The sneaker wars are more intense than ever, fueled by the rise of sneaker culture due to social media, designer and celebrity collaborations and limited product runs that have created massive demand and hype surrounding said product. It’s forced the industry — not only activewear megabrands, but also luxury fashion houses and retailers — to update their footwear strategies to produce or sell more sneakers.
And in the midst of that battle, another question arises: Who will win the resale market?
StockX, Goat and Stadium Goods — three sneaker resale companies that have captured the attention of the global fashion industry — are playing a significant role in the world’s newfound interest and infatuation with sneakers. Now, with backing from investors, the race is entering a new phase, one that had been unimaginable for the sneaker resale and collecting world, which had long been a niche market for only sneakerheads.
Each company has a different business model. StockX emulates the stock market model, with real-time resale price updates for buyers to get the best deal and traders to see how valuable their collections are. Goat focuses on digital commerce and entered retail with its acquisition and merger of consignment shop Flight Club. Stadium Goods redefined the consignment shop model with a luxury approach enhanced by the rare collection of goods in its Trophy Case.
Regarding which model will win out, all three now have deep-pocketed partners to help answer that. Stadium Goods was acquired by Farfetch for $250 million at the beginning of 2019; Foot Locker invested $100 million in Goat, also in the beginning of 2019, and StockX is valued at $1 billion following a $110 million Series C funding round in June from investors DST Global, General Atlantic and GGV Capital.
The top sneaker brands continue to use the limited-release “drop” model and tap buzzy collaborators and companies from other industries, such as food and video games, to drive demand. But StockX, Goat and Stadium Goods have stepped in to provide a way for sneaker collectors and traders to get their hands on popular, limited-edition and at times “hype” sneakers after the multibillion-dollar juggernauts release the shoes in limited quantities. In the Nineties and Aughts, traders and sellers would meet in person or sell on eBay, but these transactions were not always honest business deals.
Sellers could put one over on buyers by trading fake pairs for real ones or selling counterfeit styles with trumped-up background stories. Never-before-seen colorways were called one-of-one samples and customers, traders and buyers took to forums to see if they had been swindled or “finessed.” Even fake pairs that were identical to real styles were inspected closely for faulty construction, inaccurate detail placement and poor logo re-creations. Buying sneakers online from random web sites and traders raised more concerns and led to Google searches such as: “Is ‘x’ web site legit?”
This continues to be a problem. A 2016 report from the Organization for Economic Co-operation and Development titled “Trends in Trade in Counterfeit and Pirated Goods,” said the footwear industry has been affected by counterfeiting more than any other, and the U.S., France and Italy were impacted the most because most of the brands that were apt to be counterfeited were centered there. According to the 2018 Global Counterfeiting Report, worldwide sales of fake goods in all product categories are expected to reach $1.82 trillion by 2020.
Enter StockX, Goat and Stadium Goods, which have curtailed and seemingly ended the uncertainty and paranoia of sneaker trading and resale. These companies have also helped turn sneaker collectors and traders into entrepreneurs with million-dollar businesses. Though each company has tried-and-true services to authenticate sneakers, that is where their similarities end.
“There are three different platforms and I think they’re leading the pack in their platform,” said a footwear buyer, who requested anonymity. “Stadium Goods as a physical brick-and-mortar shop draws in so many different clientele; StockX has the biggest selection at the most competitive prices; Goat is an app and hits a very wide range of consumers. They’re all pretty much at the forefront of what they’re doing.”
As these companies gain more funding, and new players emerge like Project Blitz, the sneaker resale company founded by Andre Ljustina, there are rumblings about whether the sneaker boom has legs. And as for the sneaker resale market, will it continue to skyrocket, or is it just a fashion fad?
Alexa Driansky, a senior vice president in the retail practice at AlixPartners, argued this is all indicative of “a shift in consumption.” She cited Neiman Marcus’ investment in luxury reseller Fashionphile as another example of companies playing into the resale trend, similar to Foot Locker and Farfetch for Goat and Stadium Goods, respectively.
With these companies, as well as StockX, Driansky said, “All three of these companies have investments from major retailers. They see a lot of value in the re-market as well. Think back to Amazon. Amazon has grown exponentially and the ability to grow that much, shifting shopping behavior and expectations in a short amount of time, is not hard.” She also pointed out that the U.S apparel resale market in 2018 was $24 billion and could grow to $51 billion by 2021.
Others also pointed to the growth of luxury and fashion resale sites such as The RealReal, ThredUp, Rebag and Vestiaire Collective as a new paradigm for how Millennial and Generation Z consumers are spending their money.
Still, changes may be coming, driven by the shift in men’s fashion as streetwear appears to be on the wane. The footwear buyer predicts that a shift away from sneakers is coming, citing diminishing sneaker demand due to oversaturation. He used the Balenciaga Triple S sneaker as an example, citing a decrease in resale value after the French fashion house released more colorways of the style.
“They obviously made an amazing amount of money just from selling the volume of Yeezys and Triple S sneakers, but it’s really just not sustainable for that long-term business strategy,” the buyer said of Balenciaga.
But Jeff Chan, head of men’s apparel and footwear at eBay, has a different view. “Someone said the bubble would burst a few years ago and it only got bigger.”
Long before Goat, Stadium Goods and StockX, eBay played a significant role in making the sneaker resale market digital in the Nineties and early Aughts. The company still plays a major role today, with a “half-million sneaker listings on eBay each day, and a pair of shoes purchased every 1.5 seconds,” according to Chan, who joined the company from Walmart Inc. in 2017, around the time of the ascent of Goat, Stadium Goods and StockX.
Chan added, “Our wide inventory includes everything from rare grails and the latest trending collabs to amazing deals on top-name brands. Eighty percent of all sneakers sold on the marketplace are new, and 91 percent of sneakers sold are ‘buy it now’ — no bidding necessary.”
According to SimilarWeb, eBay ranks first in monthly site visits, receiving over 500 million web visits in May, eclipsing the second-ranked company, Poshmark. Goat and Stadium Goods were also in the top 10, at 2.3 million and at 1.34 million, respectively.
“The rising popularity of the secondhand market over the past few years, especially with Millennials and Gen Z, has played a large role in the world of fashion,” Chan said. “Sneakers are part of the general population now.”
Chan also posed a question of whether the top fashion houses will take part in resale momentum. Versace, for instance, tapped Goat to be the only third-party retailer to sell its Chain Reaction sneaker in 2018.
“Sneaker collecting has really gone mainstream, and as more and more people identify as sneakerheads, there’s increasing demand within sneaker resale,” said The RealReal’s sneaker expert Sean Conway. “Price points are rising as luxury brands have merged luxury and streetwear and set a new standard for the cost of covetable sneakers.”
Conway pointed to research firm Cowen’s projection that sneaker resale sales will pass $6 billion annually by 2025 and StockX’s recent $1 billion valuation as “signs of the opportunity in sneaker resale and the strength of demand in the space.” That includes women, who are buying men’s sneakers in smaller sizes as well as female-specific models.
“There’s an opportunity for sneaker brands to meet demand by boosting their offerings for women, which could bring an even stronger female audience into the fold for sneaker resale,” said Conway.
There’s also an opportunity beyond sneakers.
“I think the future for these sites is to follow StockX’s lead and do apparel,” said Lawrence Schlossman, brand director of Grailed. Schlossman led Complex’s now-defunct men’s wear blog Four Pins before joining Grailed, and is the costar of podcast “Failing Upwards” with James Harris.
“Fashion and fashion culture are very fickle beasts due to the trickle-down influence from very few companies that dictate what’s cool,” he said. “This could change very quickly.”
Matt Powell of The NPD Group questions much of the hype surrounding the sneaker resale market, especially the projected $6 billion annual sales in 2025. “No one tracks this data,” he said. “My estimate is less than half of that number.”
He added, “I think the biggest factor is scarcity. This is really the Achilles heel for the industry. They’re at the mercy of companies making shoes in limited quantities.”
Powell said NPD’s research shows that less than 5 percent of sneaker shoppers buy resale and companies increasing production runs impact resale prices. “Adidas previously released small numbers of Yeezys and, over holiday, they released a million pairs and the resale price of Yeezys dropped like a stone.”
Powell believes in order for StockX, Goat and Stadium Goods to be successful, they have to offer other categories that are scarce. “I think they’re going to have to diversify away from sneakers,” he said. “StockX being diversified is in a better position. My impression is that StockX is the largest and probably the one with the most diversified base — and the more diversified the better.”
Here, a closer look at the companies squaring off for sneaker resale domination.
Goat was founded by Eddy Lu and Daishin Sugano to connect traders through an app. It serves as a mediator that inspects sneakers for authenticity, and though it does not set prices, the company shares the lowest prices for sneakers in different sizes.
The company has a publication, Greatest Magazine, that showcases sneakers interspersed with interviews and stories about people in, and adjacent to, the sneaker world. Issue three recently launched with “Stranger Things” actor Caleb McLaughlin on the cover.
“When we came up with the concept of Greatest magazine, it wasn’t necessarily about sneakers, it was about the unique stories behind the individuals who wear them,” said Matt Cohen, vice president of business development and strategy at Goat Group. “We wanted to capture the industry’s sense of community and bring together the spectrum of people who are inspired by sneakers — from fashion, technology, photography and art.”
The Culver City, Calif.-based company in 2018 introduced its ambassador program with Kyle Kuzma of the Los Angeles Lakers, who wore rare and limited-edition Nike sneakers provided by Goat.
Also in 2018, Goat acquired and merged with popular sneaker consignment shop Flight Club to establish a retail presence in New York, Los Angeles and Miami, where the consignment business has physical locations. The company currently operates facilities in Los Angeles; Secaucus, N.J.; Shanghai; Hong Kong; Columbus, Ohio, and Fontana, Calif.
Foot Locker in February 2019 invested $100 million in Goat, bringing the total funding raised to $197.6 million.
“Foot Locker’s investment in Goat is the largest investment to date by a retailer into the secondary sneaker market,” Cohen said. The funds will help accelerate Goat’s global operations and expand its omnichannel experience, he said. Earlier this month, Goat launched in China with a local app and a WeChat Mini Program.
StockX takes a stock market approach to sneaker resale, providing real-time resale prices for sneakers. It was founded by Josh Luber, Greg Schwartz and Quicken Loans chairman and Cleveland Cavaliers owner Dan Gilbert, and launched with sneakers before expanding to streetwear, watches and handbags. It is now adding collectibles.
The Detroit-based company also holds auctions for exclusive drops, or what it refers to as “initial public offerings,” that have included Kareem “Biggs” Burke’s Fourth of November collection for the 20th anniversary of Jay-Z’s “Reasonable Doubt” in 2016; the Cavs Court offering in 2017 that included the Air Zoom Generation or LeBron 14 sneakers; a Cleveland Cavaliers championship ring and a piece of the Cavs hardwood court, and the “Ben Baller Did the Chain” auction of black and red slides bearing the IPO phrase.
Luber in 2018 said the company hopes to do physical retail, and it operates a permanent physical pickup location in New York. It has also operated pop-up drop-off locations in L.A. and London, and had a physical drop-off location in Chicago for ComplexCon that features a retrospective of Jordan Brand sneakers.
In June, the company closed a $110 million Series C funding round from investors DST Global, General Atlantic and GGV Capital, increasing its valuation to $1 billion.
StockX chief executive officer Scott Cutler, who succeeded Luber in the role in June, said the company’s latest investment round will help it continue its international expansion, including the opening of authentication centers in Europe, in particular the Netherlands and Asia.
Stadium Goods is a sneaker and streetwear marketplace that has positioned itself as a luxury destination. Founded by John McPheters and Jed Stiller, Stadium Goods buys goods from resellers and sells and ships the products for the seller. The New York-based company formed omnichannel partnerships early on with eBay and Alibaba, and received investments from LVMH Luxury Ventures and later Farfetch, which partnered with the company in 2018 to sell a curated selection of sneakers through a Sneaker Hub and then acquired it for $250 million in January 2019.
Its positioning as a luxury player also recently attracted Sotheby’s, which linked with the company in July to auction 100 sneakers from Its Trophy Case, a collection of rare and coveted sneakers. The entire line was estimated at $670,000 and sold for almost double that to collector and entrepreneur Miles Nadal.
“We invested in Stadium Goods due to its strong competitive advantages,” said Julie Bercovy, head of LVMH Luxury Ventures. “Their model is built on physically holding inventory (100,000-plus pairs available at any time) and fulfilling orders on their own, allowing for product authentication and a frictionless end-to-end customer experience.
“Beyond that, Stadium Goods is a curator. They have played an important role in elevating the sneaker category into a cultural phenomenon, giving them unmatched access to sneaker influencers and media partnerships, and positioning them as a source of education. The combination of Stadium Goods’ efficient business platform and trust among their customer base is a very high barrier to entry.”
José Neves, founder, co-chairman and ceo of Farfetch, said about the acquisition, “It was clear that there is a great opportunity for our two companies to leverage each other’s strengths to go after a larger share of an exciting and fast-growing segment of luxury fashion.”
Neves said on an investor conference call last February that Stadium Goods is positioned to capture “a significant share of the $70 billion premium sportswear market,” which is “largely incremental for our business.” Chief financial officer Elliot Jordan on the same call expressed plans to take Stadium Goods into China.
“China is already the second biggest market for Stadium, and with some targeted investment, has significant growth potential,” Jordan said.
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