Fast-growing startup Stockx sniffs out fake sneakers
DETROIT» The pair of allegedly rare Air Jordan sneakers arrived last month to the bunker-like 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 re-selling of hard-to-find sneakers, sportswear, watches and handbags.
But this pair didn’t pass the smell test. One of the center’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 center in Tempe, Ariz.
The company says it processes thousands of pairs of shoes a day and handles about $2 million in daily sale transactions. It plans to open new centers in New Jersey and London this year.
Stockx CEO Josh Luber, 40, said one of the company’s challenges in finding enough workers.
“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 percent of Stockx’s merchandise is currently sneakers, followed by about 20 percent streetwear and about 5 percent watches and handbags. Stockx only sells authentic sneakers that are unworn and in their original box.
The company says it overtook ebay last year for sneaker resales.
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.
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 percent cut of each sneaker transaction, with the fee lowering to 8 percent for highvolume sellers.
Similar to what Kelley Blue Book is for used cars, Stockx has 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.
Roland Coit, 39, of Pontiac 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.
Gilbert, who founded Detroitbased mortgage giant Quicken Loans and owns the Cleveland Cavaliers NBA team, financed much of Stockx’s early growth.
The asking price for Stockx’s sneaker inventory last week ranged from a $40 pair of tan Vans to $25,000 for the auto-lacing Nike Air MAG “Back To the Future” shoes. The ultra-rare MAGS came out in 2016. Just 89 pairs reportedly were made. So far, nine have resold on Stockx; the highest sale price was $32,275.
Weeding out replica sneakers from authentic originals is key to Stockx’s business model. The company guarantees that the merchandise it ships is “100 percent authentic.”
Stockx sneakers authenticators go through a 90-day training period. They study a company “fake book” showing telltale signs of knockoffs. They also examine actual fake sneakers that Stockx encountered in the past.
“We bring in fake sneakers, we rip them apart, we note every single difference between all of them. And then we teach people, ‘Here are the real ones, here are the fake,’ ” Luber said. “It could be different color stitching, it could be different materials, it could be different packaging. Sometimes it’s the box.”
And sometimes it’s the smell. “The first thing that every authenticator does with every shoe is they smell the shoe, because the glue on the fake shoes usually has a much more distinct smell,” he said.