There’s a great discussion of the secondary market for Nike in this NPR podcast (based on this 538 blog post).

It focuses on the secondary market for high end Nike sneakers. The company has a clear pattern of pre-launch hype and limited release. This ensures quick sell-out of a line. It also creates an opportunity for those who buy and the re-sell the sneakers. Here’s a fun graph from the post that shows how this market’s pricing patterns mimic the Nike swoosh.  The post ventures an estimate of the total profits from this post-sale trade:

….This suggests that resellers made $240 million last year, all but $10 million of it on Nike products. That $230 million is equivalent to 8.5 percent of Nike’s earnings in fiscal 2014. Knowing how difficult it is for a large company like Nike to add even 1 percentage point to its bottom line, Luber said, this isn’t a number to ignore.

So why doesn't Nike get greedy and try to capture more of this value for themselves? In contrast with JetBlue who made the decision last week to trade brand for cash flow, Nike presumably understands that this market creates a lot of buzz and demand for Nike’s product.  Nike couldn’t sell at the kind of prices sometimes collected by traders.  But they do get a brand boost from such passionate fans.

This is just another example of the intangible capital calculations that companies make every day. It's not always as clear as this one. In this case, Nike hasn't spoken about this publicly but the company seems to have someone who functions as an internal ICountantTM of sorts who can provide a counter-balance to the pure accounting view that dominates a lot of business decisions.

Here's a good explanation of ICountants.

 

Views: 792

Comment

You need to be a member of Smarter-Companies to add comments!

© 2022   Created by Mary Adams.   Powered by

Badges  |  Report an Issue  |  Terms of Service