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Lately, the worlds of sneakers and streetwear feel like the lottery: there’s a winner every day. Companies like Supreme, A Cold Wall, and Huf are raking in investment, with companies pouring money in in the hopes of turning niche enterprises into industry-dominating behemoths. Now, GOAT (short for Greatest of All Time), a sneaker marketplace app, and Flight Club, the New York-based consigner of rare and expensive sneakers, are merging—and collecting $60 million in investment money from Index Ventures.
For some context: When you look at other companies that have received $60 million at this point in their timeline, you don’t often find other brands playing in this same space—you find big-time mall brands and true-blue industry disruptors. In fashion, that means the likes of Warby Parker and Bonobos: companies that promise to fundamentally shake up the clothing business. Recode reports the new company took on investment at a valuation north of $250 million, which tracks: when Bonobos got $55 million in 2014, the company was valued at $300 million.
The investment raises the same questions that keep coming up recently, as those aforementioned streetwear brands rake in investment money. How much money can trading rarefied T-shirts and sneakers really get you? The newly partnered companies will have to find a way to scale up in a way that makes a $60 million worth it. And while the merger creates the secondary sneaker market’s first superpower, the investment should inspire confidence in their competition, not scare them off.
In the merger, GOAT, only founded in 2015, will become the parent company of Flight Club, a brand founded way back in 2005. That power structure illustrates how quickly digital brands like GOAT are growing, but the belief behind these investments is that GOAT, and companies like it, still have a ton of space to grow into. “The sneaker market is growing substantially but we think it’s in relative infancy,” says Index Ventures partner Danny Rimer. “The market is extremely big. We certainly feel like GOAT will not be the only successful player.”
Notably, the merger is only a merger on the backend. GOAT co-founder Daishin Sugano tells me that the two brands will remain separate, and that the partnership will remain largely invisible to customers. The deal is mostly about these companies sharing expertise—GOAT is plugged into what customers are doing online, while Flight Club is holding down the fort IRL. Goat wants to know, for instance, if a customer opens an app, are they more likely to visit Flight Club in person, or vice versa?
Almost every headline around physical retail announces that if the format isn’t yet dead, it’s busy dying. And yet permanent storefronts remain a critical part of GOAT’s strategy. “In this day and age, to be impactful and to bring access to people you need a digital experience but you also need to have a brick and mortar experience,” says Sugano. Bridging ecommerce and retail will help distance these brands from their competitors, too. Others in this space focus on doing one thing really well: Stadium Goods is fast becoming a physical mecca for sneakers, and Grailed offers a robust ecommerce experience for buying menswear. What’s hard to find is companies that do both well.
But talk of data and platforms can miss the tangible difference between what a company can do online versus what it can do in real life. For example: the average cost of an item sold through GOAT is $330. At Flight Club? It’s $400, according to GOAT. That’s not necessarily a groundbreaking concept: “Consumers tend to spend more money in a retail environment when they experience a product in real life,” Sugano says. Flight Club offers that security.
The $60 million will help fund expansion to places like Asia and Australia. That doesn’t mean physical GOAT stores just yet, Sugano says, but rather making the app work in local markets in Asia—we’re talking simple baseline changes that you wouldn’t think about until you’re trying to globally expand a sneaker reselling app, like adding languages native to those regions in the app, and getting the system to understand addresses outside the US.
But even as GOAT heads to Australia, maybe you’re wondering, like I often do, how far can selling sneakers on the secondary market can really take a company. Can this GOAT-Flight Club hybrid possibly drive the same business as something like a similarly-invested-in Warby Parker? And what happens when the trends change and we all decide we’d rather wear whatever comes after Balenciagas and Yeezys? While $60 million is pop-the-champagne money, the explosive growth around streetwear and sneakers echoes what we saw happen with athleisure. Once upon a time, investors were making similar Powerball-sized investments—brands like Rhone, Tracksmith, and Outdoor Voices accumulated $28.5 million. GOAT's “The secondary sneaker market is currently valued at $2 billion” reads like the new version of “analysts expect the athleisure market to be worth $83 billion by 2020.” But athleisure companies started to go belly up as trends flipped—denim is back, baby!—and mainstream competitors like Amazon swooped in and ate up once-reliable profit. Kit & Ace closed all its stores and YogaSmoga, once an industry darling, went bankrupt, leading many to ask if the athleisure bubble was bursting. That’s not to say that none of these investments paid off and created longlasting players—only that there’s certainly the risk that the sneaker and streetwear industry is experiencing a similarly unsustainable gold rush.
But investors and analysts, at least, think that’s misplaced worry. “The phenomena of the internet is that if you can actually communicate on a global basis, what is viewed as a niche just becomes absolutely massive,” Rimer says. Outside experts also don’t see any reason for the secondary market to slow down. While sneakers trends come and go—from Common Projects to bulbous dad sneakers—sneakers stay. “There’s innovation in colors, pattern, materials, shapes, and marketing” says Susquehanna Financial Group’s footwear analyst Sam Poser. “But as long as there's newness you're still going to be all over shoes.”
Simply put: as long as cool kicks exist, people are going to be willing to put down a ton of cash for them. GOAT says that it’s on track to sell more Yeezys than even Adidas “in the near term.” That’s hilarious and remarkable, but it also tells us that these shoes are most likely getting traded back and forth, and that they’re probably flipped a couple times over—as either bargaining chips or investments—before eventually being bought by someone who actually wants to keep them. What makes the secondary market so enticing is that there are several different ways and reasons for a consumer to engage. And while the brand, shoe, and look might change, it’s hard to imagine a future without a fire shoe getting passed around like a hot potato—each time with a 9.5 percent service fee tacked on.
Update: After this story was published, Recode updated Goat and Flight Club's valuation from more than to $200 million to north of $250 million. We have updated this story to reflect that change.