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Alternate asset classes: fashion apparel

Alternate asset classes: fashion apparel

If news of stocks and bonds has got you bored already, we’re here to tell you that alternate asset classes might tickle your fancy instead.

Changes in the way we work and live (thanks to Covid-19) combined with new technologies have drawn renewed interest (and speculation) in more “exotic” investment options. In fact, it’s practically a whole new world in the land of investing these days when you start to look into non-traditional opportunities such as fashion, art, spirits, gaming, and collectibles (like stamps, coins, and even trading cards).

Today we’re kicking off a new Deep Dives series into alternate asset classes so that we loop you in on these other asset forms as a means to invest and grow your money. Let’s start this week with fashion apparel and all the hype that surrounds it!

The Streetwear market

While not exempted from the economic consequences of the pandemic, the global streetwear market was one of the first industries to show signs of recovery in the second half of 2020. Though it was born as an underground trend to challenge traditional dress codes, in recent years, streetwear culture quickly rose to the mainstream, making its way to the forefront of fashion and millennials’ hearts.

Even though most relevant streetwear brands are currently privately owned, the ones to keep an eye on are JD Sports Fashion PLC (JD), ASOS (ASC), and giant Kering (KER). We’ve even seen companies come together to take on the opportunity hand-in-hand, with hefty price tags backing the deals. For example, Monclair purchased luxury apparel brand Stone Island for $1.4b and VF Corporation (VFC) bought Supreme (the guys selling $90,000 Oreos!) for $2.1b.

But where does the billion-dollar opportunity stem from? Are all the buyers skaters or what? Truth is, what drives this sector is mostly perceived exclusivity. Fashion labels use the “drop” technique in their arsenal. This is a marketing technique where labels release a small amount of merchandise and advertise the drop as a limited edition. Thereby, the element of scarcity is dangled in front of hungry consumers. Topped with the marketing power of social media, fashion editorials, and enthusiast communities, here we are talking about it all.

The “Sneakerverse”

Get yo’ hands off my Jordans! According to Cowen & Company, sneakers are an asset class on their own, and demand for them has the potential to reach $30b globally!

In the US, the fastest-growing buyers of sneakers are millennials and Gen Zs (at least 30% of them buy a new pair every year, Yahoo Finance reports). A trend not exclusive to men, sneakerheads include women who are choosing to wave goodbye to their high hells on a night out more than ever!

Within the “Sneakerverse,” major players are Nike (NKE) and Adidas (ADDYY). In fact, a pair of Nike SB Low London was recently sold for 83 times the retail price (~$14,000)! And while traditionally, the market has been dominated by American and European footwear brands, recently, the African footwear industry has picked up the pace. Countries like South Africa and Ethiopia are producing $37m and $30m worth of shoes annually, respectively. Up-and-coming brands in this space are Enda, Sole Rebels, and Buqisi-Ruux — all of whom contribute to estimates that the African footwear industry will cross the $1b mark by 2023, according to The Times of Africa.

Today, footwear companies are benefitting wildly from online resale platforms such as Stock X, Stadium Goods (SDMS) and GOAT group (GOAT) — and by the way, the latter recently raised $100m in funding from traditional retailer Foot Locker (FL). These platforms created sneakerhead-dedicated websites and apps, making it much easier to buy and sell sneakers on the secondary market comparing to other (more scummy) e-commerce like eBay (EBAY).

Watch out for… watches!

Ever wanted to combine your collector’s itch with your investor fever? Then you should look into watches! But not just take our word for it — research by Knight Frank shows that watches make great investments as they are resilient and non-volatile as an asset class, second only to collectible furniture.

While watches can also be extremely illiquid, there’s something about their level of fine artisanship that makes them such a fascinating asset. Not to mention, you can display this artisanship on your wrist — turning it into a point of conversation too!

As for the watch investing game, the makers you should look out for are Richmont (CFR), LVMH (MC), Watches of Switzerland (WOSG), and, invariably, Rolex. If you opt for a Rolex, keep in mind that most Rolex sports models are worth almost double on the pre-owned market just seconds after they have left the store! Some models have even become so popular that stainless steel watches are sometimes more valuable than ones made of precious metals, like gold.

However, timepieces and vintage models still dominate the sector, attributing value more to emotional appeal than true market fundamentals. In this case, the variables that affect the investment decision-making process are a possible celebrity provenance, the presence of original components, and the “degree” of vintage.

why it matters
If you're looking to diversify your investment portfolio and would not mind the "pro" of doubling things up as clothing gear but the "con" of illiquidity, then looking into streetwear, sneakers, and watches is an option we're putting on your table. As these alternate asset classes gain greater relevance in pop culture too, you might just find the prioritization to invest in them carve its way into your monthly budgeting process unconsciously in any case!