{"id":1069199,"date":"2024-04-12T11:56:00","date_gmt":"2024-04-12T16:56:00","guid":{"rendered":"https:\/\/www.snkrsday.com\/?p=1069199"},"modified":"2024-04-16T12:22:35","modified_gmt":"2024-04-16T17:22:35","slug":"the-rise-fall-and-implosion-of-zadeh-kicks-and-why-it-matters-beyond-the-sneaker-world","status":"publish","type":"post","link":"https:\/\/www.snkrsday.com\/the-rise-fall-and-implosion-of-zadeh-kicks-and-why-it-matters-beyond-the-sneaker-world\/","title":{"rendered":"The Rise and Multi-Million-Dollar Fall of Zadeh Kicks"},"content":{"rendered":"\n

Fast cars, fancy watches, and millions missing\u2014the rise and rapid fall of Zadeh Kicks is a cautionary tale about a white-hot business that moves so fast it outpaces both regulators and consumer protection.<\/p>\n\n\n\n

To make sense of the story of Zadeh Kicks, we have to first understand a few other things: how a business can operate in a shadow space without direct ties to suppliers of its products; the dangers of non-traditional and high-interest loans; why the sneaker resale business has become the hottest space in men\u2019s fashion; and the platforms that hosted the business and processed the money, and became accomplices in its drastic downfall.<\/p>\n\n\n\n

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THE BACKSTORY OF ZADEH KICKS<\/h2>\n\n\n\n

Last month, the world of sneaker resale was shaken by the news that Eugene, Oregon based Zadeh Kicks had requested an Oregon court to dissolve its nine-year-old business, declaring itself insolvent and unable to pay millions of dollars worth of debt.<\/p>\n\n\n\n

Days after the filing, zadehkicks.com<\/a> changed its homepage, directing customers to contact David P. Stapleton, the court-appointed receiver. Within hours, thousands of Zadeh Kicks customers had joined a live Twitter space, looking for answers on how to recover their money, and to share their experiences with Michael Malekzadeh, the company\u2019s owner.<\/p>\n\n\n\n

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Malekzadeh launched Zadeh Kicks, LLC in 2013 and saw it grow rapidly, climbing to $2M in sales by 2015, $6M in monthly sales in 2017, and eventually ranking in the top 1% of all Shopify Merchants by 2020. In 2021, they recorded over 84,500 sales with estimates of pre-orders to be worth more than $100,000,000.<\/p>\n\n\n\n

Zadeh Kicks sold highly sought-after, limited-edition sneakers from the likes of Jordan, Nike, and Yeezy, but had no direct relationship with these brands\u2014or any others. To obtain the shoes\u2014as described on zadehkicks.com<\/a> before the site was taken offline\u2014Zadeh Kicks would purchase the products from independent retailers and suppliers.<\/p>\n\n\n\n

Prior to forming Zadeh Kicks, Michael Malekzadeh purchased older stock from retail stores and sold them on ebay<\/a>. By developing relationships with the stores he purchased from, Malekzadeh was eventually able to secure newly released products, including retro Jordans, in a manner commonly referred to in the business as a \u201cbackdoor\u201d arrangement.<\/p>\n\n\n\n

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He told me every one of my friends in retail was selling to him, but I never did<\/strong><\/p>\nOwner of Authorized Nike retailer recalling encounter with Michael Malekzadeh<\/cite><\/blockquote>\n\n\n\n

Nike, like many footwear brands, carefully restricts the products they are able to order and which accounts are authorized to sell those products online. Brick and mortar stores which are prohibited from selling online, though, will often rely on a handful of individuals to handle shoes in leftover sizes, and to clean older products out of the stock room and off the balance sheet. The service that Zadeh provided has been common practice in the sneaker business for years, but has always operated in the shadows of major brands, as this method of offloading older stock to marketplaces like ebay or Amazon is technically a violation of retailer agreements.<\/p>\n\n\n\n

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A BOOM FOR ZADEH<\/h2>\n\n\n\n
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Zadeh Kicks\u2019 petition for dissolution makes it clear that, beginning in January of 2020, the business experienced \u201cexponential growth\u201d from pre-sales of yet-to-be-released sneakers, but was unable to keep up with that growth, lacking adequate systems to handle the surge in business.<\/p>\n\n\n\n

By September of 2020, zadehkicks.com achieved the milestone of ranking in the top 1% of Shopify stores. The @zadehkicks Instagram page has a copy of the email from Shopify pinned despite having deleted 3,432 Instagram posts since February of 2022 and recently made the account private.<\/p>\n\n\n\n

The growth continued in 2021 as Zadeh Kicks recorded more than 84,500 orders. A screenshot of this achievement was also posted as a story update on the @zadehkicks Instagram<\/a>.<\/p>\n\n\n\n

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Instagram story posted by @zadehkicks on January 1, 2022<\/figcaption><\/figure>\n\n\n\n

A BOOM FOR RESALE SNEAKER BUSINESS<\/h2>\n\n\n\n

The COVID-19 pandemic and resulting closures of retail stores caused a massive adjustment in the sneaker industry. With little time to plan, brands and retailers had to scramble to engineer new ways to sell their shoes, despite being shuttered in much of the country. Nike, for example, permitted previously unauthorized merchants to start selling online. Large chain stores such as Foot Locker responded by allocating more units to their e-commerce platform as hundreds of malls shut down.<\/p>\n\n\n\n

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Shortly into the pandemic, the Netflix docuseries The Last Dance<\/em> aired over the course of five weeks, telling the story of Michael Jordan\u2019s historic final season with the Chicago Bulls. The success of the series was reflected not just in streaming volume, but in an increased demand for retro Air Jordans, driving up prices.<\/p>\n\n\n\n

The Air Jordan 1 \u201cChicago\u201d 2015 Retro, for instance, sold for an average price of $938 in March of 2020; by May, after the last episode of The Last Dance<\/em> aired, they were selling for an average of $1517.<\/p>\n\n\n\n

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Another factor pushing up sneaker prices was the federal government\u2019s decision to respond to the pandemic by issuing economic stimulus checks.<\/p>\n\n\n\n

The Travis Scott x Air Jordan 1, released in May of 2019, saw its price peak for the year that summer, and was on a downward trend\u2014until the first stimulus checks started arriving in March of 2020.  <\/p>\n\n\n\n

\u201cYou could watch the Travis Scott Jordan 1 sales jump with each stimulus check,\u201d\u00a0Ralph Gandara of Sneaker Summit<\/a> told Snkrs Day in 2021. “All of a sudden, people got $1400 in the mail and the Travis Scotts were right below that, so for a lot of folks they opened an envelope and had a ticket for one of their grails.\u201d<\/p>\n\n\n\n

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SNEAKERS AS AN INVESTMENT CLASS<\/h2>\n\n\n\n
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StockX co-founder and former CEO Josh Luber speaking on stage at TED@IBM <\/figcaption><\/figure>\n\n\n\n

On stage in 2015, StockX<\/a> co-founder and former CEO Josh Luber talked about the market mechanics of sneakers, and alluded to the possibility of a \u201cStock Market of Things.\u201d StockX, backed by serial entrepreneur Dan Gilbert, launched in February of 2016, offering users the ability to place bids and asks for sneakers, similar to how a stock broker would. It also reported market data on product pages, providing immediate insight into their price history.<\/p>\n\n\n\n

In 2019, Cowen Research<\/a> released a report declaring sneakers to be an \u201calternative asset class\u201d, projecting the sneaker resale market to reach $30 billion by 2030. In a follow-up report released in 2021, Cowen reported that the sneaker resale market grew 100% in 2020, with the industry passing $2 billion in US sales, and expected 20% year-over-year growth for the rest of the decade. More recently, the group released its third report in the Sneakers as an Investment Class series, maintaining their 2030 projection, and adding that sneaker resale was significantly outperforming the broader e-commerce ecosystem, which had been decelerating into early 2022.<\/p>\n\n\n\n

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Nike Airship game worn by Michael Jordan sold at Sotheby’s auction. A collector paid $1,472,000 making them the most expensive shoes ever sold at auction. <\/figcaption><\/figure>\n\n\n\n

In addition to traditional sneaker resale investment opportunities, there\u2019s been a dramatic rise in interest in one-of-a-kind and game-worn sneakers. Auction houses Soetheby\u2019s, Christies, and Heritage Auctions have hosted sales for shoes worn by Michael Jordan, Scottie Pippen, Allen Iverson, and other NBA Hall of Famers. Christie\u2019s<\/a> teamed up with sneaker resale store Stadium Goods<\/a> to curate a collection of eleven pairs of game-worn Michael Jordan shoes, which sold for a total of $931,875. <\/p>\n\n\n\n

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The most expensive sneakers sold in a private sale are the Nike Air Yeezy Samples worn by Kanye West at the 2008 Grammy Awards, which sold for $1,800,000.<\/figcaption><\/figure>\n\n\n\n

The most expensive sneaker sale in history took place in April of 2021, when Sotheby\u2019s facilitated the private sale of a Nike Air Yeezy prototype worn by Kanye West during the 2008 Grammy Awards, for $1.8 Million. The purchaser was RARES<\/a>, a company that enables retail investors to purchase fractional shares of shoes, for as little as $5.<\/p>\n\n\n\n

SNEAKER FUTURES<\/h2>\n\n\n\n

Nike sells shoes to their authorized retailers primarily through two types of transactions: <\/p>\n\n\n\n