At a glance:
- As a company, StockX finds its origins upon the fetishistic nature of the sneaker market.
- More than eight million people use StockX every day, amounting to USD2 million-plus in sales every day, some three-quarters of which is accounted for by sneakers.
- In the world of sneakers, controlled supply and resale drives up cachet and fuels overall demand all the same.
If, in 2005, you bought a fairly anonymous looking pair of grey sneakers called Nike Dunk Low Staple SB NYC Pigeons, and that pair now lies dormant at the bottom of your wardrobe, then congratulations, you’ve just made SGD20,000. If your taste is somewhat to the more vibrant, and you have a pair of Air Jordan 3 Retro Legends of Summer from just six years ago, it’s not so bad.
You’ll still be able to pocket SGD11,000. But if, two years ago, you were one of the 89 people around the world who, by some miracle, managed to bag a pair of Nike Air Mag BTTFs—a replica of the self-lacing shoes Marty McFly wears in Back to the Future II—then you probably want to lie down. That pair is now valued upwards of SGD34,300. Yes, that’s five figures.
Josh Luber concedes that it’s all a bit crazy. “People go nuts about products when there’s a mismatch between supply and demand, as there is with sneakers. That leads to collectors. And it leads to trading. And the fact is that sneakers just have relevance to a lot of people. Stamp collectors are just as fervent, but you don’t get to hear about them so much. Besides, with a pair of sneakers, I get to wear the same style that, say, Jay-Z wears. But I can’t buy his USD200,000 watch. Sneakers are [relatively] accessible. Sneakers have just gone from an underground culture to a mainstream phenomenon.”
For anyone whose preferred footwear is a simple pair of plain plimsolls, easy loafers or a solid pair of English brogues—made by hand by artisans—the widespread fascination with pumped- up plasticky sneakers can seem somewhat bewildering. But not to Luber. He has some 400 pairs—he’s not quite sure of the exact number—arranged on shelves around his attic at home.
His collection—which he reckons is small fry against that of the real obsessives—is growing at a steady three pairs a month. “Wherever I travel, I find myself in sneaker stores and the obsession comes back. I still buy way too many shoes,” he admits. “But, you know, I’m kind of like a kid in a candy store now.”
That’s because Luber—a 40-year-old family man, all reversed baseball cap and baggy sweatpants—is the founder of StockX. This is the one-time strategic consultant for IBM and serial entrepreneur’s latest venture, which just happens to be all about sneakers, with a growing sideline in watches, handbags, upscale streetwear and, most recently, collectible toys and street art prints.
As the name suggests, the Detroit-based StockX is akin to a traditional stock market, using real-time pricing data to provide a true value of its goods, allowing users of the site to buy or sell immediately at the lowest listed price or place a bid that individual sellers can accept, or place an ask that a buyer might accept later. Once a bid and an ask coincide, the deal is done automatically, with StockX taking a 9.5 percent commission.
Of course, that hard market data—price volatility, 52-week highs and lows—might just as well drive prices down as up. But, as the sneaker prices mentioned above suggest, have the right pair and, as with shares in a company the likes of Apple, the long-term projection is likely to be skywards.
Sneakers are one of those kinds of goods that are often awkward to come by—if you’re after something specific—but have high liquidity.
“I’ve been into sneakers all my life and did three start-ups before this latest one [including Campless, which became the go-to sneaker pricing guide using data gleaned from eBay]. In fact, I always tried to avoid doing anything with sneakers,” says Luber, an affable guy who talks fast and fluidly and only falters, as if in reverie, when he reminisces about sneakers of yore.
“I didn’t want to build a business that allowed me to play with sneakers all day. But it’s probably no coincidence that the most successful start-up has been the one that has allowed me to involve my passion. That said, I’m much more interested in start-ups and the excitement in starting those than sneakers.”
He’s not the only one to see potential in, as some late 21st-century anthropologist might ponder, our fascination with, of all unexpected things, sports shoes. Dan Gilbert, the billionaire founder of US company Quicken Loans, became switched on to the cultishness—let’s say it, the fetishistic nature—of this market by his sneaker-obsessed teenage son, and backed Luber’s idea, as did, if primarily for publicity reasons, the likes of Mark Wahlberg and Eminem.
Earlier this year, StockX opened its European hub in London and is planning one for Japan to cover Asia. It’s here where sneakers are collected, checked for quality and authenticity, and then shipped out to hungry customers. Each member of StockX’s authentication teams goes through a 90-day training programme.
This is where knowing your Nike Air Foamposite One Paranormals from your Dunk Pro Low SB Paris really counts. And, more than that, knowing when a certain tiny detail—a shoe being the wrong weight, or, thanks to the insight provided by some high-tech machinery, the sole unit being the wrong density—is a tell-tale sign of some trickery at play.
“If you’re handling 50 pairs of Jordan 1s a day then eventually it becomes intuitive that you’re handling a fake, even though fakes are getting really good,” says Luber. “But I think there’s massive value in this process. Transparency is key—it’s the real value in a bid-ask model—and so is trust in the authenticity of the product. You need to know you won’t be getting a fake pair of Nike Jordan Black Cement sneakers.”
After all, some sneakers are seriously big-ticket items.
“This is the way certain products should be sold,” argues Luber. “eBay is great for those long tail, unique items. But you have no liquidity if you just have one of something so that sort of product doesn’t work for StockX. And the Amazon model works for products of almost unlimited supply—toilet paper or whatever.
But for products in between, there’s nothing—[these are] products that should be sold on the basis of market supply and demand. Obviously we didn’t make this idea up. We just applied what more normally gets applied to the likes of, say, oil. But it works for any product that prompts the question ‘what is this really worth?’.”
With regard to sneakers, the answer to that can be given in hard and fast monetary terms as StockX’s ever-growing data pool suggests. But it can also be judged by the fact that this is a product that can drive people to sleep on the pavement to be near the front of a queue when a certain new style drops at a shop.
“Queuing outside a store is not worth my time now, but I do look with some nostalgia at a time when I could and would do that. I get what [sneakerheads] are feeling, that excitement,” says Luber. It’s a product for which there’s also a huge secondary market, with people buying pairs with the sole intent of selling them immediately at a sizable mark-up.
It’s a product that, in extreme cases, people have been beaten or even killed for.
“There was a time when people were rightly outraged by people killing each other for their sneakers—again, that’s really a consequence of supply and demand. [Likewise], regardless of whether you believe it’s a good or a bad thing to resell in this way, the fact is that it happens and the market for those goods exists and isn’t going away,” reckons Luber.
“It’s a question of making the best of the scenario, to make that sale easy. And I don’t think anyone who buys a pair of Yeezy sneakers [Kanye West’s line for Adidas, of late remarkably accounting for 20 percent of all sneaker sales on StockX] at retail does so without at least being conscious of the resale value. If you can buy something at USD200 and the resale value is USD800, who wouldn’t buy it, whether it was a pair of sneakers or a widget?”
Indeed, Luber has given an entertaining TED talk about how one might profit very comfortably from the buying and selling of sneakers—how it’s a legal and approachable investment opportunity. In it he cheekily charts how the value of the sneakers he’s wearing on stage have outperformed the Standard & Poor index and that of Apple’s share price. Demand is there. Luber claims that more than eight million people use StockX every day, amounting to USD2 million-plus in sales every day, some three-quarters of which is accounted for by sneakers.
“The return is probably greater with sneakers [than other products] in many cases, but the problem is that you can’t buy enough pairs of, say, Jordan Black Cements in order to build a real portfolio. I’m not recommending that anyone become a day trader in consumer goods,” laughs Luber, who says he is working with sports brands to create a kind of IPO on special sneaker launches.
He’s already arranging ways for people who plan to resell their sneaker purchase for it to be shipped direct from the brand’s store to StockX, rather than to the consumer and then to StockX. You can’t imagine ever doing that with a nice pair of English brogues.“Sure, crazy things happen in [the sneaker world]. I’ve been part of it for so long that I’m not shocked by the obsession with sneakers anymore,” say Luber.
“I wouldn’t say I was cynical about it either. But what I do find interesting is people who think it’s still a fair system. Most of the people queuing outside stores for a drop are queuing for other people. Really it’s all just a game, a financial game. And the fact is that the imbalance between supply and demand is so great with some shoes that the chances of getting a pair are, in effect, zero. So the idea of a shoe costing [the stated ticket price of] USD200 is a complete fallacy. I’m surprised by how people still don’t get that.”
Even the ticket price has long been the subject of raised eyebrows. As the Flight of the Concords quip in their satirical song ‘Think About It’: “We’re turning kids into slaves just to make cheaper sneakers / But what’s the real cost ’cos the sneakers don’t seem that much cheaper? / Why are we still paying so much for sneakers / When you got them made by little slave kids? / What are your overheads?”
Yet people will pay. It is, as Luber has it, what it is. Indeed, Luber is not concerned that the sneaker market might be enjoying some kind of prolonged ‘tulip fever’, one that means it’s set to suddenly peak and then crash, as might be expected of most other products that have at least one foot in the fashion world. And that’s because the entire market is skewed and manipulated.
The big brands that make these sneakers—especially Nike, which still commands the market for must-have sneakers, in part down to its progressive designs, in part down to gigantic licensing deals the likes of that with basketball superstar Michael Jordan—are biased actors in the middle of the whole shebang.
Nike, Luber argues, crashed the value of the market for its Jordans in 2006 through over-supply, but that was with one line and it would take a suicidal act to do the same with the entire inventory. Besides, the sneaker market just shifts to favouring those products that aren’t so available.
Any other unregulated market is subject to booms and busts. But, Luber notes, the sneaker brands—much like many luxury goods brands—are, to date, very careful to control supply to their advantage. Resale might not profit them directly and that’s a market the likes of Nike could kill off overnight simply by releasing more pairs of each style.
Rather it “props up an artificial commodities market, with a Facebook level-hyped IPO every weekend,” as Luber underscored in a TED talk he gave. He says that the global sneaker resale market is worth some USD4 billion to USD5 billion per annum and is set to grow by 20 percent annually. But that’s against a retail market worth USD90 billion. Rather, resale drives up cachet and fuels overall demand all the same.
Sneakers, one might argue, are a perfect product for this model. Their very cultishness now spans age brackets—starting as an urban youth phenomenon but expanding to encompass people with disposable income as said urban youth grows older, these customers being ready to pay more to avoid the hassles of purchasing through conventional channels. Sneakers are also standardised products, “so everyone everywhere can talk about them in the same way, whereas even, say, a model of car is just a little bit different from car to car, so it doesn’t fit the model”, Luber explains.
They’re relatively hard to make too, which limits supply to a handful of manufacturers. That’s why, Luber says, streetwear won’t ever be as big a secondary market as that for sneakers.
Plenty of factories can make a T-shirt. And then, sneakers are eminently Instagrammable. “That’s what really blew everything up because all sneakerheads want to do is to show other people their sneakers,” laughs Luber. And certainly StockX is here to assist.
“What I really want StockX to do is give greater accessibility to these products,” says Luber, “for people who wouldn’t have the inclination to wait outside a shop to buy at retail or to wade through eBay listings for months to get the pair of sneakers they want. People with a little bit of disposable income, who are into sneakers, can go into a Footlocker and see, say, 150 options. They can go on StockX and see thousands.
“After all, there are just so many aspects to sneakers to like,” enthuses Luber. “The sneaker is something we’re all familiar with. Everyone has worn a pair at some time. There’s the artistic side of sneaker design, which is only getting bigger now that the big fashion houses are getting more involved. There’s the trading, the hunting. My first obsession was collecting baseball cards, when I was seven or eight, and that’s another category we’ve looked at too. Then it was baseball caps. But then it was sneakers. And that’s what stuck. I just love them.”