CEO Scott Cutler keen to expand StockX by deploying IPO-for-products concept
today Jan 27, 2020
Last autumn, Adidas launched three new designer-created versions of its Campus 80 sneakers, three products featured exclusively on specialist US sneaker and streetwear e-tailer StockX. It was the first time that the German brand, via its Adidas MakerLab project, utilised the bidding system introduced by the US pureplay. StockX specialises in re-selling new, vintage or newly-launched products, and was created just over three years ago by Josh Luber, adopting a business model inspired by the stock exchange.
StockX has a finger on the pulse of the sneaker and streetwear market, and in 2019 it was in a position to hail the Travis Scott Jordan 1 High as the most coveted shoes, and to observe that upmarket streetwear labels like Cactus Plant, Flea Market and FTP are growing, and women’s sneakers are booming. Above all, the site claimed a sales volume of over $1 billion in 2019. In parallel with a standard e-tail model, StockX has pioneered another concept, that of an 'IPO for products', a marketplace where products can be traded as if they were on the stock market. An innovative idea at a time when new purchasing and ownership formulas are transforming consumption behaviour.
“We think it’s a disruptive retailing approach,” said StockX’s CEO Scott Cutler, talking to FashionNetwork.com in Paris. “We were extremely honoured that Adidas chose such an innovative way to launch products created by three unknown designers. We received thousands of bids from all over the world for products which people had never set eyes on. If you analyse the final selling price, it is higher than the price Adidas would have chosen if it launched the new products via certain retailers. Adidas would also have had to predetermine the markets and stores to which the 333 pairs were allocated. With the IPO system, we made it possible [for the products] to be available globally. And we see there’s a second lease of life for these products, as collectors seek them on [StockX] and are willing to pay even more for them,” added Cutler.
It is a new model for both consumers and brands, combined with StockX's other obvious assets, such as connecting with a very broad customer base, reducing the constraints imposed by logistics and lessening consumer frustration for limited-edition launches only in the key cities in Europe, the USA and Asia. But above all, Cutler is keen to try to attract the interest of brands using another crucial concept, data sharing.
“It’s a new model, one that forces brands to re-think their distribution approach and their priorities,” he said, adding that “for example, more than 10,000 people bid for the Adidas collaboration. [Adidas] was able to see and find out exactly who these consumers were, who were ready to pay several hundreds or even thousands of dollars for a product. Actually, the number of potential customers for whom we have details might be 10 times greater than the number of customers a brand could reach by selling its products in bricks-and-mortar stores.”
In the case of the Adidas Campus 80, the bidding was frenetic. StockX only sells new products verified by its authentication centres, and observed that nearly one quarter of the products on the site are sold below their initial retail price. But, with the IPO concept, what happens when the selling price is below the price intended by the manufacturer?
“Brands launch new products every week. We must eventually be able to feature IPOs for all the new products arriving on the market. This is our objective,” said Cutler. “Currently, brands do this via their store networks, their retailers and distributors. They decide to produce shoes and sell them. Sometimes, new products are immediately sold out, while in most cases their price continues to fall to the level at which consumers are prepared to buy. Retailers know that prices drop over time. Using our formula, it's possible to control the price directly, rather than hypothesise how much consumers are prepared to pay. Prices don’t change every two weeks or so, they change every second. It’s the kind of dynamic that only stock markets are able to generate. This is why our business model is different from traditional retail,” added Cutler.
This is something brands have fully understood. Both Adidas and Nike, pursuing a global strategy of establishing a direct relationship with consumers, have introduced their own apps for consumers to sign up on, ahead of the drops of exclusive new models. On the more traditional distribution front, last year Nike announced it wants to limit the number of its international retail partners to about 40. And it recently stopped collaborating with Amazon.
“Nike leaving Amazon doesn't surprise me,” said Cutler. “I believe that, broadly speaking, brands are trying to build up direct links with consumers. It is a challenge for brands, they have to think differently. The majority of them have a business model based on multibrand retailers and wholesalers. In order to have a direct relationship with consumers, they now need to be very strong on the e-tail front and have stores the world over,” he added.
Besides adopting the IPO concept, StockX is keen to present itself as a partner for brands, helping them in their efforts to consolidate the relationship with consumers. With this in mind, the US-born company has been investing in Europe and Asia. In recent months, it launched localised websites for Italy, Germany and France, to respond to each of these markets’ specific tastes. In France for example, the Nike Air Max 1, the Adidas Yeezy Boost 350 V2 and Wave Runner 700 rank among the best-selling sneakers. To respond to local needs, a new authentication centre has been set up in Eindhoven, the Netherlands.
“We currently have six authentication centres, two of them in Europe. Each centre checks thousands of products per day, always using the same process,” said Cutler, adding that “authenticity is a key confidence generator, and opinions can differ in the case of pre-used products. This is why we chose to focus on new, as opposed to used products. I believe we must inhibit all the factors liable to worsen the experience for both buyers and sellers. We already have a $1 billion-plus business. On the website, you can find the pricing history of a product going back three years. And you can see at what price buyers and sellers are prepared to make their move,” he added.
With a stock exchange-inspired model, a booming revenue and a boss formerly with Ebay and the NYSE, StockX seems to be a natural candidate for a stock market flotation. For the time being however, management wants to consolidate the business model and expand StockX’s international horizons. The charm offensive has started, and StockX will have to convince both consumers and brands of its potential.
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