Sneakernomics: The Goose that Laid the Golden Eggs
Matt Powell, Vice President, Senior Industry Advisor ;
In one of Aesop’s Fables, “The Goose that Laid the Golden Eggs,” a farmer owns a goose that lays a golden egg every day. The farmer assumes that the goose must have a huge amount of gold inside it. The farmer kills the goose, and finds it to be no different than an ordinary goose, but in doing so also kills off the supply of golden eggs. Greed won out over easy wealth.
This parable provides some interesting insight into the sneaker business. Unrequited demand has been one of the key growth drivers in athletic footwear. Consumers who could not get a limited shoe came back for the next release (and the next), in hopes of acquiring a rare product.
Many brands have benefitted from this strategy, but now the industry seems to be chasing after the easy short-term sale rather than longer term sustainable growth.
Instead of seeing the release business as an annuity, some brands are trying to drive big sales increases on the back of release product. Product that was previously viewed as rare and special is on the way to becoming a commodity.
New shoe releases are sitting on shelves for weeks, as opposed to selling out in hours. Feedback from the sneaker community is that release shoes that don’t sell out are not as “cool” as they used to be. In many cases, release shoes have to be marked down to move. Previously, we rarely saw release shoes on clearance.
There is collateral damage in abandoning the scarcity model. Tangential styles that served as a substitute for sold out release product have also slowed.
Some of the recent market share shifts are likely tied to consumers’ changing perception.
The lesson for the sneaker industry is that selling out of a shoe quickly is very good for business. As one of my Twitter followers said, “The last sale is the most expensive.”
Unrequited demand is one business practice that has held up well over the years. Oversupply will “kill the goose.”
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