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It is sneakerization time!

A $700 sock with a sole the new hottest sneaker

What do you get when luxury fashion meets sport? $10,000 sneakers.

High-end brands such as Kering’s (PRTP.PA) Gucci, Prada (1913.HK) and Balenciaga are increasingly looking to sneakers for growth, putting them in direct competition with sportswear giants like Nike (NKE.N), Puma PMUG.DE and Adidas (ADSGn.DE), and giving rise to ever-more striking and expensive designs.

SEE ALSO : A $700 sock with a sole is the new hottest sneaker

Luxury groups say they are now increasing investments and marketing budgets to face down their new opponents.

“When I saw sneakers were going to be a thing, I fought it for a bit,” Salvatore Ferragamo’s (SFER.MI) designer Paul Andrew said at a conference. “We’re definitely now investing heavily in that category, getting in very specialized people”.

Global sales of sneakers – or trainers – rose 10 percent to 3.5 billion euros last year, outperforming a 7 percent rise in handbags, according to consultancy Bain & Co.

“It’s not really even a trend anymore – it’s become a category,” said Bruce Pas, Men’s Fashion Director at U.S. department store Neiman Marcus.

Both luxury groups and sports companies are looking to cash in on a booming market. Premium sneakers can start at around $400 but can easily rise as high as $3,000, for a pair of Christian Louboutin’s leather, crystal-embellished sneakers.

Limited editions can sell for well over $10,000, including the Chanel X Pharrell Hu Race Trail or Nike’s Air Jordan 3 Retro DJ Khaled Grateful.

Sneakers are a big driver of the luxury shoe business, which accountancy firm EY says is the fashion industry’s fastest-growing area.

The rise of luxury sneakers is part of the growing influence of casual and streetwear in high-end fashion, where it is now acceptable to team sneakers with a tailored suit.

Upmarket brands are tapping into street style to refresh their looks and young buyers are driving the shift. “Millennials” – born between the early 1980s and mid-90s – already represent a third of the luxury market, according to Bain.

Several luxury group executives recently noted the importance of sneakers for their business and the need to step up their game to face the rising competition.

Emilio Macellari, finance chief of Italian luxury goods company Tod’s (TOD.MI) – a pioneer in the sector, having launched its first Hogan luxury sneaker in 1986 – said “there is no brand that is not currently considering its (sneaker) offer”.

Pointing out how times are changing, he said luxury brands were now “under attack” from sportswear companies, on top of the usual competition from their luxury peers.

But so-called “sneakerisation” could steal market share from more traditional and formal-looking footwear, industry operators say.

“What has changed is competition, with a clear overlap,” said Claudia D’Arpizio, partner at Bain & Co. “Luxury consumers are buying Nike and Adidas and vice-versa”.

“If (luxury groups) go the sports way… it is only positive,” said Puma Chief Executive Bjorn Gulden said. “If that is a trend that pulls the sneaker market up, we can only be happy.”

SEE ALSO : Puma quarterly sales pushed on by women’s sneakers, APAC up 10%

Analysts also say the intensifying competition is unlikely to erode profit margins because the market is expanding.

“There is large space for prices moving up,” said Erwan Rambourg from HSBC. “The ‘luxurisation’ of sneakers could possibly impact margins positively”.

(Source: Reuters)

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