'Kanye Collaboration Product' Adidas Struggles with Inventory... Popular in the Secondhand Market?

Global sports brand Adidas is struggling with inventory issues related to products such as sneakers collaborated with American hip-hop star Ye (formerly known as Kanye West), who was 'cut off' due to controversies over anti-Semitic and Nazi-sympathizing remarks. The inventory scale is estimated at $500 million (about 660 billion KRW), but it is difficult to sell without labels or simply discard them.

Contrary to Adidas's concerns, the demand for collaboration products between Ye and Adidas has surged by 30% in the sneaker resale market, gaining popularity.

[Image source=AP Yonhap News]

◆ Inventory worth about 660 billion KRW... Both resale and disposal are 'difficult'

According to the Washington Post (WP) on the 28th (local time), Bjørn Gulden, Adidas's new CEO, recently hinted during an earnings announcement that the company might not sell products collaborated with Ye. This marks a significant shift from his stance three months ago, when he explained that they would change the labels on the inventory and recover most of the losses.

Adidas has collaborated with Ye's shoe and apparel brand 'Yeezy' since 2013, releasing products together. It is estimated that Adidas's annual revenue from the collaboration with Ye reaches about $2 billion. However, after Ye sparked controversy last year with anti-Semitic and Nazi-sympathizing remarks, Adidas stopped producing Yeezy brand products and decided to end the collaboration with Ye.

Sneakers created through the Adidas-Ye collaboration were sold for $200 to $600. The market estimates the inventory value at $300 million to $500 million. Adidas stated that if it cannot repurpose the inventory, it could lose €1.2 billion (about 1.7 trillion KRW) in sales and €500 million in operating profit this year.

Adidas has considered two options, both carrying risks. First, it could sell the inventory at discounted prices without labels. However, Tom Nikic, an analyst at Wedbush Securities in the U.S., pointed out, "This could backfire in terms of publicity," adding, "It might appear as if they are profiting from collaborating with someone who made blatant anti-Semitic remarks."

[Image source=AP Yonhap News]

Mark Cohen, a professor at Columbia Business School, explained that the inventory could be liquidated through discount stores or sold by weight to intermediaries who distribute them to retailers in developing countries. He said, "All products manufactured worldwide are sold somewhere, somehow, at some price," adding, "Even high-priced Kanye West sneakers will be worn on people's feet."

The option that CEO Gulden is expected to be considering is to dispose of the shoes. Major apparel brands such as Nike, Coach, Louis Vuitton, and Burberry have made this choice to protect their brand value. However, this also faces criticism due to environmental concerns.

Elizabeth Napier, an assistant professor at Tulane University in the U.S., suggested donating the inventory shoes to disaster relief efforts, such as those for earthquake victims in T?rkiye and Syria.

◆ Demand up 30% since last October... Prices rise due to supply shortage

While Adidas is struggling with how to handle the inventory of collaboration products with Ye, surprisingly, demand for these products has significantly increased in the sneaker resale market.

John Mokadlo, CEO of Impossible Kicks, a major U.S. resale company, recently told CNN Business that demand for Yeezy products has increased by 30% since October-November last year. He introduced Yeezy sneakers as one of the top three best-selling brands on their platform, alongside Nike's Jordan and Dunk. Mokadlo said, "We sell a total of 30,000 sneakers per month, of which 6,000 to 7,000 are currently Yeezy products." He added that the Yeezy 350 Black and White models are the most popular, with resale prices 20-40% higher than retail, selling for $350 to $400.

Impossible Kicks currently holds about 10,000 pairs of Yeezy sneakers worth approximately $2 million in inventory. Mokadlo said, "Since Ye's remarks became controversial, inventory has started to decrease, making it difficult to secure stock," describing the atmosphere.

On StockX, the world's largest resale platform, Yeezy sneaker prices are also rising due to supply shortages. Drew Haines, StockX representative, explained, "The average price of Yeezy sneakers has been rising this year, but total sales on StockX are decreasing," adding, "This should be seen as a principle of supply and demand, a phenomenon that occurs when there is no new supply in the market."