On 25 February, Bloomberg Businessweek published a profile on Joe Herbert and his thriving sneaker-resale business, West Coast Streetwear. At just 19-years old, Joe has launched a lucrative resale business off the back of sneaker bots.
Sneaker bots are advanced software programs that allow Joe to automatically add shoes to his cart and purchase them at an incredibly fast rate, from a number of different websites simultaneously. But Joe doesn’t just use sneaker bots to beat the crowd and cop the latest streetwear for himself. Sneaker bots can be particularly lucrative when used to purchase large quantities of a limited product, such as a new Yeezy shoe, that is very sought after. “Anything that’s releasing that I know I can make a guaranteed buck on, I’m gonna go full into,” Joe told Bloomberg.
With sneaker bots, Joe can check out a few hundred pairs of a limited shoe in just a few seconds, then when the sneakers sell-out, he can resell them at an inflated value, recouping considerable profit. It is this core business model that has helped Joe average $100k per month – that’s a lot of shoes.
Guilty of blabbing
In an unusual style, Joe’s Instagram flaunts wall to wall stacks of unworn footwear. There are piles of Air Jordans, the most popular sneaker to resell, and mountains of Adidas Yeezy Boosts, the signature sneaker of Kanye West. In many of the photos shared to the West Coast Streetwear Instagram page, Joe poses next to the stacks of sneakers with his face blurred.
And yet, Joe had no quandaries about showing off to Bloomberg. “If you know the right people here, this is the city to sell shoes” he said of his hometown Portland. Most seasoned resellers would never reveal those people – their sources. But Joe made one crucial mistake that would send his $100k a month house of cards tumbling. Joe called Bloomberg from a phone number that identified as belonging to an Ann Herbert. Joe also revealed that his American Express corporate account was in Ann Herbert’s name. When the Bloomberg reporter looked up the name, he discovered hidden layers to this story and a possible explanation to Joe’s rapid success in the sneaker business. Ann Herbert was Joe’s mother, a senior employee who had worked for 25 years at Nike, most recently as its vice president and general manager for North America. When Joe was questioned about the connection between his mother and Nike, he said that he had never received inside information or discount codes from her but insisted that she not be mentioned in the article. He allegedly cut off contact with Bloomberg shortly after.
The thin line between right and wrong
A sneaker reseller associated with a top sneaker retailer is juicy, but it isn’t breaking any rules. Nike said the executive had disclosed her son’s business to the company in 2018 and that Ann Herbert did not violate “company policy, privileged information or conflicts of interest”.
But Joe’s entrepreneurial spirit didn’t end with sneaker reselling. He also taught others how to resell shoes through a group he created on discord. Here, he would charge members a monthly membership to learn about bots, upcoming releases and the best websites to use to create profitable inventory. Each month Joe’s memberships would sell out, proving just how knowledgeable he was. But how was Joe obtaining all of this industry information, and where does a 19-year old get such valuable information from?
Nike vs. resellers
It seemed all too convenient for the mother of a 19-year old sneaker reseller – that charged $250 a month for information on which sneakers would be discounted, when and where the sale would begin and how many pairs each retailer would have – to be affiliated with Nike and their operations. Could Joe have been referencing his own mother when talking of his so-called sources in the city? It isn’t clear whether Ann Herbert was directly involved in her son’s business, but the optics are troubling. Ann’s responsibilities reportedly included the SNKRS app, where Nike’s rarest and most sought-after products are typically released. It calls into question just how culpable Ann was.
Despite claiming Ann that had done no wrong, it seems that the story alone was enough for Nike, who announced on 1 March that the 25-year employee had resigned. Big brands have historically stayed quiet on sneaker flipping, but Ann’s abrupt departure has exposed the uncomfortable relationship between sneaker retailers and the underground network of resellers who thrive of their brand and exclusivity.
We’ve been here before
The rise of sneaker resellers in recent years is reminiscent of the popularisation of ticket resellers in 2015. Joe’s method is a great example of how technology and innovation can enhance your business, but consumers have criticised the rise of resellers, complaining about how hard it is to get a hold of new sneakers and branding inflated resell prices immoral. It is an interesting take on entrepreneurship.
But should the government be doing more to protect everyday consumers? While using automated bots to buy goods online often violates the retailer’s terms and conditions, there are no existing laws against the use of bots to purchase sneakers. But there soon could be. Technology moves fast and new laws can take time to be drafted, approved and implemented into society. But we are now starting to see global governments taking heed of bots used for the purpose of obtaining and reselling retail products when making regulatory decisions. For example, in response to the rise of ticket scalpers, the U.S. Better Online Ticket Sales Act of 2016 made it illegal to buy tickets with bots and resell them. More recently, in December 2020, several Members of UK Parliament put forward a motion to prohibit the use of online bots to buy sought after games consoles to sell on for profit after thousands of consumers complained about being unable to obtain the new PlayStation 5. With this in mind, regulations prohibiting the use of sneaker bots could be announced within the next few years.
But what can sneaker retailers do to reduce the effects of sneaker bots now? In recent years, several large retailers decided to take the process offline by holding sneaker raffles. In a sneaker raffle, shoppers enter a contest to win the right to buy a pair of sneakers. Once selected, the winners are often required to pick up the product in person and prove their identity before purchase. This erects a huge barrier for resellers who operate on getting as much inventory as possible. Alas, the raffle system is not without flaws too. The selection process is not transparent and removes the first-come, first-serve gold standard for a fair purchase process. It is not a perfect system, in fact sneaker raffles score low on perceived fairness, but it does effectively diminish the effect of sneaker bots… at least for now until the law catches up.
By Amani-Cane Elouazani
Law and Finance Contributor