Sneaker-centric resale platforms have staked out China as the next frontier, banking that now is the moment to make their entrance as consumer attitudes towards resale in the country continue to shift.
Previously, the stigma against secondhand goods made Chinese consumers more reticent to make purchases on secondary platforms, instead focusing on new luxury items. Those changes, however, have already driven rapid growth for local Chinese companies in the sneaker space, from resale marketplaces including Dewu, commonly known in English as Poizon, and Plum, which raised an eight-figure Series B round late last year, to activewear players like Anta and Li Ning.
Now, foreign platforms want to cash in. After announcing funding rounds, StockX, Goat and Solestage all named international expansion, particularly within the APAC region, as a priority moving forward primarily in the form of building new fulfilment centres and brick-and-mortar stores. Goat launched in China in 2019 while StockX opened an authentication centre in Hong Kong and localised operations in mainland China the following year. Sneaker resale platform Solestage is set to double its brick-and-mortar stores in the region this year.
The momentum behind these international resale players has made for a critical moment for Chinese expansion. If successful, it could present a large move forward for resale in the country, opening the possibility for wide-scale growth in a region that’s been dominated by local players for years.
Still, platforms face plenty of challenges as they move into China, a notoriously difficult market for outsiders to crack. From authentication concerns and fulfilment hurdles to competing against local competitors, the future of the sneaker resale market in the country is still in question despite growing demand.
Global resale platforms have tried and failed to enter the Chinese market before. In 2017, Vestiaire Collective announced a $65 million funding round and named China as its prime target for expansion. Four years later, the brand still isn’t active in mainland China, and following another funding round, has redirected its focus toward building up its presence in Japan and South Korea.
China is a logistical nightmare for many global resale companies, creating a vacuum that has fuelled an increase in local options from Plum to Dewu. Importing goods into China is a taxing process, which requires businesses to set up legal entities in the country, along with other headaches for platforms including customs, taxes, duties, legal restrictions and other requirements.
These hurdles are particularly cumbersome in the sneaker resale market, the success of which relies on consumer ability to buy and sell goods quickly and repeatedly to keep up with the quick cadence of releases and limited drops.
It’s not enough to have a good product anymore, and you’re not going to be better because you’re foreign anymore.
International players also will face restrictions within Hong Kong, an area primed for resale platforms in part due to exemptions on luxury taxation and customs tariffs, and the bottleneck it creates facilitating demand to Mainland China. One resale platform has quadrupled its Hong Kong fulfilment centre in the region since launching in the region in order to keep up with demand.
Authentication poses another headache for platforms, an issue that is pervasive within the sneaker resale market across the globe but particularly difficult to tackle in China. In 2019, resale platform Goat, for instance, caught $72 million in counterfeit shoes, up from $34 million the year before.
Nowhere in the world is “more sensitive” to authentication concerns, said Zak Dychtwald, founder and chief executive of advisory group Young China. “It’s the home of the excellent fake…for young consumers in particular, realness matters, and it’s become a far more sore subject than probably anywhere else on earth,” he added.
Rolling out comprehensive authentication facilities and localised customer service options is time-consuming and cost-intensive for brands in new regions, particularly for a consumer segment primed for immediate access and see-now, buy-now shopping experiences.
Brands entering the Chinese resale market today also face new competition from local players that have a strong foothold in the market and unique insight into the driving factors behind regional trends.
Domestic sneaker companies like Li Ning, Anta and Peak benefitted from the mania that surrounds collaborations and limited edition sneakers, creating products that then fuel rising prices on Dewu, commonly known in English as Poizon, the country’s primary sneaker resale site.
A recent collaboration between NBA star Dwyane Wade and Li Ning, for instance, saw sneakers sell for as much as 48,889 yuan ($7,464), almost 31 times their original retail price. The frenzy prompted Dewu to remove pairs from the platform after concerns that the spike in demand would contribute to a debt crisis among younger consumers in the region. Even foreign brands are utilising the strength of local apps: luxury brand Coach recently partnered with Dewu to sell its goods on the platform and has plans for exclusive product drops in the future.
Competing with local players is inevitable but increasingly difficult. Particularly so for those at the centre of controversy for speaking out against sourcing cotton from China’s Xinjiang region, where large numbers of ethnic minorities including Uighurs and other Turkic Muslim minorities have been systematically subject to internment, debt bondage and forced labour.
Nike and Adidas faced mass boycotts earlier in China over their concern of human rights violations in the region. Local players capitalised on the backlash: Dewu threatened to remove all Nike products from its platform (though it’s unclear if it actually followed through) and Anta pulled out of the Better Cotton Initiative, an organisation centred on sustainable sourcing in the industry that also exited Xinjiang. The announcements boosted sneaker sales for both Anta and Li Ning, leading to mass sellouts.
We often joke about whenever a subculture or under the radar movement gets picked up by the masses in China, there’s no time for organic growth.
International platforms will have to maintain a delicate balance as they attempt to win over an increasingly nationalistic consumer base without losing support from their home markets. It also undercuts a key selling point of global supply and demand many international platforms hope to offer in China. If local sportswear brands continue to grow, consumers may continue to shop with platforms that offer the best range of local sportswear giants instead of just foreign brands like Nike or Adidas.
Despite hurdles, the Chinese resale market is growing rapidly. Sales of secondhand goods, estimated prior to the pandemic, are expected to double from 2017 to nearly $145 billion this year, according to the China Centre for Internet Economy Research.
But the dominance of local platforms means that new players will have to work even harder to differentiate themselves. Previously, platforms or brands could rely on their global reputation to enter the market. Now, young consumers’ increased loyalty towards local products and services means that worldwide recognition won’t provide the same advantage as it might in other markets.
Local platforms lead in overall consumer awareness, with StockX and Goat lagging behind local players like Nice and Dewu according to BoF’s The Future of Fashion Resale report. Of all consumers surveyed, Chinese companies Nice and Poizon had 7.4 percent and 4.9 percent of consumer awareness respectively, compared to Goat’s 3.8 percent and StockX’s 0.6 percent.
To compete with those most entrenched in the market, resale platforms will have to embrace local channels and marketing tactics, from partnering with KOLs, or key opinion leaders, to experimenting with sites like video-sharing platform Bilibili. It also means gaining a deeper understanding of consumer preferences and trend cycles in the region, particularly as local sneaker players gain dominance.
“It’s not enough to have a good product anymore, and you’re not going to be better because you’re foreign anymore,” added Dychtwald. “You’re competing with highly developed extremely sophisticated national players who live and breathe the China market.”
Platforms will have to adapt quickly to gain market share and prove to Chinese consumers they understand the market and its unique demands.
“We often joke about whenever a subculture or under the radar movement gets picked up by the masses in China, there’s no time for organic growth,” said Chris Wang from Chinese streetwear site Nowre. “It becomes mainstream instantly.”
The Future of Fashion Resale Report — BoF Insights
BoF’s definitive guide to fashion resale, covering the evolution of the market, its growth and upside, consumer behaviours and recommendations for crafting a data-driven resale strategy.
To explore the full report click here.
The Future of Fashion Resale is the first in-depth analysis to be published by the BoF Insights Lab, a new data and analysis unit at The Business of Fashion providing business leaders with proprietary and data-driven research to navigate the fast-changing global fashion industry.
Editor’s Note: This article was updated on 11/08/2021. A previous version stated StockX opened an authentication centre in mainland China in 2019. That is incorrect. StockX opened an authentication centre in Hong Kong.
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