Sneakers are the core of StockX’s business. When the site went live in 2016, billing itself as the first “stock market of things,” sneakers were the product it launched with, calling them “the perfect gateway product.” Recently they were also the item most responsible for helping the Detroit-based company notch a valuation of $3.8 billion.
But StockX’s ambitions have always been larger than footwear.
The site is an online marketplace where users can buy or sell high-demand items of all kinds, using the same bidding model and price transparency underlying the stock market. Lately, categories aside from sneakers have seen rapid growth. Over the past year, the product with the most sales by units and value on the site was the PlayStation 5 video game console, according to the company’s senior economist, Jesse Einhorn. Sales of other electronics products, including the Xbox Series X and graphics cards, have also grown rapidly, as have categories such as collectibles and trading cards.
Branching out beyond sneakers, as well as reaching more shoppers outside the US, are key to StockX’s continued expansion in the years ahead, according to CEO Scott Cutler. The company had a strong year in 2020, even with the pandemic, seeing total merchandise sold on the site rise to $1.8 billion for the year, versus about $1 billion the prior year. Already this year it raised $255 million in new financing, opened a new authentication center in Australia—its 11th globally—and is rumored to be considering an IPO.
Quartz spoke to CEO Scott Cutler, who joined the company in 2019 after holding leadership positions at eBay, Stubhub, and the New York Stock Exchange, about StockX’s plans. The interview has been edited and condensed.
How big is the opportunity beyond sneakers?
Oh, there’s a significant opportunity for categories of current culture. In 2016 we had 6,000 product listings from 17 brands. Today we have 125,000 different items in the catalog from over 500 brands. In some of our new categories, as an example, electronics, which we introduced in Q4, we have over 300 items in that catalog from everything from Microsoft to Sony to Apple to [chip maker] Nvidia. The PlayStation [5 and Xbox Series X] gaming consoles were two of our top products in 2020. Collectibles [is] another exciting category for us. We launched trading cards in 2019 as part of our collectibles category and then sales surged by 4,000% in 2020 in that category. What we are focused on are those categories that are relevant for that next-generation consumer.
What does it say that the top two products in terms of total value of sales on your site last year were gaming consoles when StockX is best known as a sneaker resale platform?
It’s awesome. [The PS5] was released at something like 30 different price points around the world. We’re providing on our platform essentially a centralized market where you’re always going to purchase for the lowest price at which any seller is willing to sell it for. Some brands think that the world is truly this distributed world that no one’s going to know what else is priced. And here we’re providing a platform of equal access to anyone around the world. This is a paradigm that is brand new. This is a paradigm that I think brands are starting to understand. Certainly our customer sees economic opportunity as well as access that most brands and retailers can’t even fathom because they can’t deliver this type of experience.
StockX deals a lot in products becoming alternative asset classes. One of the big things people are talking about this space is NFTs. Does StockX have any plans there?
So we think about it in a number of different ways. One of those experiences could be for a buyer that might choose to purchase a product but never possess it, in which case we could hold that in inventory. And that would be very much more of a trading-like experience for that buyer. On the other hand, sellers could actually place items into our warehouse and we could provide for instantaneous shipping of that item. From the very beginning we conceived that either fractionals or a digital representation of the underlying physical asset is the way that many people like to trade. Going back to my days at the New York Stock Exchange, if you looked at the actual consumption of oil, the actual trading value of oil—oil that never goes into the tank or is never refined—is almost a hundred times greater than what’s consumed. So certainly as commodities and these products trade more like financial instruments, it’s a huge opportunity for consumers and investors.
Are we going to see sneaker futures at some point?
Yes, I mean, we very well could. Indexes, futures, derivatives, digital representation of that sneaker or a fractional share of that sneaker. That trend of the digitization of physical products that’s being unlocked with these blockchain-based technologies is really exciting.
StockX is growing fast outside the US. How are you expanding internationally?
We service customers in over 200 countries and territories around the world, so global expansion is a key focus for us. And it’s not just about meeting the high demands of these consumers around the world, but it’s also providing a consistent user experience to this global community, as we do in our more mature markets. That’s a function of opening up an authentication center in that region, localizing our experience, localizing the payment method. That’s driving significant growth in our international business. Trades internationally in the last year grew 130%. Our international buyers grew by 135% and international sellers grew by 120%.
One of the things StockX says differentiates its business is that it authenticates every product. Is that a limiting factor on StockX’s growth?
Well, the authentication process stands in the middle of every transaction for us. It results in an end buyer’s high degree of trust in us as a brand to authenticate the products that are sold on our market. In order to handle the volumes that we experienced in the business, particularly internationally, last year we expanded our authentication footprint by 66%. We opened up authentication centers in Hong Kong, in Tokyo, in Toronto, Canada, and Portland, Oregon. So we’re not constrained from a supply perspective. We’re not constrained from a demand perspective. But we certainly have to build up operations to be able to deliver that consistent experience to our customers, no matter where they are around the world.
(Editor’s note: StockX has an office in Tokyo, not an authentication center.)
One of the things that’s happened as the sneaker resale market gets bigger and more people pour in is the frenzy around releases grows. Customers get angry because they can’t get the shoes they want, while resellers using bots are buying up a lot of the stock to flip on sites including StockX. Is this something StockX is thinking about?
We don’t make decisions on scarcity of product that’s being created. Most brands today are leveraging scarcity as a way to drive brand value. When that product is released in limited quantity and with unlimited demand, it’s certainly going to put pressure on how quickly that product gets sold out and potentially what it trades for in the resale market. That’s a dynamic that we’re certainly aware of. But I think for us, the value proposition for our customers is access to that product, access at a transparent price, access at its market price, and to be able to access product that, quite frankly, you’re most likely not going to get from the brand or any of its retail distribution channels.
I know people have speculated about this for years, but is there a sneaker bubble and will it burst?
This is a category that’s existed powered by an enthusiast community going back to 1985 [the year Nike released the Air Jordan 1]. What I think you’ve seen happen is a rapid expansion of who considers themselves an enthusiast. As you think about what that means, that is a huge demographic of customers that are new to the category. You’ve seen appreciation in the price of many of the more sought-after limited releases. Those prices have outperformed the market, but they haven’t gone into bubble territory that means they’re unattainable for consumers. What’s exciting to us is to see this idea that there’s economic opportunity in these products as assets. That opens up a whole new set of consumers now, a new set of enthusiasts, a new generation that’s powered by these passion communities.