The Journal. - Nike’s Sneaky Sneaker Thieves

Episode Date: August 17, 2023

Nike’s supply chain is under attack. WSJ’s Inti Pacheco explains how crime rings are swiping valuable, limited-edition sneakers as the shoes make their way from factories to store shelves, often staying steps ahead of police. Further Reading: - How Nike Sneakers Get Stolen at Every Turn  Further Listening: - The Downfall of a $300 Million Sneaker King  Learn more about your ad choices. Visit megaphone.fm/adchoices

When Nike drops limited edition sneakers, fans go wild. Bam! We have the Air Jordan 11 and the brand new Cherry Colorway. This is the insanely hyped Jordan 1 Chicago. In today's video, we're going to find out if the brand new Travis Scott Air Jordan One Low Reverse Mocha is worth the hype. People line up for hours just for a chance to buy the shoes. Sure, it's because they're cool. But it's also because of their resale value.

There's a slew of websites where you can find the hard-to-get Nike drops, often at a big markup, for hundreds of dollars above their original price. Our colleague Inti Pacheco covers Nike, and he was looking at these websites recently and noticed something weird. The most coveted Nikes were popping up for resale way ahead of their release dates. were popping up for resale way ahead of their release dates.

You could almost always get a hold of a pair of limited edition sneakers months before the release. And that is like, how is that possible? That question would set Inti off to learn all about how Nike sneakers move from factories to stores and all the ways they're stolen along the journey. Welcome to The Journal, our show about money, business, and power. I'm Kate Leinbaugh. It's Thursday, August 17th. It's Thursday, August 17th. Coming up on the show, the explosion in Nike shoe theft. Make your nights unforgettable with American Express.

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That's the powerful backing of American Express. visit amex.ca slash y amex benefits vary by card other conditions apply do you own any nikes i do i did uh i actually have a weird pair because you have to make them yourself. But they're like a really old model called the Internationalist. Oh, right. And I just get them all in black suede, which is pretty cool. I do own a lot of sneakers. I'm just not a sneakerhead. You're not a sneakerhead. I just, I'm not that much into basketball. So I never, like, I don't wear Air Jordans at all.

Inti might not wear Air Jordans, but a lot of people do. The Jordan brand has annual sales of around $6 billion. These shoes are so prized and valuable on the resale market, they've become a target of crime rings. And to understand Nike's problem, Inti dug into its supply chain. There are numerous, you know, paths that a pair of sneakers can take. But yeah, usually they'll be manufactured

in Vietnam or China, where most of the footwear that Nike sells is made. Then it arrives to a port in the U.S. And it is offloaded from a huge ship and then moved by trucks from the port to a warehouse. Sometimes that's a Nike warehouse. Sometimes that's a third-party-owned warehouse. And from then, it goes to a distribution center.

And where along this journey are these thefts happening? Everywhere. Everywhere? Yeah, they're happening everywhere. Like, where? And, like, how? I had heard of these, like, specific cases where cargo, meaning, like, hundreds of thousands of dollars were being stolen. And that, you know, containers were being broken into and, like, people were going into drop yards where, like, companies keep their inventory before it gets to the distribution center owned by Nike.

Usually that means Memphis. to the distribution center owned by Nike, usually that means Memphis. Nike's main distribution center is in Memphis, and it holds a lot of goods there before sending them around the country. When its goods are sitting there, Inti says they're ripe for theft. What one expert said was that

whenever the merchandise is moving, it's safe. The risk happens every time that the merchandise is sitting somewhere, you know, where it stops. So, yeah. It's not like a Fast and Furious movie where, like, Don and, like, they come up on the side on the highway for a high-speed takeover. No. Yeah, no. Vin Diesel is not part of this, of this crew. You will never be able to break my family.

There's no family involved. What these thieves might lack in muscle cars and oiled biceps, they apparently make up for with planning. They often target software that's used for managing the shoe shipments. Through an online portal, you could pretend to be a driver or a trucking company and say, I'll pick up that container and take it to Memphis. And then because the company wants that delivery to happen as soon as possible, rather than make sure it's a real trucking company,

they'll just say yes. And it could be me pretending to be a trucking company and I'll just steal that. One of the cases that brought all of this to Inti's attention happened a few months ago. A surprise in a warehouse full of boxes. Stolen Nikes worth millions. Police in Los Angeles responded to a tip. It led them to a warehouse near the port of L.A. And once they got there, they saw that it was about $3 million worth of merchandise that had been taken from several containers. Inside the stacks of stolen boxes were thousands of Nikes,

including some from its hottest new release, sneakers designed in collaboration with the rapper Drake. Those shoes retail for $160 a pair. It's called the Nocta Glide, and it's a colorway that hasn't been released that is, I think will be named the triple white, which is an all white version of the Nocta Glide sneaker. Police are still investigating. Nike didn't comment on this theft or any of the others Inti looked into. So one thing that's been happening around the country kind of more broadly for retailers from CVS to Home Depot is theft at the retail level, at their stores. Is that also happening to Nike? At retail level, it happens all over the country. But I reported on a case of a store in East L.A. What happened there? The L.A. County Sheriff's Department had been doing a stakeout for about two days

before people that belonged to this crime ring went into the store to try to steal merchandise, and it was then that the police was able to, you know, catch them in the act and arrested, I believe it was like a dozen people. That store in East L.A. has recorded losses from robberies them in the act and arrested, I believe it was like a dozen people. That store in East L.A. has recorded losses from robberies of more than $750,000. And why don't these stores do anything about it, like increase security?

The one case where I can say that they were trying to do more was for a store in Portland, Oregon. That's like home store in Portland, Oregon. That's like home turf. Yes, absolutely. That's Nike's headquarters. Last year, there were a number of incidents happening at this specific Nike store in Portland. And because of it, they actually had to close the store. And in February, Nike wrote a letter to the major's office, actually suggesting that they could pay for off-duty cops to, you know, come and work a security at the store. And also they were offering to pay for even more on-duty police officers to be around the area so they could maybe stop this incident from happening.

The mayor's office declined Nike's request, citing a lack of staff. Does this kind of theft happen with other kinds of shoes? Not that I'm aware of. Like, I haven't seen reports of Adidas stores or containers being stolen. I haven't heard of cargo being stolen from an Under Armour truck. I was thinking, I wonder if there are people stealing, like, Jimmy Choo shoes or... Right, Manolo Blahniks and that kind of stuff.

I think it's mainly about Nike. and that kind of stuff. I think it's mainly about Nike. Whether it's store-smashing grabs or hits on the supply chain, Nike thefts keep happening. Coming up, what happens to these shoes after they're stolen? This ad was expressly recorded to create a sense of simplicity. Just a few simple sounds. No complexity.

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There are pairs of sneakers that, you know, usually you could buy them for two hundred dollars and then you can flip them for like five hundred or even more but in this case if you don't even pay the two hundred dollars then the five hundred dollars are profit entirely so i just think it's an easy sell it's also not like a five thousand,000 thing that you're going to have to get someone really rich to pay for. Like there are kids online on these resale platforms trying to get the sneakers that their friends don't have so that they can look cool. That's why it's attractive. And, you know, it's also not that hard. Like you just go online and put them somewhere, whether that's Poshmark or Facebook Marketplace or StockX. StockX is one of the biggest players in sneaker resale.

Stolen shoes often end up there months before they're set to go on sale. Like last year, pairs of the Air Jordan 11 Special Cherry Reds ended up on StockX after $800,000 worth of merchandise was stolen from a drop yard in Memphis. The online retailer took note. When those sneakers were stolen from Memphis last year, StockX halted all sales of that specific sneaker because, you know, they saw in the news that maybe some of them were stolen. At the time, StockX said that the transactions violated its terms of service and that it was cooperating with law enforcement. But theft of retail merchandise is a growing problem around the country. And retailers and businesses have called for action. Late last year, lawmakers made a move. Congress passed a law requiring online marketplaces to keep track of people

who are selling at least $5,000 in gross revenue during a 12-month period or who have more than 200 transactions. I think it's a way to deter people from, you know, acquiring stolen goods and just going online and selling them. But legislation targeting the online resale market can only go so far. online resale market can only go so far. Brick-and-mortar Nike stores are having a harder time addressing theft, and some remain closed. In October, it will be a year since Nike's big store in Portland was forced to shutter. How much of a headache does all this theft pose for Nike? To me, it was remarkable that I wrote this story.

It was published on a Saturday. And then that Monday, there were reports of another half a million dollars worth of Nike merchandise that was stolen from another drop yard in Memphis again. And then another week went by and that same store that we were talking about, it was hit again by, you know, a group of people that were doing a smash and grab. So Nike hasn't been really outspoken about organized retail crime. Just seems like it doesn't stop. Like it keeps happening. So what does this story tell us about the state of the sneaker industry?

That sneakers are really hot. People are still very interested in buying limited edition sneakers. Maybe that's the problem with the hype. Maybe there was, you know, maybe hype was a really good way to make a lot of money, but maybe it's also becoming a problem now.

That's all for today, Thursday, August 17th. The Journal is a co-production of Gimlet and The Wall Street Journal. If you like our show, listen to us on Spotify or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.