Sneaker lovers have long since discovered online marketplace StockX for themselves. But the online platform doesn’t only sell sneakers but also sought-after streetwear, luxury watches and handbags. Consulting firm Bain & Co. recently estimated the resell volume for the luxury segment in the US alone at US$6 billion. We had the chance to meet Scott Cutler, CEO StockX, and had a lot of questions in stock.
You seem to have a passion for online marketplaces. You have worked for eBay before and now StockX. What do you like about them?
Yes, I have been with online marketplaces for the last plus 15 years. I think today’s consumers have the expectation to purchase what they want, when they want, wherever they are. Marketplaces are really the only way that this can be delivered, because traditional retail can only offer what’s on the shelf. What fascinates me to work for StockX is that this field is not dominated by Amazon or big box retailers. It delivers a unique customized experience. StockX uses aspects of stock markets that I am very familiar with but to deliver it in a marketplace is a really compelling idea and concept that I was attracted to.
StockX started with sneakers, meanwhile the portfolio has expanded to streetwear, luxury watches and handbags. Which product could be added in the future?
Our two largest categories will be sneakers and streetwear. We recently launched collectibles. In that category we have toys and trading cards things that similar to sneakers have asset-like pricing and persistence meaning that their trade is continuously out there. For us category expansion means that we look at those things that are tradeable in our model. We are not trying to create a marketplace that can sell anything. We want to be able to have a platform that provides opportunity access to items that are scarce but also that are persistent, that are available over time and that are available in new condition, even though they might not be currently available at the shelf in a warehouse. In the sneaker category for example you have sneaker enthusiasts that are collecting sneakers for decades and there is a tremendous inventory out there available for consumers today.
In October you further developed the business model for the first time. Brands could sell exclusive products directly to the highest bidders in an auction. Adidas is the first prominent partner. How did this cooperation come about and are similar projects planned with other brands?
If you look at the most popular brands that sell on StockX it is Nike, Adidas, Louis Vuitton and Supreme. Our target customers want to purchase items directly from brands. It was always our idea that while today the marketplace is powered by sellers, that we wanted to create the opportunity for brands to be able sell products directly onto the platform and to reach our customer base. Adidas was the first brand to do that. Adidas and Nike have been watching and observing what’s been going on on StockX. Our customer base reaches around the world, 170 different countries, we have millions of customers that are coming to our site now every single month, that is more than most other retailers have. So the brands want to be wherever the customers are. We had a unique value proposition to offer to Adidas which was offering products in a new model we called Initial Public Offering (IPO). It is a new way releasing products out to the market. Customers can place anonymous bids on the item of their choice for any price they are willing to pay. No one can see what these bids are. The only thing you can see is the total number of bids on the product page. Once the auction ends, we take the highest bids that match the amount we have in stock to determine who wins along with the clearing price. In case for Adidas we had 999 pairs of sneakers that were available we had 10,000 unique bidders and 20% were outside the US and you could actually see how many people are willing to pay a $1000 or more as well as the individuals that are willing to pay less.
And was Adidas surprised about the results?
I think Adidas was excited about the results because again they saw the depths of the demands of the product, they saw the full spread of prices that consumers are willing to pay and for the designers prior unknown it gave them a platform for their creations to a global audience.
What was the highest bid ever made for a sneaker on StockX?
It was actually a Nike Air Max. It was sold for just under US$40,000. It’s the Back to the Future Marty McFly sneaker–a very rare and sought after model.
You have some competitors like Goat, that for example landed a $150 millions deal with Footlocker. Do you think that in the future several big resellers can exist side by side or will the market clear itself and there can only be one big marketplace?
I think it depends on the consumer experience. I don’t think that all of these platforms are the same. We approach the market differently. I think we are the most global and have the largest customer base. We do expect to see increased competition but we are also very confident that the value proposition and the momentum that we have with consumers is going to be the secret for us to be the category leader.
Our last issue was all about denim and we asked ourselves why denim lost its coolness. It used to be Levi’s or another certain brand to wear, but nowadays it seems like it is not important for young people anymore what kind of denim brand they wear but much more important what sneaker brand and model they wear. Sneakers have reached this cult status. Do you have an explanation why?
Fashion in particular but also culture really drives certain brands and certain products. We are a platform that represents this demand across the categories in which we operate. Sneakers in this category are not new, but now it’s becoming a much more stronger theme across a wider demographic of buyers. In addition to Nike and Adidas you also have the luxury brands and collabs with high fashion. Right now you see a crossover of streetwear, sneakers and fashion. You see a crossover between a sneaker enthusiast, a fashionista and a teen that thinks a sneaker is a cultural relevant thing to wear. With the rise of social media and social influence you see what you wear largely being driven also by social influencers.
So are social influencers a big topic for you as well?
Yes, it is! Because social influencers have an impact on fashion and an impact on trends. A lot of them have a unique voice in perspective on the market. A lot of consumers will follow these trendsetters and we’ve seen this across the globe. We see a Chinese influencer that will wear a very particular style, colorway of a shoe and then you see a spike in demand in China for that particular shoe. Same thing in New York and London. You very much see the cycle of trends as they are represented in the social community.
At the end of 2018 StockX expanded to Europe starting in France and Germany. Consulting firm Bain & Co. estimated the resell volume for the luxury segment in the US alone at $6 billion. Do you also see such great potential in Europe?
Absolutely. That’s why we here. We started a year ago in London where we have a significant presence now. We opened our second authentication center in Eindhoven. We are authenticating literally thousands of items every single day through those centers coming from consumers directly in Europe.
What is the biggest difference between buyers in Europe and the US?
I would say there are small variations in terms of taste and preferences between countries but they are not significant. We might have more people that are interested in trainers in Europe and more of a basketball type Air Jordan in the US.
What about the Asian market? China seems to be particular interesting?
Uniquely so we have buyers in mainland China. Largely driven by rising middle class, consumer that love brands, consumer that actually want authentic brands and they are finding that through our platform. We recently rolled out two new payment methods, Alipay and Wecheck pay, which are common payment methods in China.
How should one imagine this authentication center?
Imagine a warehouse were in the end of the day truck loads with palettes filled with boxes come in to that authentication center and a team is unboxing and inspecting those items and then repack them and shipping them out to customers. That happens every single day in six authentication centers around the world. The authentication process is key to the trust equation in the market. Consumers expect to buy a real and a new product on StockX. When we are going through the physical authentication process, which we do for every single item that is sold on the platform, we are looking for lots of different things. We want to make sure the box itself is not damaged, it has all of its individuals components as it was originally sold, that it is the right size, the right color as well as it being real. Part of the authentication is making sure, what that seller sends to us is what the buyer expects on the other side.
How long does the process take?
Every item that comes in our authentication center in the morning leaves at the end of the day.
Could it be possible that a fake sneaker slips through?
We developed an expertise around authenticating. That wasn’t a job that existed before. We have to train people. We constantly learn how to do it better. Everything from stitching, to color, to smell, to packaging–all these different aspects we are looking at. Typically, somebody who is trying to fake these items misses on many of those different components. Yes, there are opportunities that people are getting better at faking but at the same time we are looking at so many things to ensure authenticity.
So you are hiring a lot of people at the moment?
Yes (laughs), obviously we’ve been expanding as a company. We are nearly 1,000 employees now worldwide. We’ve been growing tremendously as a company.
You opened the first brick-and-mortar location this year in New York. How is the store developing?
The store is doing great. We are really excited what we are seeing there. It is centrally located in SoHo New York around a lot of brands that sell on our platform. So it is both largely a place where sellers drop of items that are sold on the platform. We also have a pop-up in London that goes until the end of the year. There we are providing a drop off experience for sellers but also for customers to learn a little bit more about the brand. We have an art exhibit and people have specially curated unique collections of items that can be available on StockX.
Are you planning to open up more physical stores?
We look at the physical store as one strategy to reach our customers. It’s somehow limited in its reach because the experience online to duplicate in a store is impossible. Even in sneakers alone we have a catalog of over 20,000 items that are available, it’s very hard to represent that in a physical location.
Have you ever purchased a sneaker on StockX?
Me? I am one of the top buyers on StockX! I buy and sell! The sneakers I am now wearing were my latest purchase. I am constantly using the platform because as the CEO it is really important for me to understand what that user experience is. I am constantly sending changes to our product team of things that I find frustrating as a customer. It can be the time, slowly page loading, representation of buttons on the page–this is part of leading a company: Knowing and understanding it.