In the last month, investors have put more than $10 million into young sneaker e-commerce companies, including Kyx World and Kicks Crew. Although mainstays like StockX and GOAT have raised hundreds of millions in the last three years and are now billion-dollar companies, sneaker startups are continuing to drive investor interest and confidence.
Brian Mupo, CEO of 8-month-old sneaker rental company Kyx World, which raised $3 million from sports tech venture capital fund SeventySix Capital at the end of February, said there are several reasons investors are still interested in sneaker e-commerce.
First, Mupo said, the sneaker audience is both highly receptive to marketing and a clearly defined segment whose purchasing power has been proven by the success of companies like GOAT. The total global sneaker market is estimated by Statista to be worth around $70 billion and is growing every year. Secondly, sneakers are assets that, generally, appreciate over time. That offers some downside protection when these companies acquire inventory, making it less likely that purchased inventory becomes a loss.
Lastly, he said, “sneakers serve as a bellwether for where the industry is headed.”
“The category is a tastemaker,” Mupo said. “Things that are popularized in sneakers then spread to the rest of fashion. And tastemakers always attract investor confidence.”
As an example, Mupo pointed to the fact that the sneaker world embraced NFTs early, which then spread to the rest of the fashion world.
Ross Adrian Yip, COO of sneaker e-commerce platform Kicks Crew, which raised $6 million on Wednesday from Gobi Partners, said investors have seen sneakers filter from a niche interest to a massive market with broad appeal and are following the trend accordingly.
But the sneaker e-commerce market is crowded, and new players are entering regularly. Kyx World launched in June of 2021, while others like SoleSavy, Another Lane and SODA all launched in the last year. SODA received $22 million in funding from SoftBank in January and SoleSavy raised $2 million from Panache Ventures.
“It’s definitely a competitive market but not an impossibly crowded one yet,” Mupo said.
To stand out, these e-commerce players are experimenting with alternative business models, versus mimicking those of the more successful sneaker companies like StockX. Kyx World offers a subscription rental model, for example, while resale platform Kicks Crew is differentiating by targeting everyday consumers and not sneakerhead specialists.
That difference is what drew Kicks Crew’s investors to the company.
“In the online sneaker market, most platforms target the relatively niche high-end and collectibles segments and put less emphasis on the much larger everyday sneaker consumer,” said Chibo Tang, managing partner at Gobi Partners Greater Bay Area.
New sneaker e-commerce players need a differentiating factor, Mupo said. It’s no longer the ground floor for sneakers, with billion-dollar startups like StockX and established legacy retailers like Foot Locker dominating the market.
“At this point, it would be an uphill battle to just open a straight marketplace,” Mupo said. “But there’s still a lot of room for more differentiated models.”