STREETWEAR CULTURE FUELS BILLION DOLAR SECONDARY MARKET
The online clothing resale market has expanded 21 times faster than regular retail since 2016 and it is expected to more than double in size reaching USD 41 billion in the next three years, according to a report by online reseller ThredUp. With revenue increasing, brands and retailers that previously disliked resellers profiting from their wares are forced to act and acquire these up and coming players, in order to play a role in this market.
Particularly in the streetwear and luxury industry, the rise of online marketplaces is pushing retailers and brands to rethink the potential of resale sites as new distribution channels. In February, Foot Locker invested USD 100 million in GOAT and said the companies would “combine efforts across digital and physical retail platforms.” LVMH invested in consignment-business Stadium Goods, which was later acquired by the luxury site Farfetch for USD 250 million in December and Neiman Marcus owns a stake in Fashionphile. The fervor for sneakers and limited goods have been fueled by “hypebeasts” that regard these as investment assets. All told, the market for resale sneakers and streetwear is projected to reach USD 6 billion by 2025 alone in North America, according to Cowen, an investment bank. In the retail race, secondhand is coming first.
StockX and Grailed are part of a group of online marketplaces that have turned the resale of sneakers into a new type of asset and an increasingly big business. Other sites like GOAT, Stadium Goods and Bump, which also resell sneakers, streetwear and other goods, have raised more than USD 200 million in venture capital funding, while StockX alone have collected a fresh USD 110 million in financing is now valued at more than USD 1 billion. “The internet and eBay made reselling into a cottage industry,” said Matt Powell, an analyst at NPD Group. “Platforms like StockX made it into a business.”
For sneaker brands like Nike and Adidas, sites like StockX add a twist to the ecosystem around their most desired shoes, like Jordans and Yeezys. So far, the companies have taken a hands-off stance to the online marketplaces, with Nike’s Chief Financial Officer saying in March that the company was not focused on reselling and had no partnership plans or business strategy for it. But while the sneaker brands are not capturing any resale revenue, they benefit indirectly because that market generates buzz for them. Scott Cutler, the new chief executive of StockX, said: “Nike, Adidas, Louis Vuitton, Gucci, Rolex, whatever it is, they’re certainly not ignoring marketplaces and are not naïve to the fact that their distribution channels are evolving.” So they carefully manage the supply of their hottest items, leading to wild spikes in resale prices, said John Kernan, a research analyst at Cowen. “Keeping Jordans or Yeezys in cool markets, with demand far outstripping supply, is making them more relevant in the mass market,” Mr. Kernan said.
StockX grew out of Campless, a website that Josh Luber, a former IBM. consultant, built in 2012 to track sneaker resale prices on eBay. After Mr. Luber delivered a popular TED Talk titled “Why sneakers are a great investment,” Dan Gilbert, owner of the Cleveland Cavaliers, and a co-founder, Greg Schwartz, acquired Campless. Campless eventually transformed itself into StockX, a marketplace to buy and sell sneakers. From the beginning, it also positioned itself as a “stock market of things.” On StockX, that played out with buyers bidding on items or purchasing them for the lowest asking price from sellers. Once a bid was accepted, sellers shipped their items to one of StockX’s four authentication centers, which make sure the shoes are not fake brands and then send them to the buyer.
The company makes money by charging sellers a transaction fee and said its revenue had more than doubled in the last year with gross product sales topping USD 100 million a month. StockX have started to expand into streetwear and is looking to enter into secondhand sales of luxury goods such as handbags and watches, an area currently topped by companies like The RealReal, a San Francisco start-up that has successfully been listed on the New York Stock Exchange at the end of May.
Arun Gupta launched Grailed in 2013. The site is a peer-to-peer platform that makes a profit from charging 6 per cent on sellers’ income. In Gupta’s eyes the company is not only about reselling, but it is meant to democratise access to these rare products. He says: “Five years ago if you wanted a pair of Saint Laurent jeans, you better live in New York, be comfortable going into a boutique and dealing with snooty sales people and have USD 700 to spend. Now with the internet there are hundreds of pairs of them on Grailed for USD 200 to USD 400. And if you bought some and it doesn’t work out, just turn around and sell them again.”
Mr. Luber, StockX’s founder, now has an even bigger vision than dropping new Jordans on StockX: He wants to replace static retail prices with a stock market style of shopping. In this setup, shoppers place bids on new items and prices are determined entirely by supply and demand. Mr. Luber said he recognized the concept might initially be a stretch. However, StockX has already started moving ahead with the notion. In January, it held an “I.P.O.” — that’s initial product offering — for a limited run of slide sandals created by Ben Baller, a celebrity jewelry designer. The company used a complicated Dutch auction to determine which bidders got to buy the sandals and at what price. It resulted in an average price of $210 a pair — three times as much as they would have cost at retail, but lower than the majority of the bids. StockX now has half a dozen such releases in the works with other designers, Mr. Luber said. “It’s not going to be an overnight thing, but it is absolutely logical,” he said.
Influencers on the men’s fashion scene include musicians ASAP Rocky and Travis Scott, designers such as Virgil Abloh and style-conscious athletes such as American-football player Odell Beckham Jr. These stars have normalised high fashion for men. In fact, there is a shift in how men consume and collect in the digital age, which has a lot to do with likes of Grailed, Goat and Stadium Goods. Gupta talks about clothes the way an older generation might have discussed records or books. But if you’re 30 or younger, most of what you “own” is digital. The impulse to collect and possess things has not gone away, it is just been redirected. Instead of buying original Blue Note records, you might search for Rick Owens’ Ramones trainers. In a world where everything is virtual, it might be that fashion becomes the only physical reminder of times past.