A Nasdaq for sneakerheads?
An e-commerce site aims to tame ‘chaos’ of luxury market, writes Dan Hyman
STANDING among more than 350 pairs of sneakers in his converted attic, Josh Luber, a self-proclaimed “sneakerhead”, held a pair of nearly identical Nike Air Jordan IVs in each hand. He eyed them as if they were rare biological specimens.
One was a standard model of the shoe that typically sells on secondary markets for US$160 (RM650); the other was an ultra-rare model designed by rapper Eminem that can fetch more than US$20,000.
“This is the sneaker industry right here,” he said, referring to how brands use scarcity and buzz to drive up prices in secondary markets and create brand cachet.
That price volatility helped inspire Luber to found StockX, an e-commerce platform for luxury goods.
The familiar model of buying and selling high-end shoes “leads to chaos”, Luber argued.
When limited-edition sneakers are released, people camp in line for days to get their hands on a pair, and the opportunity to make a quick profit can lead some to bribe store workers. It can even turn to violence: In 2015, a Brooklyn teenager was shot in his foot for cutting in line.
So Luber, the company’s chief executive, and his co-founders, including Dan Gilbert, the billionaire founder of Quicken Loans, came up with what they believe to be an elegant solution to determine the value of high-end goods: Treat them as if they were stocks.
On StockX, products, which include streetwear, handbags and watches in addition to sneakers, are assigned ticker symbols.
Sellers put out asking prices, and buyers bid. Users can see data like recent sale figures from across the Internet, price volatility, and 52-week highs and lows. Once a bid and an ask coincide, the sale is automatically made. Niche marketplaces for high-end goods are not new: Before sneakerheads connected on the Internet, there were consignment shops reselling shoes and stores that specialised in just one brand of watches.
But when people have access to hard data on how a product is selling across the market, they can best understand its true value, which has the potential to bring down prices, Luber argued.
His goal is to work directly with retailers and have products open on StockX in an initial public offering of sorts. He said that this would provide more pricing stability, and that allowing average consumers access when new products were released could help brands expand their customer bases.
“Brands love the fact that, ‘Oh, yeah, people waited three days outside of the store to get my product’,” Luber said of traditional product releases. “Our whole idea is, ‘Look, there’s just a different way to benefit from that, that adds order to it.’”
Luber, who, like many sneakerheads, speaks of his footwear collection as if it were an ever-expanding portfolio, started collecting at age 10.
In 2012, while an analyst at IBM, he founded Campless, a website he described as the Kelley Blue Book for sneakers. When he met with brand representatives, he would describe his dream of a marketplace that treated sneakers as if they were assets. Companies were interested in his data but uninterested in overhauling their sale process.
In April 2015, Luber was summoned to a meeting with Gilbert, who had started an in-house incubator and was exploring new business ideas. Gilbert was intrigued by the idea of a stock-market model for e-commerce and, as the father of a teenage sneakerhead, was convinced that sneakers were a perfect starting point to test the concept.
To protect against knockoffs, sellers ship purchased products to StockX, which authenticates the items and sends them to buyers by day’s end, similar to services provided by other high-end marketplaces. StockX takes a 9.5 per cent commission on each sale.
Since starting in February 2016, StockX has grown to more than 10,000 transactions per day. It has added nearly 170 of its more than 370 employees since the end of April.
“We’ve gone from zero to US$700 million in sales in two years, and most of the world doesn’t even know this exists,” said Greg Schwartz, 37, a co-founder and now the company’s chief operating officer.
With a billionaire co-founder, capital has not been an issue, but StockX has still sought out investors who Schwartz said “provide outside value” or cultural cachet: Eminem and his manager, Paul Rosenberg; actor Mark Wahlberg; Scooter Braun, Justin Bieber’s manager; and Steve Case and Tim Armstrong, former chief executives of AOL.
StockX has two authentication centres, and more than 100 authenticators, who go through a 90-day training course. As the authenticators receive items, the details of the product and the sale are available on a computer screen at their station. Once they have performed all the steps in the authentication - which can include smelling the shoe - a shipping label is printed and the seller is automatically paid.
When StockX started, Luber personally authenticated sneakers in a room of the office before taking them downstairs to be shipped. “And then if the freight elevator would break down for the day, we’d be like, ‘Oh, our whole business is done!’,” Schwartz recalled with a laugh.
But Luber said the business was not just an excuse to play with sneakers.
“Everyone feels like it’s impossible to get a pair of Off-White Jordans for retail” unless you have insider connections, Luber said, adding: “There was a reason the Foot Locker manager’s brother won the raffle every time.”
NYT