Hypebeast arbitrage was retail’s 2017 Trend of the Year.
Even in a retail year marred by increasing store closures and bankruptcies, one phenomenon is bucking that trend. The oldest strategy in the hype business — giving buyers an opportunity to speculate and profit in the secondary market — has resurfaced in a big way in the Technology Age. Think Beanie Babies meets cryptocurrency ICOs.
Let’s call the phenomenon what it is: hypebeast arbitrage is the simultaneous buying and selling of extremely popular merchandise to exploit differing prices in the market. The hyped merchandise generally are birthed through a scheduled “drop,” a strategic, highly-choreographed manna release from high above Madison Avenue at volumes and prices far lower than would be justified by demand. Instant sellout and hype are inevitable, though it’s not quite clear which of these two was engineered first. Look behind the curtain and you might find a math wiz optimizing the relationships between retail price, secondary price, release volume, number of retail outlets, and distribution of stock keeping units.
Hypebeast arbitrage is the simultaneous buying and selling of extremely popular and hyped retail merchandise released in limited quantities in order to take advantage of differing prices in the market.
Hypebeast arbitrage opportunities are created by brands’ retail strategy based on a point-in-time release of merchandise at limited volumes and at prices low enough relative to the secondary market so as to enable immediate sellout and hype.
Retailers shift some costs and inventory risk to scalpers. However, these costs and risks to scalpers are mitigated by a robust secondary market (example: StockX).
Brands manage the degree of hype by optimizing the mathematical relationships between retail price, secondary price, release volume, number of retail outlets, and distribution of stock keeping units.