the past years and grown in the industry and been researched because of its growing importance (Lee et al., 2021). Moreover, collaborative consumption is a driver of social communities that identify less with mass consumption and seek a new approach to collaborative problem-solving in consumption (Slaton & Pookulangara, 2022). An essential enabler of the growing resale market is the digital environment and infrastructure, which shifts the trade of secondhand goods onto digital marketplaces. In addition, the information available through social media has increased enormously, especially among young people, and trends are quickly shared and disseminated. Thus, platforms offering the trade of fashion goods have grown enormously in recent years, along with interest in more sustainable consumption methods. In addition, the possibility of selling as a private individual has been simplified by digital marketplaces and no longer poses a barrier (Stephen & Toubia, 2010) Further, Slaton & Pookulangara (2022) research found that pop culture and social media positively influenced fashion-conscious consumers interested in the secondary market consumption and increased their desire for sneaker purchases on the secondary marketplaces. Additionally, the study found that pop culture, mainly influenced by celebrity and athlete collaboration, finds tremendous interest in generation Z and millennials. 2.5. Social identity and social movement Regarding the research of consumption intentions, conspicuous consumption has already introduced three main intentions to consume conspicuous goods. Furthermore, to elaborate on the social dimension, which involves the motivation of belonging to a social group and the thrive for uniqueness, social identity theory is a critical approach to investigating consumption (Tajfel et al., 1979). Moreover, products can also be used as symbols of social movements (Holt, 2004). Brands that are strongly related to the social movements focus more on the culture around the product rather than on the product itself. A story for identification is told and gives the consumer a symbol to identify with and shows conformity when wearing a brand with a deep storyline and identification factor. Holt (2004) argues that companies that want to build their brand to address these social movements need to focus on cultural branding and less on the product itself. Streetwear and Sneakers fit into products that have been used for social movement patterns (Holt, 2002). Significantly, the intention of the sneaker was not to be a symbol for the streetwear culture or a status symbol for uniqueness or identification with a 12
movement, e.g., Skating or Snowboarding (Chae et al., 2020). In its original state, the sneaker was developed to be a shoe for athletics, basketball, or other sports (Denny, 2021). Social identity theory describes how individuals use their social identity to assign themselves to groups that they interpret as fitting. They use this to define and express their personality within society (Tajfel & Turner, 1979). This theory was used to determine the consumer perspective on brands and deals, for example, brand loyalty and brand identification (Kuenzel & Halliday, 2010). Simmel (1957), a well-known philosopher, recognized that fashion awakens two conflicting social thoughts. On the one hand, fashion is used to find social affiliation and belonging to a social group. Further, Swain (2002) found that clothing was a powerful sign of the students' self-esteem and an essential component of social acceptance or rejection within their specific peer group culture. So, it is done what everyone does. On the other hand, individualization and differentiation should not be left out. Standing out within the group is also essential so that, in the end, a middle ground is found. Thus, fashion is a form of expression among the many forms of life. One can combine social egalitarianism with individual differences and variety in cooperative behavior (Simmel, 1957). Being a part of the fashion industry, the sneakers business works congruently. If there is too much interest in a product or brand, there is too little individuality. At the same time, too little interest in a product or brand does not appeal to consumers because of too little meaning in the social group and no participation of others (ibid.). As the fashion industry is dynamic, brands and products can become highly demanded in one period and less if too few participants are too little individualization. Social status, identity, and conformity are often through brand consumption and presentation in the present fashion industry. Brands play an essential role in the sneaker business. In contrast, consumers play an important role in the meaning-making and image-making of a brand. Without the identification of consumers, there is no brand identity. The communication of the brand identity is mainly in the hands of the consumers (Guschwan, 2012; Heding et al., 2009). Therefore, to investigate more into the particularities of fashion and especially the sneaker industry with its consumer culture, the next section will explain today's sneaker industry. 2.6. The rise of the Sneakers Sneakers are a fashion item everywhere in the world. To identify the characteristics of the sneaker industry this thesis will provide an overview about the great increase in sneaker sales 13
and the sneakers as a conspicuous consumption good. This section should provide an overview about how and why sneakers are creating this high demand. damn, I just got to flaunt it, got to show 'em. So exclusive, this is that new shit. A hundred dollars for a pair of shoes, I would never hoop in. Look at me, look at me, I'm a cool kid. I'm an individual, yeah, but I'm part of a movement. My movement told me "Be a consumer", and I consumed it Lewis, The Heist, 2012). These quotes from the song by Macklemore show that sneakers have become a cultural mass phenomenon. Keywords such as exclusivity or coolness are intended to represent what youth culture is all about. He describes how people felt they belonged to the sneaker movement through their consumption. Generally, fashion and especially sneakers are a big part of the participants in youth and pop culture. Looking into the sneaker market, the two most famous sneakers in the current industry seem to be the Jordan´s by Nike, which collaborated with the famous former Basketball player Michael Jordan and the Yeezy by Adidas, which was designed by the famous Rapper Kanye West. Sports, Music, and celebrities play a significant role in the rising of the sneaker globally (Denny, 2021). The sports shoes mainly influenced the modern sneaker from the mid-90s century that was primarily used for basketball and other sports. The converse Chuck Taylor was one of the first shoes to be worn in the streets of America as in the 1950s, a looser look was preferred in the society (ibid.). From this on, the Chuck Taylor All- Star by Converse was worn on the basketball courts around the USA and the streets. A few years ago, it was estimated that 60% of Americans at least have owned one pair of the Chuck Taylor All-Stars in their lifetime (Peterson, 2016). With the rise of Michael Jordan and his own Jordan brand, which was offered to him by Nike when signing his first contract, the sneakers scene developed into the iconicity it has now (Denny, 2021). Jordans became the sneakers every sneakerhead needs to possess, as the direct involvement of Michael Jordan and the storytelling around his career were unmatched. In addition, the many color variations and models allowed fans to associate each model with its moment in the superstar's career, giving them more incentives to collect and trade (ibid.). With the increase in demand, a community of well-informed collectors grew called Sneakerheads. Most of these sneakerheads are knowledgeable about the product itself and the history of the sneakers. Further, they developed a passion for collecting and exchanging 14
sneakers and set themselves apart through nostalgia and appreciation for rarity and uniqueness (Choi & Kim, 2019; Powell, 2014; unique relationship with the brands and products turned into a significant financial impact (Powell, 2014). For the sneakerheads, the shoe itself is not the only important thing. However, the community and the historical understanding of the scene and the products are essential factors for the purchase itself and the sense of membership in the sneakerhead culture. It is not enough for many to own the products but also to understand the culture behind them and deal with the background (Kawamura, 2016; Matthews et al., 2021). Until today, sneakers have evolved from being sports shoes to being worn in everyday life in the 20th century. In the 21st century, the sneaker has evolved from being on foot to being traded for new record high prices annually and being kept unworn as an investment property (Luber J., 2016). Furthermore, Sneakers are used as the abstract value of the product. The sneaker got to be looked at as a symbol in the 60s and early 70s in New York City, where a fresh layer (Denny, 2021). This developed with the influence of Hip- player, new and unique sneakers were a symbol of wealth in the view of Hip-Hop (ibid.). A Sneaker symbolizes what the social group the person is in interprets (Holt, 2004). Different groups can have different interpretations of the symbol and different meaning-making processes for what the products and the culture mean to them. People identify strongly with personal symbols and refer to them in their everyday lives (ibid.). These can be brands, people, or products. Furthermore, various factors make a product considered luxurious in the luxury fashion industry. These include price, rarity, and symbolism. Luxury fashion goods can be categorized in three dimensions as. They are functional, experiential, and symbolic (Pitt et al., 2009; (Lasslop, 2002). In addition, these can be viewed in the three different spheres socially, individually, or materially. In the intention of the brands, sneakers are not sold as pure luxury products as there is no price premium. Nike, for example, sells most of their sneakers for a retail price between 100-150 Dollars. However, as described in the scarcity subsection, the rarity and perceived scarcity also are important factors for consumers to identify a product as unique and, therefore, possibly luxurious (Gierl & Huettl, 2010). Pitt et al. (2009) imply that rarity is a factor in luxury goods. Currently, the most famous sneakers can be considered luxurious, as they are scarce and highly demanded. 15
2.6.1. The present sneaker business In this subsection is presented the current sneaker business and the various participants. The aim is to get an overview of sneakers consumption, what is involved in the buying process, and what relates to the consumption of sneakers and their acceptance in the culture. releases in the upcoming week or month with an integrated Newsfeed for the latest updates on the most famous sneaker and streetwear brands and products. While focusing primarily on sneakers, the App provides multiple essential features for the customers who want to buy consumer can see the next upcoming sneaker that will be released brand new. Also, restocks in certain shops and upcoming releases that are not set on a date yet. This app shows even rumors with pictures of new shoes and possible release dates. When trying to buy a shoe, the App provides more than only a link to the shop. Clicking on a shoe gets the consumer to the page where he can even see the predicted or announced the number of produced shoes and the predicted demand. Additionally, the App provides the customer with a direct listing of the shoe's price on the secondary market. In this example, the popular platform StockX gives an estimated price that the consumer can sell the shoes right after purchase. The platform was stock market of things (Luber M., 2016). Moreover, to the general overview that a consumer can quickly get, Nike also provides information and purchase possibilities in their own App SNKRS. Consumers can see the upcoming drops and announcements, including day and time. Furthermore, the consumer can set an in-App alarm not to miss the drop. 16
In doing so, it is generally easy to get information about sneakers. In addition, there is a great demand on social media for information about sneakers. In addition, the purchase of the sneakers, such as here, for example, with the SNKRS app from Nike, is handled by different apps that only revolve around the shoes. It is also possible to buy products via the websites, while the apps often present complete information and provide purchase possibilities. Figure 3: Screenshot, Heatmovement Figure 2: Screenshot, SNKRS App, App, 24.04.2022 24.04.2022 The fact that this great interest and the special treatment of sneakers on the part of the brands is also reflected in the sales figures can be seen in the example in the following graphic. Despite the corona pandemic, Nike's net revenue in the footwear segment increased significantly in 2021, after falling in 2020. net revenue is as high as it has been in the last five years. Net revenue increased in every region of the world, with North America and Europe the main drivers. Figure 4: Nike net revenue, Statista, 2021 17
The increase in sales in Europe shows what Nike has achieved in their footwear sector despite the corona pandemic. For the German market the numbers also have risen. For the year 2021 where the research for the thesis started, the Statista Consumer Market Outlook (2021) predicted a sales figure of 47 million sneakers with sales of 2.73 billion euros for Germany. These figures are expected to continue to rise in the coming years and are forecast to reach sales of 3.35 billion euros in 2025. Figure 5: Statista Consumer Market Outlook, Statista, shoez.biz., 2021 2.6.2. Digital secondary markets Digital secondary marketplaces like eBay or Amazon are an everyday life need for many people. In the sneaker industry, these marketplaces like eBay and StockX have a massive impact on the industry (Matthews et al., 2021). Sneakers are not only a consumable product anymore. The market has evolved, and collaborative consumption increased (Luber J., 2016). StockX calls itself a cultural marketplace that provides a platform where the current market value of a Sneaker can be viewed live. The possibility to oversee the prices of the latest buys and sells delivers a transparent look into, what the current value of the sneaker is. While purchasing a new Sneaker from a Nike Retailer for 100 Dollars, it is not uncommon that the same sneaker on StockX is worth double the amount. Nike originally sold the Travis Scott x Air Jordan 1 High OG TS SP for 175$ in May 2019. 18
Figure 6: Screenshot, StockX.com, 25.04.2022 With the Jordan 1 shoes being one of the favorite models from the brand, the addition of the famous Rapper Travis Scott increased the interest. It brought music fans into the Sneaker business. In March 2022, nearly three years after the release, the limited-edition shoe is traded for 1.422 Dollars on average. With increasing prices depending on the most demanded shoe sizes up to 3000 Dollars. As StockX only trades unworn sneakers and provides a quality check while also checking that the product is authentic. No replicas are traded on the platform. Further, StockX does provide not only the opportunity to sell sneakers but also clothing, mostly streetwear and luxury fashion goods. In addition, there are now collectables from other industries. Consumers can buy rare LEGO sets, trade the still highly demanded PlayStation 5 or even trade NFTs on the recently introduced virtual section on the website. Especially in the reselling of clothing, many consumers use StockX. Resellers moved products of the Streetwear brand supreme worth about 3 million dollars a week on the platform (Minhaj, 2018). The markets are fully transparent as StockX provides statistics to overview past sales of every shoe in detail. It is possible to follow the price development closely. For example, restocks or later releases from stores that had a contingent of the shoe are influencing factors for changes in the price. Additionally, the average sale price and the all-time trade range are included to give an even more detailed picture of the shoe´s sales. 19
Figure 7: Screenshot, StockX.com, 25.04.2022 As already described, these market pulses such as StockX are still relatively new phenomena. Even before that, sneakers were already traded. Mainly online marketplaces like eBay or Facebook marketplace were used. These continue to be an important driver of sneaker resales since StockX, for example, charges a certain amount for the service to the platform. eBay and Facebook Marketplace, or even WhatsApp groups and Instagram are platforms for direct personal selling without a platform in between. These platforms, mainly WhatsApp, Instagram, and Facebook, are means of communication and finishing deals without giving a commission to a platform but to sell privately. Figure 8: Best-selling brands on StockX, Statista, 2020 20
For a better illustration, the above graph shows the price difference that can be achieved with different brands in the sneaker industry (Richter, 2021). Nike and Jordan lead the way in the average markup of shoes sold on the StockX platform. In the process, Jordans are paid, on average more than 50% of the original purchase price at the dealer. For a Jordan 1 that costs 120 euros at Nike, that would be a resale price of around 180 euros. Further, also clothing, and other collectables are traded on the platform StockX, where for rare products, even higher price premiums can be reached. 2.6.3. Brands in the fashion industry The example of Supreme is a striking illustration of the radiance of brands in the field of fashion. As a small company from New York with influence from the skater scene, Supreme has become a world-famous brand that sells fashion items and things that are rarely bought as a branded product that is not used for their intended purpose. For example, Supreme sold a brick with the logo of the brand. In 2018 Supreme was sold for 1.8 billion dollars to the VF group while only operating from 12 stores worldwide (van den Broeke & Maoui, 2020). Another example is a crowbar with the Supreme brand logo and colors. One thing quickly becomes apparent. The logo, the name, and the colors red and white, which characterize the brand, are indispensable in the brand's products. In general, luxurious items and brands are in trend nowadays. Moreover, luxury increasingly represents a counterpoint to everyday consumer goods (Lasslop, 2002). However, luxury must also always be viewed regarding economic and cultural differences. While luxury tends to refer to individual experiences and a high standard of living in Western countries, it tends to be associated with a high social status in developing and emerging countries. Furthermore, it is not easy to delineate what is a luxury brand and what is not (Kapferer & Bastien, 2009). Currently, Adidas, Nike and Jordan continue to dominate the sneaker market. In the calendar week 16, which went from Monday the 18.04.2022 to Sunday the 24.04.2022, the top 10 best- selling sneakers were presented at StockX. Besides these three brands, no other brand's shoe has made it into the top 10 best-selling sneakers on StockX (Grailify, 2022). The most sold sneaker, the Nike Dunk Low "White Black" (2021), was sold 3963 times in one week via the platform. The shoe, which has a sales price of 100 euros at the manufacturer, achieved an average sales price on the StockX platform of 225 euros. This corresponds to a price premium of almost 105%. In addition, another Nike shoe has landed on the second plat. The Nike Air 21
Force 1 in white. A popular shoe, which is currently very often seen on the streets. With a manufacturer price of 100 euros, this shoe was sold on average for 110 euros on the platform. 2.6.4. The influence of pop culture wanted to be like Mike, right. Wanted to be him. I wanted to be that guy. I wanted to touch the rim. I wanted to fit in. I wanted what he had, America (Macklemore & Ryan Lewis, The Heist, 2012). forms of expression and identity that are frequently encountered or widely accepted, commonly liked or approved, and characteristic (Delaney, 2007). Pop culture is an essential field for the sneaker market. Role models for consumers from music, sports, film, or art can become important advertising figures for the brands. As the famous American Rapper Macklemore states in his song Wing$, the idolization of Michael Jordan in the United States was visible when talking about the Jordan sneakers. With the possession of the shoe, primarily young people associate it with closeness to their idol and try to imitate them as a part of their social identity (Swain (Minhaj, 2018) The importance of clothing and sneakers consumption in the western world can also be seen in how much cultural influences such as music, television, or celebrities deal with the topic. Hasan Minhaj, a well-known moderator and entertainer, dedicated an entire episode of his Supreme brand, the flagship brand for the streetwear hype in America. He outed himself as a (Minhaj, 2018). Another phenomenon in the fashion industry is collaborations, which are used for primarily limited versions of products and are often unique events between two brands. Often, two fashion brands that were in vogue joined forces and created hype with a limited joint collection based on the popularity of the two brands. Collaborations are already known for the cooperation of sneaker brands with well-known personalities from music or sports (Denny, 2021). This also involves collaborating with brands from different industries. For example, Nike collaborating with with Coca Cola. There are no limits to the creativity of the big brands, whereby these limits 22
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