Novelship in race to capture Asia's resale market for rare sneakers

Singapore

THE race is afoot to capture the resale market for collectors' sneakers and streetwear in Asia, and Singapore-based Novelship is all laced up and ready to run.

The e-commerce market place recently secured seed funding to take its online platform, which has authentication built into its core, into the region. It needs to move fast, before major competitors such as US-based StockX and China's Poizon arrive.

"We only have two to three years before these players have consolidated markets in their home country and look towards Asia's markets," Novelship co-founder and chief executive Richard Xia told The Business Times.

Cowen & Co has estimated that the global sneaker resale market could be worth about US$6 billion by 2025. It is a niche segment where limited-production models or special collaborations are pricey enough to offer significant margins but sufficiently affordable to be an indulgence for the middle class. For instance, the Travis Scott x Nike Air Jordan One can resell for up to US$2,101 (S$2,885) a pair. That is 13 times its original retail price.

Mr Xia and Novelship co-founder Chris Xue got a hint about the potential for that market in 2017 when they tried listing limited edition sneakers and streetwear on online marketplace Carousell.

The first night, the pair received more than 10 interested buyers, with some even putting down deposits for the limited edition footwear.

"This was when our (Carousell) account had few reviews and very little credibility," said Mr Xia, adding that he was surprised that people were willing to part with their money without any formal guarantee, despite a large number of counterfeit products and fraud cases in the market.

After a period of testing, during which Mr Xue sold more than 30 pairs of his own sneakers to support the project, the duo felt confident enough about demand to take part in an accelerator programme in Taiwan. They clinched pre-seed funding from a sneaker manufacturer there to take their idea forward.

Novelship finally launched its website in September 2018. What sets Novelship's platform apart from generic online classifieds is its addition of a layer of trust in the middle of every transaction.

When a buyer agrees to purchase a pair of sneakers that has been listed by a seller, the buyer transfers the payment - including the buyer's delivery cost - that is held in escrow by Novelship. The seller then sends the sneakers to Novelship where they are checked by staff to make sure the shoes are genuine articles. If the shoes are legitimate and as advertised, Novelship will send the shoes on to the buyer and release the payment funds - less seller's delivery and Novelship's take of 9 per cent of the sale price - to the seller. If the item turns out to be a counterfeit, Novelship will dispose of it and fine the seller an amount of at least 15 per cent of the item's transacted value.

That authentication process addresses a major hurdle to the growth of the rare sneakers market in Asia, Mr Xia said.

"The two biggest issues the industry face are the lack of access to products especially in less developed regions, and fraud."

He noted that according to OECD reports more than 85 per cent of counterfeits come from Asia and there is no single trusted platform for the region.

"Right now, the region lacks a credible online marketplace where people can trade their limited-edition wares for a peace-of-mind," he said, adding that consumers turn to third parties such as Facebook groups to fuel their demand.

This puts them at a high risk for online fraud.

Today, Novelship deals with 400 to 500 transactions each month. The startup is projecting S$1.6 million of sales by the end of 2019, and more than 1,000 transactions per month.

Those numbers are still a far cry from StockX's monthly gross product sales of US$100 million, according to the New York Times. But the big players like StockX and Poizon in China have their hands full developing their home markets at the moment, Mr Xia noted.

That leaves Novelship with a window of opportunity to become the main player in the Asia-Pacific region.

With US$2.05 million in capital raised from a recent seed round led by Global Founders Capital, Novelship is primed to accelerate its regional expansion; Hong Kong, Australia, Malaysia and Indonesia are among its priorities.

Novelship is also working on integrating image recognition capabilities on its platform by the first half of 2020. This will help to identify potential counterfeit items even before they reach the warehouse.

"We hope to be the platform that people can turn to and trust when they buy and sell their sneakers and streetwear," Mr Xia said.

Novelship at a glance