Detroit-based online sneaker market’s stock soaring

Correction: This story has updated the number of employees and correction the location of StockX's office.

It’s StockX Day in Detroit, and 150 sneakerheads from all over the world have descended upon the Motor City to check out the inner workings of a local company that is reshaping the online sneaker market.

These sneaker-lovers are wearing all manner of spiffy, spotless kicks, from rare Air Jordan and Yeezy models to Sean Wotherspoon Air Max 97s (which run upward of $600 a pair) to the “Off-White” Jordan 1s (yours for around $2,000). Amid the flashy footwear on display inside the fifth-floor auditorium in downtown’s Madison Building, there’s one notable guy not wearing sneakers, and that’s Dan Gilbert.

Gilbert, who wears a pair of sensible leather boots, said he doesn’t want to look like he’s trying too hard to be cool. He should probably start wearing LeBrons, the Cleveland Cavaliers owner jokes, but it doesn’t work if it’s not authentic.

Authenticity is the key to the success of StockX. The website, which counts Eminem and Mark Wahlberg as investors, is currently doing more than $2 million in sales a day, a number which equates to more than $700 million a year. That number is soon expected to top $1 billion in yearly sales.

Not bad for a website that recently celebrated its second birthday.

“The growth of this company has been phenomenal,” said Josh Luber, CEO and co-founder, in StockX’s 10th-floor office inside One Campus Martius. Luber, 40, is wearing a hoodie, a backward Detroit Tigers hat and Air Jordan 1s. Not the typical uniform for a CEO.

But StockX is not a typical company, and it has the numbers to back it. The company boasts around 300 employees, up about 30 from two months ago. The company currently has 50 job openings and is rapidly outgrowing its physical space.

A tour through the lively StockX warehouse, which processes 7,000 to 10,000 orders a day, shows there’s not much room to expand without spilling onto the street. “We should be out of here already,” Luber said.

To understand the phenomenon of StockX, one must first understand the site. On a base level, it connects buyers and sellers of goods — sneakers, streetwear, handbags and watches are the items StockX currently sells — much like eBay.

Unlike eBay, where users ship items directly to one another, StockX acts as a literal middleman in the transaction. Sellers ship to one of three warehouses — two in Detroit, one in Tempe, Arizona — and experts verify the item with a green seal of authenticity before moving it on to buyers.

That stamp of approval is especially important in the sneaker and streetwear markets, where counterfeits thrive. So when you buy from StockX, you know you’re getting the real deal.

Because StockX has become the de facto home for online sneaker sales, it is instrumental in determining the market value for a pair of kicks. Air Jordans typically carry a retail price tag of $160-$220, but supply and demand dictate a shoe’s true value, which is why some pairs sell for more than 10 times their retail price. And those prices rise and fall, just like a stock market. Hence, StockX.

“Everything is based on the way the stock market connects buyers and sellers. That’s the key to it,” Luber said. “That generally doesn’t exist in any other consumer marketplace, the leveraging of the stock market’s mechanics. There’s a lot of nuance and a lot of details in that. But at the highest level, it’s all around the data. It is built around having a market price for an item.”

On the website www.stockx.com, buyers place bids and sellers place asks. When a bid and an ask meet, a transaction is made automatically.

For each sneaker and streetwear transaction, StockX takes an 9.5 percent cut; for handbags and watches, 14.5 percent. Sneakers currently make up 70 percent of the business, streetwear is 25 percent, with handbags and watches making up the final 5 percent.

Less than 2 percent of the merchandise that comes through StockX’s doors is fake.

“That’s because people know we authenticate,” said Luber, who lives in Birmingham with his wife and two children. “If you have a pair of shoes that are fakes and you want to scam someone, go sell them on eBay where you know people aren’t checking.”

Because StockX bills itself as a “stock market for things,” the deliberately open-ended business model has room to expand into other markets. Sneakers and streetwear today, but the variable pricing formula can be applied to almost anything, and Luber and Gilbert see it expanding in the near future.

“It doesn’t work for a one-of-a-kind item. A unique work of art, a house, there’s no market for one-of-one,” Luber said. “And it doesn’t work for anything that has infinite supply: a cup, toilet paper, plastic water bottles, anything that you can make infinite of. But almost any consumer good, anything that we’re wearing, cars, wine, toys, there’s a finite supply of that. And if you have that, you can apply those mechanics to the stock market, and that’s the big idea of what we’re working on.”

He pauses. “Amazon’s not just a book company anymore, right?”

Sneakerhead with a dream

Luber was raised in Philadelphia, the son of a tax attorney and a dental hygienist. He had an entrepreneurial mindset early on, selling bubble gum and candy to his classmates at a 500 percent markup, but his makeshift business operation was shut down when administrators at his middle school confiscated 132 packs of Bubbalicious from his locker.

Luber grew up playing basketball in the era of Michael Jordan and longed to wear His Airness’ sneakers. When he finally saved up enough money, a seventh-grade Luber bought the white and purple “grape” Air Jordan Vs, and his love of collecting sneakers was born.

After graduating from Emory University, Luber took a job at IBM in New York, but his love of sneakers led to him collecting and studying data from sales of sneakers on eBay on the side. With the information he gathered he started Campless, a website that reported the market-value prices for new and used kicks, which acted as a sort of Kelley Blue Book for sneakers.

Luber — who owns around 350 or 400 pairs of sneakers, “which is very reasonable in the sneaker world” — said his goal was to take the data he had compiled and use it to create a sort of stock market, of sorts, for sneakers. Through Campless, he took meetings with every major player in the sneaker industry — Nike, Adidas, Foot Locker, Complex Media — but nothing was a fit. Then one day he got a call from Gilbert’s team.

“I had this one piece of paper, a roadmap of what I was looking to do, which I took to every meeting. When I shared that with Dan and his team, they looked at me with pure shock,” Luber said. “One of them takes out a piece of paper, and it’s the same thing. So the crazy backstory of this company is there was maybe one other guy in the world trying to do the exact same thing as me at the exact same time, and it happens to be one of the most successful business people in the world.”

StockX was born in February 2016. In its early days, the site employed two authenticators who struggled to get 50 pairs of shoes a day out the door. Now the warehouse is constantly buzzing, with an assembly line process that takes about 1 minute to authenticate, box, and ship a pair of sneakers out the door.

Saturdays are a big day for sneaker sales, and thus, they’re big for StockX. New pairs of Jordans, Yeezys and other top sneakers are typically released through online sales at 10 a.m., and a number of those pairs end up on StockX. The most popular shoe in the site’s history is the recently released Air Jordan 1 “Bred Toe,” which Luber said has accounted for “tens of thousands” of sales.

The big event

StockX Day, which was held April 20, saw fans and users from the United States and as far away as China, Ecuador and the United Kingdom come to Detroit for a day of education and sneaker ogling. The first StockX Day was in October.

More than 3,000 people applied to be one of the 150 StockXers chosen to participate in StockX Day. Luber and Gilbert spoke to the chosen faithful, sharing with them the history of the site and where it hopes to go in the future.

Golan Adony of Fort Lauderdale, Florida, who has sold more than $40,000 worth of merchandise on StockX since January, said he left StockX Day feeling “inspired.”

“They have really helped me grow my business,” Adony said. “The transactions are clean and seamless. I don’t have to deal with the buyer myself; they take care of everything.”

Jack Turner, an online influencer who traveled from New York City to StockX Day, said StockX has really made its mark on the sneaker market in the last six months.

Mustafa Hamed of Fayetteville, North Carolina, said the first pair of shoes he bought on StockX turned out to be fakes, a fact caught during the authentication process. Hamed said customer service contacted him, told him about the error and sent him a replacement pair within three days.

“That’s when I became a StockX lover,” said Hamed, who has bought around 60 pairs of sneakers on the site and sold around 150. “Every time I emailed StockX, they emailed me back within 20 minutes. Who does that?”

During StockX Day, the power users were given a tour of the warehouse, the company’s offices at One Campus Martius, (work desks have spilled onto the Cavaliers’ replica basketball court), and the spot where StockX tapes its internet talk show, Stock X TV. The show is hosted by Luber and is heading into its second season.

Attendees of StockX Day were shown a collector’s set of LeBron James sneakers that Nike debuted through the company, the first time the retailer had forgone the retail market and went right to the secondary market. They were also shown a pair of Eminem-branded Air Jordans that the site worked with Eminem on during a promotion in late 2017. The Wu-Tang Clan also participated in a charity promotion with StockX.

After lunch, there was a long Q&A session with Luber, followed by drinks on the roof of the Madison Building. It was a sunny spring day, and people walked away with a rare inside look at one of Detroit’s burgeoning businesses.

“Right now, it’s a secondary market,” Luber said of the site. “But the idea is — and this comes back to the model of how the stock market works — is you can begin to blur the line of what is retail and what is resale.”

As StockX grows, Luber said he sees opportunities to work with brands to IPO consumer goods and release those products direct to the market. He sees the site as a chance to shake up the retail world.

“There’s no better time in the history of the world to be disrupting and improving retail,” he said.

agraham@detroitnews.com

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Twitter: @grahamorama