How StockX Built A Billion Dollar Sneaker Resale Empire

this is stock ex a stock market for all kinds of things smells good ready to go you can buy or sell items like a pair of these Jordan 5 retro trophy room sneakers this Supreme Box logo hooded sweatshirt and Hermes Birkin bag and Himalayan crocodile or a Rolex Oyster Perpetual watch you can even find extremely rare pokemon cards like this Charizard Hollow 1999 Pokemon based set in November 2018 stock X Sol its most expensive item ever a $70,000 trunk from Louie Vuitton and supreme stock X does about 20,000 sales of merchandise a day and by June of 2019 the Detroit based company reportedly reached a 1 billion dollar valuation here's how stock X went from a simple price guide for sneakers to a reselling Empire this is suddenly obsessed meet Josh Luber this camera the co-founder of stock X I have the exact same story as every other 42 year old sneaker head you know I grew up playing basketball when Jordan played I always wanted air Jordan and so I literally have sneakers from when I was probably eight before stock ex Luber had nothing to do with buying or selling sneakers he ran three tech startups and joined the corporate world as consultant at IBM in 2010 I almost intentionally avoided creating any businesses that had to do anything with sneakers almost at a fear of creating a business that was just an excuse to play with sneakers but while analyzing data at IBM Bluebird realized eBay was the biggest market place for sneaker reselling ebay played a bigger role but also was really more up to the consumer to find the buyer but the problem with eBay was at each reseller with this different prices for the same product if you go to ebay and you search for the shoes I'm wearing I'm wearing Jordan one royal you'll get thousand listings you usually decide you back to this person or that person Eliza 600 why is that 1-800 we were figured that the sneaker reselling market would benefit from following the stock exchange model which means every stock listed on the exchange has one true market value system helps alleviate uncertainty you don't buy a share of Nike stock and then go home when your friends in I got that cheaper on advert I'm like no like there's one market plate to that so in 2012 we were started a side project called campus which was essentially a shoe reselling price guide for sneaker heads Weber would scrape valuable data from eBay resellers and obtain all of the information about closed auctions for all sneaker sold on the platform slowly campus started gaining reputation and people started reaching out people started emailing and saying hey you know I love sneakers I love data can I help in fact Libre had a volunteer team of 17 people they were on the same mission to make informed decisions before buying or selling expensive sneakers on the resale market I could look at someone's whole sneaker collection and I could say what the whole sneaker collection is worth and then I can look at their sneaker collection the same way you look at a stock portfolio and just track it about you over time and then the logic is well if you understood asset pricing and you understand portfolio construction then perhaps we could create natural stock market for sneakers the only problem someone with extremely deep pockets had a very similar idea enter Dan Gilbert the Cleveland Cavaliers owner and billionaire investors sons were also buying and selling sneakers through eBay Gilbert's on industry prime for disruption so he put together a team to build a sneaker stock market but it didn't take long before they discovered campus in April 2015 lewbert of a call from Gilbert's team they wanted him to fly to Cleveland on short notice to meet Gilbert on his home court four days later on Easter Sunday uber made Gilbert for a Cavs game and Luber or his Tiffany dunks we get there we kind of make small talk before the game and then after the game we go back to this private room and that's where I realized that we were both trying to build a sneaker stock market that actually lent it to them kidnapping me and taking me to Detroit for the next two days uber left IBM in May 2015 one month later gilbert invested in campus for an undisclosed amount stock ex was launched in february 2016 and so it was a pretty crazy serendipitous you know happening the fact that there was maybe one other guy in the whole world i had the exact same idea at the exact same time it happens to be you know one of the most successful business people in the world stock extrait aend the real-time shoe pricing and analytics that made campus a crowd favorite among sneaker heads and added an online marketplace since the existence of stock cakes I've sold $67,000 since then I've done about a hundred and seventy thousand dollars in sales here's how stock X works stock X acts like a middleman between buyers and sellers buyers place bids and sellers post asks both the buyer and the seller are completely anonymous throughout the entire transaction sellers don't have to upload photos or write product descriptions once the seller accepts an offer the seller ships the product to stock X stock extent Achatz the item and releases the money to the seller then stock accepts the item to the buyer stock exchanges a 3% payment processing fee and a transaction fee of up to 14.5 percent the more someone sells on stock X the lower the transaction fee but the biggest beneficiaries of stock X may be the buyers if someone is going to spend $600 on a pair of sneakers they shouldn't have to worry about buying a fake from day one we authenticated every product at stock X and that was always gonna be the case and so if you're a 15 year old kid and you're spending up all your money and saving up all your money to buy a pair of bzees you know you're never getting gonna fake Parisi's massive added value but it wasn't until the release of the Air Jordan 1 bred on September 3rd 2016 that they realized just how big the market was for a company like stock X we did about 300 sales that day and we'd only been doing about 50 or 60 day B up until that point and that's when we knew that like the model was better right it was just watching trades come off the board and watching the the spread clothes down to $2 at a time Wow like I think this is really gonna work the company has raised a total of 160 million dollars from an impressive roster of outside investors from Eminem and Mark Wahlberg to former Victoria's Secret model Karlie Kloss stock ex announcing their most recent Series C funding round where they raised over a hundred million dollars which officially values their company at 1 billion dollars but to understand how stock X group so rapidly in such a crowded market we look at the evolution of the sneaker resale industry over the past few decades we actually should go back to the 70s that's Elizabeth Similac creative director and senior curator at the baddest shoe museum in locations specifically within New York City and its Burroughs as sneakers began to become associated with ideas of expressing individuality through fashion consumption particularly in relation to breaking and hip-hop a new word entered the pop-culture lexicon deadstock one of the things that early sneakerheads if you want to call them that began to do was to go and try to find dead stock and so dead stock are things that have sit on somebody's shelves maybe in a back room somewheres it just never sold that are overstocked and it was in looking at shoe retailers who had dead stock and finding these rare shoes and then breaking them out that I think created the first steps towards wanting to have the rare and unique finds and it was around that time when some of the first big sneaker collaborations and releases happened in 1984 the first pair of Nike Air Jordans was released in 1986 adidas partnered with the hip hop group Run DMC in 1989 Reebok launched the pump sneaker for a whopping 170 dollars all of these ideas of fashion masculinity basketball hip hop and price point come together in the mid 80s in 1995 eBay was born and it didn't take long for sneaker heads to start selling hard-to-find shoes on the site all of a sudden now there's a platform by which people can begin to do this exchange in earnest and dollar amounts could be assigned to sneakers well eBay created a place for consumers to buy and sell items the rise of social media put the resale market on steroids the sneaker community was almost like a dark place like it was a niche market before Instagram because now you start to see their shoes the riches of the rich and you know people who are still trying to get by and make a living they're wearing the same things and I think the Instagram brought all of that together that's like Instagram and Facebook allowed users to not only show off their collections but to buy and sell their products directly with each other take a look at the largest sneaker collection Ariana Dresden and Dakota Peters are the sisters behind a more than six thousand pair sneaker collection they inherited nearly 5,000 pairs of sneakers from their father Douglas Roy Peters these chicks with kicks have been selling some of their sneakers through Instagram they've made more than two hundred and fifty thousand dollars in sales so far Instagram is so easy and you don't pay fees so there's really no reason to look elsewhere for the everyday just you know buyer of one pair or the seller of a few pairs Instagram probably wouldn't be fit for them and that's where stock ex and those types of companies come in because they're safeguarded and and you know you're safe selling went from niche to mainstream which meant some enterprising people started making good money peddling hard to get items and when there's money involved you can count on someone gaming the system that was the hardest part about being able to deal sneakers it was like you was so scared to get a fake pair of shoes sometimes you just stayed away from me uber says stock ex addressed three things that were missing in the sneaker resale market structure transparency and most importantly authenticity in fact a robust authentification process was put in place at the company's launch the challenge is finding authenticators who are able to consistently spot fakes the higher the price of an item the better the counterfeit he couldn't go to LinkedIn to find sneaker Authenticator that job didn't exist we had to build it we had to create that job we had to create that process so stock X pot a bunch of real and fake shoes and dissected them documented the differences and created training manuals the company even developed a proprietary technology process and established difficulty levels double NCR there's a lot of faces it's very hard to authenticate it so when I cut your fig I I get happy nights a scream fake authenticators have to go through a 90 day training program to ensure that they can review any sneaker that come through the door I've done over 600 700 transactions selling and buying so you know my experience has been absolutely great today stock ex has six identification centers and it employs over a hundred authenticators around the world and now that the company is also selling street wear handbags watches and collectibles the authentication process has become even more critical to its ongoing success but as the reselling market keeps growing maintaining a rigorous authentication process is proving to be a challenge for all players in the resale space in November of 2019 a CNBC investigation found that the real real the world's largest online marketplace for luxury items and one of stock xcos had used copywriters and not so-called experts to authenticate numerous items and had also sold counterfeit merchandise the company has stood by its authentication process transparency is going to be very important you see the real Rail has had some trouble with that they stand behind their authentication process but it's bringing to light to consumers potential issues there so retailers really need to give consumers insight into that authentication process to you know make sure that they are comfortable with what they're getting the current overall resale market is about a twenty four billion dollar industry and in 2019 the sneaker resale market alone was estimated to be worth over two billion dollars in the US with that much money on the line big players and traditional retailers are investing heavily in online reseller marketplaces bigger players and traditional retailers are investing in resale if you think about footlocker's investment in goat neiman-marcus --is investment in fashion file Farfetch'd purchased outright of stadium goods really they feel this is important and this is the direction they should be moved because this is where there's growth company even eBay is trying to regain its place as a destination for sneaker resellers in December 2019 eBay announced that it would be eliminating North American selling fees on any sneaker sold at $100 or more creating a ripple throughout the industry in fact the lines between resale and retail are beginning to blur in October 2009 teen stock X teamed up with adidas to create three exclusive pairs of Adidas campus ATS releasing a total of nine hundred and ninety nine pairs on the platform and in December 2019 eBay partnered with Stadium Goods to launch its own series of sneaker drops stock X owes its success to the popularity of American companies like Nike and supreme but it's fastest growing market is actually Europe in fact almost a quarter of stock X is happening outside of the US that's why it opened a 35,000 square foot authentication centre in eindhoven Netherlands in August 2019 stock ex CEO Scott Cutler says that at some point the company will explore going public but Luber wants to take his stock market of Things concept even further retail pricing is completely antiquated there's no reason to create an arbitrary number to attach to a pair of sneakers when the Jordan one Travis got dropped they retail for $175 but we're immediately reselling for 1500 hours like that just doesn't make sense at all if you have variable pricing if you can be able to put products into the market at a true market value then that shoe maybe goes in the market at 700 hours or 800 hours or something way more than 175 for probably less than 1500 Luber says the ultimate goal is for brands to release products directly on stock X moving the company from middleman to primary seller the idea would be for stock X's customers to set the true value of a product at the onset and that's really the future of stock X and to be somewhat cliche probably the future of all e-commerce which is for certain products not all products but for certain products that our supply and demand constrained to let the markets at the price to literally I peel those products into existence and get rid of retail pricing for them stock X's rise isn't that hard to understand the company is simply being the rules of the stock market and the way it understands value on to the next

Channel: CNBC Make It

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Keywords: CNBC Make It, Make It, CNBC, How To Make It, Entrepreneurs, Starting A Small Business, Business Success, Small Businesses, Finance Tips, Career Tips, Work Hacks, Lifehacks, Money Management, Career Management, Managing Business, kayne west, kanye yeezys, complex sneakers, seth fowler, sneaker shopping with complex

Id: GNoWxl-eLuc

Length: 15min 31sec (931 seconds)

Published: Mon Jan 27 2020