StockX: How It Became the Stock Market for Sneakers & Collectibles

From Passion to Platform: The Genesis of StockX

The familiar saying suggests that finding work you enjoy eliminates the feeling of labor. However, this sentiment predates the rise of content creators, curated social media presences, and the modern resale market. StockX, now a multi-billion dollar company significantly impacting sneaker culture, originated from the decision to convert a personal enthusiasm into a viable business strategy.

A Data-Driven Insight

Initially, founder Josh Luber deliberately maintained a distinction between his professional life and his passion for sneakers. He progressively invested in his hobby, but noticed a critical element absent in the sneaker world – comprehensive data. His experience in corporate roles highlighted this gap.

As he analyzed and delved deeper into the available figures, a new perspective emerged. Following a basketball game and a crucial check, the concept for StockX took shape.

Riding the Wave of Sneaker Culture

The launch timing proved exceptionally opportune. Over the last ten years, sneakers have transitioned from a growing subculture to a widespread phenomenon, and the need for verified authentic products has increased dramatically.

Few competitors successfully implemented the essential components needed to facilitate a functioning marketplace specifically for this product category.

From Excel to Unicorn

What started as a simple price tracking chart, resembling a Microsoft Excel spreadsheet more than a tech startup, has evolved into a globally recognized and fascinating marketplace.

StockX’s success lies in its ability to provide a transparent and reliable platform for buying and selling sneakers and other collectible items.

Determining Sneaker Value

Prior to establishing StockX, Josh Luber worked as a consultant with IBM, intentionally keeping his involvement with sneakers as a personal interest. This arrangement persisted until he identified the potential for systematically organizing information related to his passion.

Functional markets necessitate price transparency, and a decade ago, ascertaining the value of a sneaker on the resale market presented a challenge. The original retail price was known, however, sought-after sneakers frequently appreciated in value due to demand, which was subject to considerable shifts.

Luber, alongside a team of 17 volunteers, addressed this by collecting data from over 13 million eBay transactions. This effort resulted in the creation of Campless in 2012, a continuously updated guide to sneaker resale pricing.

“Despite its imperfections and the need for considerable manual input, it provided the most reliable benchmark available at the time,” explains Greg Schwartz, COO and co-founder of StockX. The Campless team gathered pricing information from completed eBay auctions and analyzed resulting trends, mirroring the approach of individual sellers.

However, by expanding the data volume, they achieved significantly more precise market-clearing prices for both purchasers and vendors than had previously been accessible.

Comparable to Kelley Blue Book’s role in the automotive sector – providing estimated car values based on model and year – Campless delivered detailed data on the secondary sneaker market. This ultimately became a foundational and exclusive feature of StockX.

The Escalating Sneaker Craze and the Rise of Secondary Markets

Initially, when Campless was established by Luber and his colleagues, obtaining limited-edition sneakers presented significant challenges for buyers. Options were limited to directly purchasing from retailers through lengthy queues and overnight waits, navigating the uncertainties of eBay to locate trustworthy sellers offering competitive prices, or relying on exclusive connections for access to coveted releases. Each of these avenues, however, carried inherent risks.

The name “Campless” and its accompanying slogan, “know more, camp less,” directly addressed the practice of consumers camping outdoors – sometimes for multiple days – in pursuit of the latest, highly sought-after sneaker releases. Flight Club, founded in New York City in 2005, initially focused on consignment, primarily dealing with rare, vintage footwear rather than new models. However, for individual resellers, platforms like eBay and Craigslist were the only means of facilitating direct transactions, lacking the necessary security measures for authentication or price stabilization.

This fragmented marketplace functioned adequately when the sneaker market remained a relatively small subculture. However, its popularity had been consistently growing since the 1980s, and experienced a substantial surge in the 2010s.

Luber highlighted the significance of this period in a 2014 interview with eBay, citing the release of Nike’s “Galaxy” Foamposite during the February 2012 NBA All-Star Weekend as a pivotal moment. This release was part of a celestial-themed collection worn by prominent basketball players including LeBron James, Penny Hardaway, Amar’e Stoudemire, and Kevin Durant.

The release was described by the respected sneaker blog Sole Collector as “one of the most chaotic sneaker releases of the last decade,” triggering “riots nationwide as sneakerheads desperately attempted to acquire pairs.”

Mark Sabino, a 24-year-old sneaker enthusiast, recalled that this was “the first time I remembered people other than my group of friends that loved shoes talking about a ‘drop.’”

Andy Oliver, E-commerce Director at Kith, a sneaker and streetwear brand, also views this as a turning point. He stated, “It was a combination of a popular model – Foams were incredibly popular – with a unique graphic design. Coupled with its association with All-Star Weekend, a major event in 2012, the limited availability fueled an unprecedented level of demand.”

Brendan Dunne, co-host of Complex Media’s sneaker show Full Size Run, noted that the release established a new standard for hype and disorder. “The enduring image is that of helicopters hovering over the mall in Orlando during the release.”

A community that had existed since the 1980s suddenly gained mainstream attention. The growing popularity of Instagram further intensified the situation, allowing enthusiasts to showcase their collections to a global audience, reaching potentially millions of followers instead of just their immediate social circles. Successfully obtaining a release during All-Star Weekend signified not only personal style, but global recognition, placing immense pressure on a market unprepared for the escalating demand.

While sneakers remained footwear, they were rapidly evolving into a different asset type. Transactions involving rare and vintage sneakers were gradually superseded by sales of new, unworn releases – often referred to as “deadstock.” Russ Bengtson, a sneaker journalist, explained, “Instead of focusing on 10-year-old pairs, people began selling newly purchased items. Nike SBs, Jordan retros, and Yeezys were key drivers of this trend.” He added that the potential to resell a pair for a 1,000% profit within a week transformed “sneakers into a commodity, attracting a larger pool of potential buyers.”

Campless’ data analysis and insights, published on their blog, aided this influx of collectors, shoppers, and potential resellers in making informed decisions within the unregulated sneaker market. It also provided a clearer understanding of the financial opportunities available through sneaker reselling.

Unfortunately, as sneaker values increased and brands released more exclusive and limited-edition designs, incidents of sneaker-related violence also rose. Instances of theft at knifepoint, orchestrated robberies targeting buyers or sellers meeting for private transactions, and even cases resulting in death or imprisonment became increasingly common. It became evident that the existing infrastructure – or lack thereof – was failing to meet the needs of sneaker consumers.

The Origins of StockX: From Cavaliers Owner to a Novel Marketplace

Away from the typical sneaker campouts and informal resale networks, Dan Gilbert, owner of the Cleveland Cavaliers and co-founder of Quicken Loans, initiated discussions with Greg Schwartz, now StockX’s Chief Operating Officer, regarding a potential new business venture.

Schwartz remembers a Friday morning in March 2015 when he and Gilbert explored the possibilities of a collaborative project. Gilbert, already an investor in a tech firm managed by Schwartz, was intrigued by the concept of applying the stock market model to commerce.

“We began analyzing the advantages of this model compared to existing platforms for consumer goods and other marketplaces,” Schwartz explained. “The discussion centered on elements like trust, transparency, and authenticity – principles often taken for granted when trading stocks on a traditional exchange.” Gilbert, through his involvement with his children and an NBA franchise, recognized the passionate engagement within the sneaker community and believed a stock market approach could resonate strongly.

The pair promptly began detailed planning the following Monday. Their focus extended to envisioning the user experience of a stock market-style platform, alongside thorough research into the sneaker industry, specifically the secondary market, which was already estimated at approximately $1 billion in value. This research consistently pointed towards Josh Luber and Victor Campless.

“Josh was uniquely employing a data-driven methodology within the sneaker world,” Schwartz noted. The extensive data compiled by Campless over years proved invaluable for StockX’s initial presentations and branding concepts. Leveraging Gilbert’s professional connections, they located an acquaintance of Luber’s to facilitate an introduction.

“It’s unlikely Josh initially placed significant importance on the contact,” Schwartz stated. “Many individuals had approached him with various sneaker marketplace ideas, but we extended an invitation to Josh to attend a Cavaliers game.”

The conversation commenced during halftime of an Easter weekend game in Cleveland, revealing substantial common ground. This led to Luber extending his visit to include a trip to Detroit. The shared objective was to explore the possibility of Gilbert acquiring Campless and collaboratively establishing StockX.

Within a month of this meeting, Gilbert made an undisclosed investment in Campless. Luber subsequently relocated from Philadelphia, leaving his position at IBM in May. StockX officially launched in February 2016, with its headquarters located in Gilbert’s One Campus Martius building in downtown Detroit. Josh Luber, Greg Schwartz, Dan Gilbert, and Chris Kaufman, currently the company’s Chief Design Officer, are recognized as the co-founders.

Expansion and a Compromised Trust

Josh Luber served as CEO from the company’s inception until June 2019. This was when StockX secured $110 million in Series C funding, achieving a valuation of $1 billion and earning “unicorn” status. Throughout his leadership, the company completed three funding rounds, as documented by Crunchbase (excluding the aforementioned Series C).

In 2017, the company broadened its product offerings beyond solely sneakers, incorporating watches, streetwear, and handbags into its marketplace.

However, the company soon encountered a significant setback. As initially reported by TechCrunch’s security editor, Zack Whittaker, StockX experienced a data breach in 2018. The company initially minimized the incident.

StockX attributed the need for password updates to routine “system updates,” but in reality, a security compromise had occurred. The personal data of 6.8 million users was exposed. This compromised information included names, email addresses, passwords encrypted using the MD5 algorithm with salting, shoe sizes, preferred trading currencies, and details about users’ devices and software.

This breach, coupled with the company’s subsequent lack of transparency, significantly damaged its reputation, particularly within the sneaker community, given its emphasis on building trust.

Despite this challenge, StockX had established itself as a leading platform in the sneaker resale market. Growth continued, with international expansion occurring in 2019.

This expansion included the establishment of a new authentication center in the Netherlands and a corporate office in Japan. The platform was also localized with French, German, and Italian translations, and support for additional currencies – the British pound, the Euro, the Australian dollar, and the Canadian dollar – was added.

Upon Luber’s transition from daily operations in June 2019, Scott Cutler, previously with NYSE and Stubhub, assumed the role of CEO.

Just over a year later, in December 2020, StockX obtained an additional $275 million in Series E funding, marking its fifth funding round to date.

“My primary focus since joining has been the international expansion of the company, which we have pursued aggressively,” Cutler stated. He also emphasized efforts to diversify and expand the product range available on the platform.

“When I arrived, expansion into categories beyond sneakers was just beginning. Now, we have established categories for collectibles, a broad range of apparel, and electronics.”

The company’s workforce has grown substantially, now encompassing nearly 1,000 employees globally. These employees are distributed across the Detroit headquarters, nine authentication centers, and a combined drop-off and authentication facility in New York City’s SoHo district.

Shoe Sales Demonstrate Continued Growth Amidst Global Stay-at-Home Trends

Despite the economic uncertainties brought about by the COVID-19 pandemic worldwide, StockX experienced continued growth as individuals adapted to new routines. Cutler notes the company’s performance during a recession was previously unknown. Prior to last year, the market had largely been characterized by growth.

His extensive experience – eight years as executive vice president at NYSE, including navigating the 2008 financial crisis, and nearly three years as president of StubHub, owned by eBay – proved invaluable during the challenges of the past year. In April of last year, the company implemented staff reductions, impacting approximately 12% of its workforce, as part of a strategy to achieve profitability.

Cutler acknowledges that the pandemic’s restrictions, such as limited access to physical retail locations, accelerated the shift towards e-commerce. He states that pre-pandemic trends regarding access to scarce products became even more pronounced during the pandemic.

The core concept of directly connecting buyers and sellers for highly sought-after sneakers with limited availability has proven adaptable to other items within the “hype” market. As StockX concluded its fifth year of operation in February, its newest category, electronics, saw the highest spending. Jesse Einhorn, the company’s senior economist, reports that the PlayStation 5 and Xbox Series consoles were the top-selling products in terms of total revenue.

Users can also engage in the buying and selling of authenticated trading cards, sneakers, handbags, timepieces, clothing, and other collectible items. Consequently, Cutler positions StockX as a provider of market and pricing data for consumers interested in contemporary culture.

A personal passion can potentially evolve into an entrepreneurial venture – at a cost. However, when investing in a premium product, verification of authenticity is paramount. This necessitates robust authentication processes and a continuous effort to outpace fraudulent activities, which is central to StockX’s success and will be further explored.

StockX EC-1: Contents

• Part 1: The Company’s Origins
• Part 2: Authentication in E-commerce
• Part 3: Analyzing the Competitive Landscape and Consumer Behavior
• Part 4: Future Outlook and Impact

Explore additional EC-1 reports on Extra Crunch.

This article was updated on April 6, 2021, to reflect that Josh Luber departed StockX in June 2019, not September 2020 as previously stated. The timeline of the company’s funding rounds and its expansion into The Netherlands and Japan have also been revised.