In many respects sneakers and streetwear are the last of a dying breed: hyped items drop and draw crowds to camp out (pre-corona, at least) for the chance at securing the latest object of desire. You certainly won’t find people queueing up for the latest iPhone anymore. Profiting from the sneaker and streetwear hype is the world’s largest marketplace for overhyped products, StockX. In this week’s episode of the OMR podcast, founder and CEO Josh Luber discusses how he erected a billion-dollar enterprise by piggybacking on the likes of Nike, Adidas et al, why Eminem and Mark Wahlberg were early investors and how the platform differs from eBay and is thus poised to spawn a revolution in eCommerce.
“I am 42 years old and I have the same story as every other 42-year-old sneakerhead,” Josh Luber tells OMR founder and CEO Philipp Westermeyer in the OMR podcast. “I always wanted Air Jordans, but my mom would never buy me any.” After trying his hand launching three previous startups, he decided to “merge personal passions” with business. Together with Dan Gilbert (billionaire owner of the Cleveland Cavaliers and CEO of Quicken Loans), Greg Schwartz and Chris Kaufman, Luber founded StockX in Detroit in the summer of 2015; the website went live in 2016. “Today, we are the biggest marketplace for sneakers and have more traffic than the biggest sneaker retailers, like Foot Locker and Finish Line and every other retail marketing channel,” says Luber.
The success of StockX lies not only in the platform’s unique business model, but in its star-studded lineup of investors. While early investors included Eminem, Travis Scott and actor Mark Wahlberg, star DJ Steve Aoki and supermodel Karlie Kloss have also invested capital. “We never intended to go out and get the most famous people in the world involved—it happened really, really organically,” says the StockX founder. “When we decided that we wanted to raise money and step on the gas and continue growing the company then it becomes very valuable to have such people at the table.” The early attention caught the eye of even more investors. In June 2019, StockX raised USD 110 million in funding and received a billion-dollar valuation.
A billion bucks for sneakers
But how did StockX manage to soar so soon given that the resale market up to then was primarily on none other than eBay? For Josh Luber the secret to the business lies in its name: the platform mirrors a stock exchange. “If you go to eBay and search for a pair of sneakers, you will get 2000 listings with different prices and it’s up to you to find out which one you want to buy, which one is real,” he says. “But if you go to the New York Stock Exchange and want to buy some Nike stock, there is one ticker symbol for Nike and there is 1 market price. With StockX we bring the same level of transparency: there is one product page for every pair of sneakers and every product on StockX,” Luber says. “That alone is the structural difference [between StockX and eBay] and everything emanates from that.”
Every time a purchase is made, the second USP comes into play: each and every product is sent to one of 6 authentication centers around the world, where it is tested for authenticity and its condition is inspected. Only then is it sent to the buyer. That not only creates added value for the buyer, who can trust that the items ordered are genuine, but also for StockX. “If you thought what you were buying might be fake, it would change your whole perception of value. It would change what you are willing to pay for. Trust facilitates the larger model and everything that comes with it—including how sellers sell,” says Luber. And that’s not just a passing point for StockX: every sale that takes place on the platform generates a 9.5% commission for the company from new sellers (regular sellers can drop their commission to 8%), while buyers pay 3% of the sales price as a processing fee. Annual revenue figures to be somewhere in the ballpark of USD 100 to 200 million—Luber declined to provide specifics. Since the company’s inception, he says goods totaling USD 2.5 billion have been sold through the platform.
Product IPO to revolutionize eCommerce
Josh Luber foresees continued growth for StockX thanks to having unique IPOs for products. Recently, StockX had an IPO for a special edition pair of New Balance that served as the product’s introduction to the market. In such IPOs, users were solicited to blindly state what they would be willing to pay for the shoes in their size. Based on the number of shoes available, a group of the highest bidders retain the right to buy the show—but the price paid is the lowest winning bid. For these specific New Balance shoes, the price varied between 350 and 500 bucks depending on size.
“Brands release products into the market and the market sets the price for them,” says Josh Luber. “That’s the—for lack of a less clichéd word—revolutionary thing about it, getting rid of the idea of retail pricing.” He says that StockX does everything to ensure that products reach their true market value and thus modernize the process of purchasing hyped wares. Simultaneously, product IPOs provides StockX with the opportunity to advance from resale platform to direct retailer, where margins are an order of magnitude greater.” “We are fortunate that the products we sell are the most coveted products in the world,” says Luber.
Listen to the latest episode of the OMR Podcast to learn more about Josh Luber and StockX, as well as how Nike and Adidas are doing battle for the top spot in sneakerdom, what role musicians, celebs and artists play in the price explosion for individual products and what the most expensive shoe ever sold through StockX was:
The OMR Podcast with Josh Luber from StockX at a glance:
- What exactly does StockX do?
- Why does Josh Luber think the StockX model is better for sneakers and streetwear than eBay & others?
- Where does the StockX story begin?
- How did Luber succeed in generating supply and demand when StockX launched?
- How does StockX view the customer lifetime value of its clients?
- Brands now work with StockX directly when they launch products. How lucrative are these exclusive partnerships?
- What is the most successful shoe on the platform?
- Who are typical StockX buyers and sellers?
- How was sneaker hype created?
- What impact do influencers and Instagram have on the value of shoes?
- StockX has several prominent investors—Was that intentional?
- How has corona impacted StockX’s business?
- What are Josh Luber’s plans regarding an IPO for StockX? What is the overall vision for the future of the company?
- Which brand is the most important partner for StockX? Who’s winning the sneaker battle between Nike and Adidas?
- How important are artists and stars regarding resale value for a sneaker brand?
- New Balance is in the process of changing its brand. How does Josh Luber view the strategy?
- Which streetwear brands are particularly hot at the moment?
- How is StockX’s watch resale business set up?
- How is the collaboration with celebrity investors in the company?
- How big is StockX’s gross merchandise volume?
- Which brands have caught Luber’s attention recently?