As the U.S. shuts down, StockX’s business is booming, says its CEO
StockX, the high-flying resale marketplace that connects buyers and sellers of sneakers, streetwear, handbags and other collectible items, has seen its fortune rise along with the $6 billion global sneaker resale market, which is part of the broader $100 billion sneaker category. In fact, the company, which was assigned a billion-dollar-plus valuation last year, says $1 billion worth of merchandise was sold through its platform last year.
The big question is whether StockX can maintain its momentum. Not only are other rivals biting at the heels of the five-year-old, Detroit-based outfit, which has raised roughly $160 million from investors, but some believe the streetwear “bubble” is on the verge of bursting. Add to the mix a pandemic that’s putting millions of people out of work (and in some cases jeopardizing the health of those still showing up), and you might assume that answer is no.
Yet in an online event earlier this week hosted by this editor and conducted by Erin Griffith of the New York Times, StockX CEO Scott Cutler insisted that the exact opposite is true. By his telling, business is booming.
Perhaps unsurprisingly, he even argued that StockX looks more durable than the traditional public market right now, and he’s well-acquainted with the latter, having spent nine years as an executive with the New York Stock Exchange earlier in his career.
Some highlights from their chat follow:
Griffith kicked off the interview by asking who is driving the marketplace and whether it might be a small number of power users.
“Seventy-five percent of our customers are under the age of 35. And that customer is a now a wide demographic, I would say two years ago, it was defined in sneakers as a “sneakerhead,” meaning somebody that collected sneakers and bought and sell sneakers specifically. But today, that demographic, if you looked at millennials and Gen Z, as an example, 40% of them would define themselves as sneakerheads, and so that’s male and female, and this demographic is around the world. We have customers in over 170 countries and territories.”
Cutler went on to say that StockX is very well-positioned because, unlike with a lot of goods that people might find through Amazon or a Google search and thus compete on some level with them, StockX is itself the “first” shopping destination for most of its customers.
“Even the brands can’t provide access to [what’s for sale at StockX]. So that consumer comes to us as a first destination; they don’t go to those brands to shop to shop . . . That means that we have an incredible opportunity then to deliver exactly what that customer wants at the beginning of the journey, which is very rare in e-commerce, to be that first point of destination.”
Naturally, Griffith asked how the virus has impacted StockX’s bottom line. Cutler said it’s been “great for our business and growth.”
“The recent events over the last couple of months has been a benefit to our business. We’ve had more and more traffic and buyers coming to our site because in some respects, traditional retail in some geographies is not available. We thought we’ve always been a marketplace of scarcity, but now you can’t actually go into a real retail location, so you’re coming to StockX. So on the one hand, it’s been great for our for our business and for our growth.”
Cutler also acknowledged that to accommodate that growth, StockX needs people in the warehouses where sellers send goods so that StockX can authenticate them before shipping out to buyers. He said that StockX has “people in those centers that are coming to work right now, even in places like New Jersey that are certainly impacted.” He called it a “balancing” act of trying to ensure its team members feel “safe” while continuing to operate its business at scale around the world.
As for how, exactly, StockX is ensuring these employees are safe, he said that StockX is “operating under all of the local rules and regulations that we have in all the different places where we operate.” As an added sweetener, he said the company recently gave a “spot bonus” and increased the salaries of employees at its authentication centers by 25%.
And what happens if the warehouses are ordered to shut down or employees begin showing up with the virus? Griffith asked what StockX’s backup plan entailed.
Here, Cutler noted the company’s multiple authentication centers, saying that “in the event that we have to reroute traffic from one authentication center to the other, we will do that. We’ve been operating that way.” (He also said that business continuity planning is currently a “stand-up every single day [wherein] we go through site safety and security and any incidents that come up and we’re making decisions as a team every day on some of that routing logic.”)
Griffith wondered what kinds of conversations StockX’s venture investors are having with the company, given everyone’s focus right now on belt-tightening. ((StockX is backed by DST Global, General Atlantic, GGV Capital Battery Ventures, and GV, among others.)
Cutler acknowledged that the “future, in some respects, is uncertain for many of us, in that you don’t know how long this is going to last.” He said that as the company looks to the future, it’s trying to factor in “different scenarios of macro shifts in demand” but that as it looks at “macro shifts in the supply chains” it has reason for optimism. He pointed to China, for example, where many supply chain factories went down this winter, yet most are back up to to 80% or 90% of their previous capacity.
Asked if StockX is recession-proof should the downturn last (Griffith noted that some of the pricier sneakers on the platform are selling for thousands of dollars), Cutler suggested that he hopes so for the sake of the businesses that are run off its platform.
Said Cutler, “For a lot of our sellers, you have to appreciate that our they depend on StockX for their livelihood. They actually may be running a very sophisticated business that is selling sometimes thousands of pairs of sneakers every single day to [maybe] a student who’s using StockX to fund their education.”
Cutler also compared StockX to the public equities markets, insisting that they aren’t so different and that, to his mind, StockX might even be the safer bet right now.
“We actually have buyers who see this time as a market opportunity and see the price of a rare Jordan 1 [shoe] that’s maybe coming down, and they say, ‘Hey, this is short lived,’ much like somebody may say, ‘Hey, the market is off a little.’
“They’re putting their money in sneakers,” Cutler continued, adding: “My portfolio right now in sneakers is still up on the year. That’s more than I can say about the S&P.”