Fast-growing startup StockX sniffs out fake sneakers
DETROIT — The pair of allegedly rare Air Jordan sneakers arrived last month to the bunkerlike Authentication Center of StockX, a Dan Gilbert-backed company that is one of Detroit’s fastest-growing startups.
The black-and-red Jordans were purportedly from 1995. For sneakerheads who collect such things, that’s close to antique.
If these shoes were authentic, they might fetch $500 on StockX’s online marketplace, which functions like a stock market for the resale of hard-tofind sneakers, sportswear, watches and handbags.
But this pair didn’t pass the smell test. One of the centre’s “authenticators” took a whiff of the Jordans and immediately knew something was off. Smell is one of the 25 to 30 indicators they can use to distinguish a legit shoe from a cheap knockoff.
“It just had a very distinct smell that we hadn’t smelled before,” recalled sneaker authenticator Sadelle Moore, 31, of Detroit, “so we knew automatically that was fake.”
This army of dozens of merchandise authenticators form the backbone of StockX and its effort to become the world’s leading resale marketplace for scarce consumer goods.
Launched in February 2016 with just a handful of employees, StockX has grown to 370 employees, including about 40 workers at its Western U.S. authentication centre in Tempe, Ariz. The company says it currently processes thousands of pairs of shoes a day and handles about $2 million in daily sale transactions. It plans to open new centres in New Jersey and London this year. StockX CEO Josh Luber, 40, said one of the company’s latest challenges is finding enough people to hire.
“There are 200 people we’d hire tomorrow if we can find the right people,” Luber said. “We’d triple the engineering team, we’d double the authentication team, we’d double the customer service team. That is just part of hypergrowth.”
Roughly 70 per cent of StockX’s merchandise is currently sneakers, followed by about 20 per cent streetwear and about five per cent watches and handbags. StockX only sells authentic sneakers that are unworn and in their original boxes. The company says it overtook eBay last year for sneaker resales. Its competitors also include online sellers and platforms such as GOAT, Grailed, Flight Club and Stadium Goods.
There is significant money in reselling sneakers. Shoe companies intentionally produce limited quantities of desirable models, such as the latest Adidas Yeezy or Air Jordans, which makes it hard for consumers to buy a pair before inventories sell out. Similar to the dynamics of event ticketing, this confluence of small supply and big demand creates a market of people who are willing to pay lofty sums for a must-have commodity. Hot sneakers can sell for hundreds or sometimes thousands of dollars above the original retail price.
StockX’s innovations include its elaborate authentication process and unique sales platform that functions like a stock market. The way the platform works is buyers place bids and sellers place “asks.” When a bid and ask match, a sale occurs automatically. StockX then tracks and graphs the completed sales, showing the current and historical market value of a particular sneaker, watch, handbag or other item.
StockX takes a 9.5 per cent cut of each sneaker transaction, with the fee lowering to eight per cent for high-volume sellers.
Similar to what Kelley Blue Book is for used cars, StockX has already become a leading gauge of market value in the sneaker resale world — even for transactions that don’t happen on the StockX platform.
That dynamic was on display June 30 at a sneakers and streetwear trade event called the Michigan Sneaker Xchange in Cobo Center. The event, which was sponsored by StockX, was jammed with sellers displaying like-new and lightly worn merchandise with price tags that could hit several hundred dollars or more. Many in the crowd of buyers were teenage boys. Some looked no older than 12. Sneaker seller Mohamed Ibrahim, 21, of Toledo, Ohio, said it’s common to see buyers check the price of a shoe on StockX.
“Everyone references StockX when they’re at these events,” Ibrahim said. “They’ll pull out their phone before they’ll even think about purchasing something.”
Sellers typically like how StockX uses stock photos and standardized descriptions for merchandise, which makes the sales process easier for them than platforms requiring photos and written descriptions for each item. Roland Coit, 39, of Pontiac, Mich., has sold as well as bought shoes through
StockX. His purchases included a roughly $700 pair of black Air Jordan 4 Retro X Kaws and a pair of Yeezy Wave Runner 700s for which he paid under $500.
“The dope thing about it is you know it’s real and you don’t have to worry about counterfeit or anything like that,” Coit said.
Not everyone at the sneaker event was a StockX fan. The owner of a Columbus, Ohio, store called Addicted 2 Kicks, who would only give his Instagram nickname “Juice,” said he stopped selling on StockX because it forbids worn shoes, which he often sells. StockX only allows “deadstock” shoes in never-worn condition. He instead sells on rival resale website GOAT.