How Long Should I Wait in Line for “What the LeBron”? [Economics]

imageI was listening to this NPR podcast on the fashion sneaker economy and I got interested in the people who wait 12, 24, or even over 36 hours to purchase and then resell the shoe. Is it really worth it?

I absolutely believe in time is money, in the sense that any time you waste should be considered at a labor rate. This isn’t much different from waiting in line for a new Xbox or Sony Playstation console either. In November 2001, my friend Mike and I slept overnight outside Best Buy and Walmart in a Milpitas shopping cart in hopes of getting an Xbox. We did, but at the time we were both students who had nothing better to do and also made about $8.00 an hour in our part time jobs. We also only waited about eight hours or so – even though people were waiting in line at Best Buy, no one actually went to Walmart and we got our Xboxes easily that morning.

Now that I am an adult, the economics are different. Let’s answer two questions:

1) How much is it worth for me to pay in premium rather than wait in line for the new Nike Lebrons or Jordans that are released?

2) If I look to resell the shoes, how much do I need to profit to make it worthwhile to wait in line (versus taking care of my children or just flat out working another job?)

First Scenario:

$20 an hour, $800 a week ($40,000 per year)

(Assuming 40 hours of work; let’s avoid taxes and benefits reductions for simplicity. As a side note, the average salary in the US is $1000 per week.)

The chart below shows, based on how much the shoe originally cost ($250 before tax), your expected returns and salary based on waiting (this dismisses transportation, shipping costs, etc. This also doesn’t account for the times you may actually lose out on the shoe – yikes!)

If you are looking to buy and you make at least $20 an hour at your job, it is worth it for you to buy a $250 shoe at any of the prices listed in green. For example, if you think you would need to wait a full 24 hours in line to secure the shoe, you should be willing to pay up to $700 for the new Lebron rather than wait in line. If you purchase the shoe for $700, you are paying someone else $18.75/hr to wait in line for you, which is less than your own salary.

If you are thinking, but I have to pay someone, well, think of it as outsourcing your work. How much would you pay someone to do your job? If you make $20 an hour, but you can outsource it to Bob for $18.75, you can make $1.25 an hour from doing nothing. This is an arbitrage, free money off the ground.

If you are looking to sell, the cells in red show your hourly wage rate from waiting in line.

At $20.00 (white highlighted cell), you are indifferent (waiting 5 hours to sell (or buy) the shoe at $350).

imageSecond Scenario:

$25 an hour, $1,000 a week ($50,000 per year, roughly the average pay across the nation)

imageThird Scenario:

$30 an hour, $1,200 a week ($60,000 per year)

imageFor the last scenario, let’s say you do pretty well and make the magical $100,000 a year mark. Because you make a pretty darn good salary (congratulations, by the way!) I expect that you should have an intelligent approach to your time.

Final Scenario:

$50 an hour, $2,000 a week ($100,000 per year)

imageAs you can imagine, the more you make, the harder it is for you to really profit from waiting in line if you want to resell the sneaker, but it’s also more valuable for you to not wait inline if you just want it for yourself. If I had to wait more than 2 days for a shoe and I made the average US salary, it is economically worthwhile for me to pay $1,000 for a $250 shoe on eBay or NikeTalk rather than wait in line. In the podcast, they mentioned how resellers talk about the shoes like a stock, but there is one big difference. The transaction cost for purchasing/selling a stock is minimal. I can make a trade on eTrade for $20 at any time, it’s automatic. You can set it and resell it anytime (no waiting in line as with shoes) you need based on defined amounts, there are no extra fees in terms of storage (you need to keep shoes and boxes in great condition, collectors are picky).

If you make $100,000 a year, you are better off going to work rather than waiting in line longer than one night. Do some research on Campless, for example and find the right timing to make an offer on the shoe you want.

You may argue otherwise, which is fine, but ultimately you should define to yourself how much your time is worth before blindly waiting in line for shoes, video game consoles, or the new iPhone. Especially if you are an adult, with real bills to pay.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s