Josh Luber (StockX): “The notion of retail price is dead, market price is what counts”
This is a success story in the best American tradition. In just three years, StockX has grown from start-up to genuine unicorn. On June 26, after raising fresh funds worth $110 million, the online marketplace for buying and selling sneakers, watches, handbags and streetwear was valued at over $1 billion.
How to explain the explosive growth of a site which claims to have generated a revenue of over $1 billion last year? First of all, because StockX's recipe uses quality ingredients: it is a thriving company headed by remarkable, enterprising young businessmen teamed up with an open-minded tycoon. There is also an added sprinkle of showbiz glitz, since a number of film and pop music stars have invested in the Michigan-based company since its inception. But above all, StockX pioneered an innovative concept: it prices the products it sells based on what it defines as a “true market price,” like a share price on the stock exchange. A concept which enabled StockX to steal a march on competitors like Stadium Goods or Goat.
Josh Luber, StockX’s co-founder with Greg Schwartz and Dan Gilbert, the owner of the Cleveland Cavaliers NBA team, took advantage of a visit to Paris to talk to FashionNetwork.com about StockX’s ‘stock market of things’ concept, its impact on retail trade, and to give more details on the company’s growth drivers. Because StockX plans to expand beyond its native USA.
“We are an evolution of Ebay”
“We launched the site in February 2016. When people talk about stock markets, the majority of them think investment. Instead, we’re more of an evolution of Ebay. We put buyers and sellers of a specific product - whether sneakers, streetwear, handbags or watches - in touch with one another,” said Luber.
“The question is how to establish this connection. And what’s crucial is to ascertain the real market price of the product in question. When a product goes on sale on Ebay, some bids come out at $300, others at $400. There is no benchmark. Instead, if you buy one Nike share, it has a [listed] price. And you can only buy Nike shares on the New York Stock Exchange. The idea was to set up a marketplace where products could be traded like on the stock market. We simply apply to sneakers and handbags the same principle that has been applied to minerals or natural gas for decades,” added Luber.
Data and analytics are at the heart of the concept. In order to set a market price that is as accurate as possible, StockX must attract both buyers and sellers.
“It’s the best model, but it’s very hard to explain. We need to promote it constantly, via our brand and SEO strategy, through digital marketing and also customer service. Frankly, it can get a little confusing. The challenge was to set up this idea with a website and then teach 14-year-old kids to use it. Our design team succeeded in creating a site that's accessible. What made the difference was that the customer experience is better. Customers found faster response times and more realistic prices, this is why the company has grown so quickly.”
StockX authenticates products
StockX earns a commission on each sale, one that varies depending on several criteria. Once a sale has been initiated, the product is sent to StockX for authentication. After it has been verified, it is delivered to the buyer, and the seller is paid. The business has grown so much that StockX now employs 820 people. Thanks to the latest funding round, it will be able to hire some 500 more in the coming months. Notably, to expand overseas.
In Paris, StockX organised an event in collaboration with Sarah Andelman, showcasing exclusive t-shirts by BornxRaised, F.A.M.T. and Club75, and a selection of rare sneaker models at a venue in the Marais district. A StockX truck also made the rounds during the recent Paris men's fashion week, to meet Parisian influencers. The site’s presence in Paris had a twofold objective: to rub shoulders with the fashion and streetwear labels taking part in the fashion week, and establish a direct contact with potential buyers and sellers.
“We want to tap key countries and cities in Europe”
“In February 2016, the whole business was US-based, with dollar transactions routed via Detroit. But in order to be global, you need to have a global presence. We opened a European office in London in the fourth quarter of last year, with a product authentication centre. We have other offices in Detroit, New York and Tempe, Arizona. And we recently finalised the details for opening another one in the Netherlands. This will allow us to operate much more quickly across Europe. The closer we are to the transactions, the quicker we authenticate products, the quicker sellers receive their money and buyers their products. This also lowers transport costs and limits the impact of customs duties. We want to tap key countries and cities in Europe. For streetwear, London, Paris and Berlin are the three top cities. Language-wise, we will also add Italian, because, while in Italy we have few sellers, we have many buyers,” said Luber.
Launching into new countries means shelling out on marketing investment, introducing site languages and payment tools appropriate for each market, and a dedicated customer service team too. It is a challenge for Europe, one that the group will also undertake in Asia. StockX is planning to deploy in China and Japan by the end of 2019. The U.S. has a marketplace culture, with the U.S. resale market estimated to be worth $2 billion. Globally, Luber reckons that it should be worth “between $6 and $7 billion.”
Once again, China is perceived as a country with enormous potential. And StockX’s main asset is that it has an attractive source of products by labels with a strong reputation.
Nike, Louis Vuitton Rolex, Supreme, Yeezy, Jordan and Off-White the most coveted brands
“Highly coveted brands and products are pretty much the same the world over,” said Luber.
“Each country has its own specific tastes, but top of the ranking are Nike, Louis Vuitton, Rolex, Supreme, Yeezy, Jordan and Off-White. New Balance is popular, notably after signing up Kawhi Leonard, NBA champion with the Toronto Raptors. But they feature only three models. Asics does new collaborations each year, but still doesn’t have much resale appeal. In the last few years, Adidas with Yeezy and Human Race, and also Off-White, really took off. Previously, Nike and Jordan cornered 96% of the resale market,” added Luber.
According to the founder of StockX, a sneaker aficionado himself of course, mastering the science of making products desirable is crucial. Stock-outs are what create this hype; this appetite for exclusive products and collaborations. Commercial buttons that the Nike group, in particular, is very adept at pushing. “If [Nike] produces too many units of a product, it could kill the product’s reputation, but it won't kill the resale market as a whole,” said Luber.
Tapping other targets besides sneakerheads
Actually, Luber sees the full-price and resale markets as converging.
“I think this is just the beginning. In a store, 300 models might be available. StockX features 26,000 models, and 25% of our business is transacted at below-retail prices. It means amazing access to products. The global retail market is worth $100 billion. What's happening now is that the second-hand market is growing, blurring the lines between retail and resale. The opportunity for us isn’t tapping young sneakerheads, but rather consumers who buy from Foot Locker or JD, and who four years ago had no notion of buying on Ebay. Now, they realise that it's easier on StockX. And it's no longer a question of retail or resale price, but simply market price.”
For Luber, the concept of market price is central to the development of StockX. It means transparency and credibility, and has the potential to replace the long-established practice of retail prices being set by manufacturers. StockX is pioneering the concept of an IPO for products. When launching a product or collaboration, labels go through the StockX site and members of the latter's online community assign the price. In other words, the market is allowed to set its own price. StockX is planning to use this system in half a dozen cases in the coming months, in collaboration with various brands.
More product categories on the cards
“Through the IPO system, brands have control over the launch. The notion of retail price is dead. For some products, brands set a price because this is what they have always been used to doing. But there are models launched at a retail price of $200 which immediately resell for $1,000. It’s simply illogical. And it also generates security issues with these launches. So much money is involved. Our idea is that, for some products, market price can replace retail price,” said Luber. If brands want to, they can transfer the difference between retail and market price to charitable institutions, and still control the launch.
This is an approach that StockX doesn’t want to apply to sneakers alone. It soon introduced further product categories. Besides streetwear, it also features high-end handbags and watches, and has recently introduced a new segment, collectible objects.
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