31-year-old Richard Xia walks into a room and the first thing you can’t help but notice is his shoes.
This avid fan of streetwear loves collecting pieces from brands including BAPE and Supreme. In 2018, the Hwa Chong Institution and National University of Singapore graduate decided to set up sneaker and streetwear business Novelship with his long-time friend and schoolmate Chris Xue.
“The idea to start Novelship came from our mutual interests in sneakers and streetwear. As avid sneakerheads, we saw an enormous market opportunity across the Asia Pacific region, and wanted to solve our own problems with buying and selling sneakers and streetwear, namely the availability and authenticity of the products.”
Today, the company employs about 70 people, has five processing centres and a presence in six markets including Japan, Taiwan, and Malaysia.
From Carousell shop to US$2 million funding
The founders started selling sneakers on Carousell in 2017 with their own savings of US$9,000. “At the start, Chris and I were just listing things day in and out. I think we probably cranked out a few hundred listings a week just trying to gain more exposure. It was a good start for us to build our user base and some of them are regular users of Novelship up till today.”
The business subsequently branched out to its own marketplace website. The goal was to optimise the buying process of streetwear drops so that streetwear fans can easily buy and sell authentic and exclusive fashion goods online.
Novelship’s interface is designed to look like sneaker reseller marketplaces that sneakerheads would be familiar with, where offers (bids) and lists (sales) are displayed to facilitate transactions.
Popular brands on the site include Nike, Air Jordan, Adidas Yeezy, Fear of God, Supreme, and Bearbrick. Other than sneakers and streetwear, there are also collectibles sold.
In 2019, it bagged about US$2 million in a seed round led by Global Founders Capital, pushing its total raised capital to US$2.3 million. The plans then were to fuel its expansion in key high-growth markets across Asia.
The business has not yet hit profitability, shared Richard, because currently its main focus is to expand rapidly to serve more customers in the region first. “We’re fast approaching a nine digits annual run-rate,” Richard revealed.
Sneakers as investments
Collecting these items may not always be for personal consumption. The shoes and streetwear on Novelship provide unique investment opportunities for buyers, said Richard.
“Sneakers and streetwear as “alternative assets” help those who are looking for additional streams of income, and present major business opportunities to sneakerheads or even first-time buyers locally and regionally. Customers are able to buy and sell hot releases for a profit on the go,” he said.
“Personally, the thing that makes sneakers one of the hottest traded assets, is that sneakers are a catch-all – they have a great aesthetic, are very comfortable to wear and are flexible.”
Richard mused that he is also a collector. At one point in 2021, he collected almost 50 pairs. “I resold some of the things that I don’t use, so currently I have about 30 to 40 pairs of shoes.”
However, there’s a caveat interested collectors need to know before getting into this space. “The reality is that some sneakers do really well while others do not, but most sneakers don’t completely fail, which means it’s relatively safe as an asset.”
So what’s the best brand if I want to invest in my first pair of shoes? Richard said that for a first-timer to venture into reselling or investing in sneakers, it’s best to go for a classic pair such as the Nike Air Jordan 1 Retro High OGs.
“No matter the silhouette, colorway or models, the Air Jordan 1 High tends to hold its value really well and is most likely to increase in price. Another type of sneaker worth investing in would be the Nike SB dunk or a sneaker collaboration with a designer or celebrity,” he said.
“One of the most valuable releases we had last year was the Nike x G Dragon PEACEMINUSONE 2.0 which was an Air Force One release with Peace Minus One G Dragon.”
As for profitability? Richard said they look at retail premiums to calculate how profitable certain brands and models are. Retail premium is derived from deducting the sales price over the retail price.
Shoes like Nike SB Dunks fetch the highest average retail premium of 121 per cent, shared Richard. Meanwhile, Air Jordans make up roughly half of all sales in Singapore and Malaysia.
Spotting counterfeits and keeping it real
Over at Novelship, its aim is to serve the consumers in the ASEAN region and fulfill all the product transactions seamlessly. Its average fulfillment time is five working days.
When queried on how it ensures the authenticity of the goods in the marketplace, the co-founder said that the authenticity of products is a very serious part of the business.
“It’s our core duty to ensure users obtain only real and authentic sneakers/streetwear via our platform. Our proprietary technology enables seamless transactions with rigorous quality checks and a unique authentication process – a combination of in-house brand experts and image recognition on all transacted products – to ensure every item traded on the marketplace is 100 per cent authentic.”
“If we determine a product is fake or used, we will refund the buyer, send the item back to the seller and if necessary, take action against the seller to remove them from Novelship,” he added.
Based on Novelship’s experience, the two common counterfeits are Yeezy and Air Jordan 1 because of their popularity. “As for unique counterfeits, we have seen very realistic and good quality sneakers due to the materials being used or that they were hand-stitched. However, such unique counterfeits are not as common as the production would be costly and you might buy it at almost retail price or even higher.”
How to store the shoes as “assets”
To ensure that these “assets” appreciate in value, the way to do so might be an eye-opener for some.
“Preservation plays a big part so it’s important to not wear them ever, if you intend to maximise the resale value! Keep your limited-edition sneakers in the shoe box as long as you can and store it in a relatively cool, humidity-controlled climate.”
“Avoid touching the sneakers too much and do not stack them on top of each other during storage, as this might bend the box downwards over time and cause the sneaker to crumble up as well. Invest in a good storage rack and keep them off the floor so they don’t get mouldy or dusty,” he added.
“Most importantly, what tends to kill releases is humidity. Humidity causes the pleather or the leather in some cases, to get wet and then crack. Once that cracking process starts it’s really difficult as it may cause oxidation (white soles turning yellow over time).”
Richard recommends putting the shoes in a good storage box such as glass or plastic for storing. “However, there isn’t a 100 per cent guarantee that the sneakers will remain in mint condition, there is going to be some degradation because at the end of the day, a lot of these releases, even though they cost S$500.00, are not really made out of better materials than the box standard Nikes that are coming out.”
When queried on why investors should consider sneakers instead of other assets like cryptocurrencies and Non Fungible Tokens (NFTs), which have been gaining traction in recent years, Richard commented: “Digital currencies are not for everyone. Due to its technicality, most people struggle to fully grasp the concept. In fact, cryptocurrency’s unnecessary complexity was deliberate to avoid regulation.”
He adds that a meaningful way to accumulate wealth is via collecting limited-edition sneakers. “For some investors, collecting rare and beautiful objects as an investment tool provides more meaning to the experience.”
“I’d ask the same question to people who collect expensive art, on how they would pay millions of dollars on something that will deteriorate in time? I think it is the same logic. There are sneakerheads and collectors who would go the extra mile and encase their collections in crystal casing to preserve the quality as much as they can. To them, it is a way to express their creative identity.”
Covid-19 endemic and plans ahead
For 2022, the brand is focusing on growing the business further via the recent launch of its Android app (Novelship already has an iOS app) and exploring the setting up of drop-off locations in its key markets for consumers’ convenience. Novelship is currently fully online.
There are also plans to work with celebrities and influencers to offer a curated selection of products and to host exclusive releases on the website.
If anything Covid-19 has taught the company, it’s to be nimble to change. “Just like many other businesses, we were badly affected when COVID-19 hit. Our logistics lanes were cut off and we could not ship reliably out of Singapore. This meant delays in customers receiving their items. When the circuit breaker happened, our warehousing crew and logistics flow was further disrupted,” shared Richard.
“However, the entire team quickly came up with multiple contingency plans while implementing various safety processes at the same time to ensure we could continue operating our business.”
Richard added that the pandemic has also pushed him to be more innovative in his approach to the business.
“Despite the challenges and setbacks faced, it has helped me focus on making my milestones achievable – this helps me to keep things in check, celebrating wins and having visibility of where we stand as a business. Furthermore, the surge in online shopping during the many months of lockdowns and heightened restrictions definitely helped the company to navigate this period.”
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Featured Image Credit: Novelship