Adidas will potentially burn $500 million worth of Yeezy product. The German sneaker brand severed ties with Yeezy designer Kanye West in October following a slew of antisemitic remarks.
West’s blatant antisemitism tainted the Yeezy brand — leaving Adidas with millions of unsellable product. Analysts valued the mass of product at roughly $300 million to $500 million. And the company risks losing as much as $1.3 billion in revenue this year, according to the Financial Times.
“What makes this so dramatic is how big it is,” Wedbush analyst Tom Nikic told the Washington Post, noting that the Yeezy brand was doing nearly $2 billion a year in revenue. “That’s really a big, substantial part of (Adidas’s) business — and the abruptness with which it happened.”
Reaching a decision to the Yeezy dilemma won’t happen for months, Adidas claims, but the brand is left with limited options. Selling the product at a discount (each pair of sneakers retails between $200 and $600), rebranding the shoes or even burning the sneakers are all potential solutions — but they all raise ethical questions.
One option the brand has suggested is selling the merchandise at a discount without the Yeezy branding, transferring them to what Nikic calls “zombie Yeezys.”
“But that’s quite frankly a risky proposition,” Nikic told The Washington Post. “It could backfire on them from a PR perspective. It would still look like they were profiting off of a collaboration with someone who made blatant antisemitic statements.”
Another solution Adidas has discussed is liquidating all the product. In retail, liquidating product refers to the practice of offloading a surplus of product to warehouses to sell the product for cents on the dollar, per The New York Times. The product often gets distributed to retailers in developing countries.
“Almost everything you can imagine that is manufactured in the world is sold somewhere, somehow, at some price,” Mark Cohen, Columbia University’s director of retail studies, explained to The Washington Post. “And these high-value Kanye West sneakers are going to wind up on people’s feet — maybe people who value the Kanye association or (people) who don’t care; they just want fresh, clean, modern footwear.”
Liquidation is more environmentally responsible option for purging excess product, but some companies still prefer the practice of destroying merchandise. Fashion brands such as Coach and Burberry have admitted to destroying product by burning it or slashing it to prevent it from getting resold — brands believe this practice preserves the value of their products, per Vogue.
According to some sources, Yeezy demand is up
Impossible Kicks, an online reseller for high-end sneakers and clothing told CNN that Yeezy sneakers are currently among the top three sellers on their website.
“Demand for Yeezys has surged 30% since last October-November,” John Mocadlo, CEO of Impossible Kicks told CNN. Yeezys are closely following behind Nike Jordans and other Nike sneakers.
Mocadlo believes customers are hoping Yeezys will become a collector’s item and increase in value over time. He claims many of his customers are unaware of the Yeezy controversy.
According to StockX, a leading sneaker resale platform, Yeezy sneaker prices have increased due to tighter supply, but the demand has actually decreased.
“Since the start of the year, the average price of Yeezy sneakers has increased but sales overall have decreased on StockX,” Drew Haines, director of sneakers and collectibles at StockX, told CNN. “This is in line with the principles of supply and demand and consistent with what we’d expect to happen when no new supply is in the market.”
What should Adidas due with Yeezy surplus?
Adidas is in a pickle — there are limited solutions for how to handle the surplus of Yeezy. But Adidas isn’t the first brand with too much unsellable merchandise on its hands. Here are some options Adidas could consider.
1. Donate the product to disaster relief
Elizabeth Napier, an assistant professor at the University of Toledo, studies how fashion brands dispose of unsold merchandise. She believes the best solution for Adidas is to donate the product to disaster relief effort, per The Washington Post. She suggested donating it to Turkey and Syria following an earthquake in February that killed more than 46,000 people.
“I don’t know why they just won’t come out right now and do that,” Napier told The Washington Post.
2. Grind the product up to create gym floors
Nike grinds up unsold shoes and repurposes the product to make new shoes, gym floors, tracks, football fields and even furniture.
3. Donate them to people who need shoes
There are more than 600 million people in the world who don’t own a single pair of shoes, reports Got Sneakers?, a sneaker recycling organization.
Shoes help alleviate foot pain, prevent against infections and other foot problems (such as corns, ingrown toenails and athlete’s foot).
A brand new pair of shoes is something millions of people around the world will never get — Adidas has thousands available. Donating them to those in need is something worth considering.