Starting & Scaling StockX Into A $3B+ Sneaker Marketplace With Josh Luber | EM Group Chat #197

Welcome back to Everything Marketplaces, where we talk about founders and leaders from some of today's top marketplaces. So this is episode 197, which is a really great chat to just have with Josh Luber. Josh previously started StockX, which is one of the largest marketplaces for authenticated sneakers and collectibles. Josh was the CEO for the first 4 years as they scaled to be a billion-dollar marketplace. In addition to starting StockX, Josh also co-founded Fanatics and has more recently started Gostrate. So this is a really great chat with Josh. We're going back to the founding story and first steps for starting StockX, How they solved the cold start problem. We got to learn how StockX evolved as it scaled. Josh shared some of his key learnings from StockX. We discussed lots of topics related to resale marketplaces. Got to learn more about what he's building with Ghost right now. We also had a great group Q&A. I really enjoyed this conversation. You're going to find it a great watch to the end. So Josh, I mentioned it to you right before we started recording, but you know, I'm a big user of StockX for years, and you've of course paved the way for many of us building resale marketplaces here. So you know, Really excited to have you join us here today and want to start off by saying huge thanks for taking the time to do so in advance. And we have a lot that we're going to dive into with all of your experience at starting and scaling StockX. But before we do, I thought it'd be great if you're going to start off by briefly sharing your background for those here that might not know you.

First of all, thank you very much for having me. Thank you everyone for joining. You know, background's a, that's a like big question. We could just do the whole thing on that. You know, I am, I kind of feel at this point in my career I've become an accidental economist. you know, StockX was the first business that was, you know, a real success. But, you know, I'd started 4 other startups before that. None of them had anything to do with sneakers. None of them had anything to do with marketplaces. You know, just trying to, you know, just trying to find a reason to not work at a corporate job. But I'm a JD/MBA. I've spent time as a lawyer, spent time as a corporate strategy consultant at IBM, but always had some startup in between those as I was doing it. But, you know, in the summer of 2008, when that was, you know, the crash, and that was, I was running a startup at the time and that business fell apart during that crash. And, you know, and then I went and took a job at IBM. At that point, I was married and Well, I never thought I'd go work at IBM, but if you're a startup guy, you go work at IBM. The first thing you do is you start working on stuff on the side. And so that led to a lot of, a number of side projects. I moved to New York, I was working on a music-related startup and then started a company called Campless, which was a sneaker price guide. And that, that would eventually turn into StockX. But these were side projects, you know, just trying to find something to do, some way to sort of move out of the corporate world. And so I've certainly spent a lot of time in the corporate space, but in fall of, or I guess spring of 2015 is when we started the transition from Campless to StockX. So I don't know, we'll start. That's the background. That's all the before StockX stuff, which is a failed entrepreneur, attorney, and consultant.

That's a really cool background. I think most of us here can relate with some aspects of it as well. So if we go back to the very beginning for StockX, you know, what were the first steps that you actually took to start at the time? Then, of course, like as marketplaces, we of course, you know, face the chicken and the egg or kind of cold start problem and actually starting out. So, you know, how did you solve for that?

You know, Campus was a price guide. It was the Kelley Blue Book for sneakers. We were scraping eBay, you know, at the time for anyone who's even remotely familiar with sneakers. You know, this is— we started this in 2012. And so from 2012 to 2015, sneakers was a much different time than it is today. This is, you know, pre-Easy, pre-Virgil, pre-StockX, pre-Goat, pre-all of it. So eBay was was really the only real marketplace that had any size and scale for sneakers. And we were the freeconomics of the sneaker world. We were creating analytics blogs around sneakers, trying to figure out, for me really, how do I leave IBM and turn this into a real job? But so it started as this like price guide blog data company, right? By the way, in the heart of all analytics permeating into business, right? So you have Moneyball, you have FiveThirtyEight, you have Kurt Goldsberry and ShotCharts. And, and so, you know, the, that sort of wave of the like analytics in culture and sports companies like Free Darko, which was an important blog of, of sports analytics, we were doing that for sneakers. And so, but then we were trying to figure out how do you turn it into a business? And I talked to everybody in the sneaker industry, Nike, eBay, Foot Locker, Complex, Flight Club, and there was never really a good fit of who to work with. How do I leave IBM? How do I turn this into a real business? And the short version of a long story was that I eventually met Dan Gilbert, who was the owner of the Cleveland Cavaliers and Quicken Loans and pretty much the entire city of Detroit. And he had had the same idea, but coming from the other end. So I was sort of building this ground up in sneakers saying, hey, this would be a better way that we could buy or sell sneakers. And Dan was coming very top down saying that You know, this could be a better way to create marketplaces. The idea of can we take the way that stock markets work with bid-ask, with single product page, and create a marketplace based on that? And so we sort of met in the middle. I moved to Detroit to start working on this business. And then, you know, for us to get this thing off the ground, it was the like perfect moment in time where The sneaker community was just small enough that everyone knew everyone. All the people who were all the sellers, they were all some form of small business. They were all very highly attuned to the tools that were out there, the businesses out there, the marketplaces out there. And, and so for us to come in and create a new place for that commerce to happen, it was not hard to very quickly sort of infiltrate into that, that space. And it was growing a lot. There's a lot of like macro factors that of the reason this thing works in terms of the timing And everything else. But we launched StockX in February of 2016, which is one year after Kanye and Adidas create Yeezy, and then the year before Virgil and Nike create the 10. So we're like, you couldn't have chosen a better time from a supply standpoint, the products that are out in the marketplace. And you know, then you have this demand that obviously is just you know, you can't, you can't control it. And we spent all this time in the beginning to get this thing off the ground. Like, do we have to, do we have to teach 15-year-old kids how to use the stock market? You know, all the, the really difficult things around this as a concept. But the reality was, and again, we were just sort of like blessed by the, the time, there was so much demand for the products that were going, that 15-year-old kids will figure out how to do whatever you put in front of them to be able to, to get this product. And so it made our job a whole lot easier in terms of, you know, understanding, you know, how to grow this thing, which was that, you know, if we could provide easy access to those products, well, then, you know, we were in a good position to be able to do that. So we can talk more about the how and the what. But, you know, at the end of the day, there's a lot of just like really fortunate timing to create this business at this exact moment in time in this specific industry.

Yeah, that's really interesting to hear about. And definitely, you know, the importance of the timing, right? And the kind of why now playing a part in it. So, so you mentioned lots of topics that we're probably going to get into here. But, you know, one specifically was around pricing. And you mentioned that, you know, StockX is unique in that it has like the bid-ask and also option, you know, purchase at a set price. So could you share maybe how you've thought about pricing for StockX and, you know, some of your learnings around that?

The real business of StockX is not sneakers. The real business of StockX is the pricing model. It is, you know, for anyone who hasn't used it, we use what's called a bid-ask, which, by the way, as a starting point, we didn't make any of this up. Everything that we did at StockX, we just copied different areas of finance, things that create sort of efficiency and transparency in financial markets and apply it how we could to consumer goods. And everything that we did to build that business was a function of what do we have to build or change or tweak in order to facilitate that? How do we facilitate the bid-ask model? And as a starting point, the most macro level that applies to every single marketplace and anybody that that has started marketplace is there's only 2 halves. There's only 2 different forms. There's either a listing-based marketplace like eBay where sellers are creating individual listings, or product-based marketplace, which is based off a catalog. And in StockX's case, it's product-based and we created that catalog. And you can't have a bid-ask without a product base. You have to have, that's what creates the efficiencies. All the bids and asks are in one place. That's what creates efficiency, liquidity, the virality, you know, all of it. And so in order to do that, you have to be able to standardize the product. If you want a shorthand, you need to be able to sell that product off of a stock photo. If you have to see a picture of the individual product that you're going to receive, then it just doesn't work. And that's bright line rule even to this day at StockX, which is why, for example, that we don't sell used sneakers. And we debated that from before we, you know, a year before we launched the business because it was obviously a big part of of the industry and people still do buy and sell used sneakers. It's still a big part of eBay's business. And so a lot of people know that StockX authenticates sneakers. And in order to do that, we had to build authentication centers. We had to create a job that didn't exist before, which was sneaker authenticator. And we had to build a, that job and that career. And we have, I don't know what they're up to now, 10, 12, 14 authentication centers around the world. But a lot of people think that that's the order winner for StockX, that we authenticate shoes. That's just the order qualifier. That's the ante to play because the only way to have a standardized product in sneakers is we have to account for condition, product, color, size, and authenticity so that when the buyer's buying it, all they are concerned about is what are they willing to pay for it? What do they want to sell it for? And so authentication is just one part of standardization, which is the fact of it. So That's the core business of StockX. And it all is about the pricing model, which then allows a bid-ask pricing mechanism, which for any product that is sort of in that Goldilocks space where, you know, it has finite supply, meaning, you know, it's more than one, anything that's a unique one-of-one product doesn't work and doesn't have infinite supply, like, you know, Cheerios or soap, right? There's an infinite amount of soap. They'll make as many bars as people will buy. And Cheerios and soap can have a fixed price. It can be whatever, a dollar bar. But for products that are, that have finite supply, it's supply and demand. And the only way to truly get to that at a marketplace is to have one single product page. And that was kind of the initial way that we tried to explain it to investors and people, everyone, which just says you go on eBay and you want to buy X pair of shoes, you want to buy a Jordan 3 Black Snack size 10. You put that in the search bar, you'll get thousands of listings. Then you have to decide, do you buy this one or that one? You know, why does this one have a, a picture? Why is there a cat in the back of that picture? Whatever. You go buy a share of Nike stock, there's one ticker symbol for Nike and every bid and every ask is right there and everything you ever wanted to know about the company and the, and the, the stock. And that's the idea. There's one product page for a Jordan 3 Black Cement. You cannot be on the wrong place. It's the only place you can go to find that. And that's what then enables the pricing model to be able to do that. So the pricing model is the, is the whole business.

And as far as, you know, with pricing, you mentioned that's kind of the business, you know, it does kind of take, take data, you know, plays a role in that. Right. And so, you know, it seems like you've taken a very data-driven approach to kind of starting StockX and also to, you know, later having like the market data and kind of pricing, you know, on the individual item pages and even, you know, putting together the state of resale reports every year. So could you share a little bit more about how you've kind of approached, you know, data at StockX and the role it's played with it as a marketplace?

Yeah, well, look, that's like core of the DNA back to, you know, Campless, which was, a data company and, and there wasn't much of a business model at Campless. I think in, in, in 3 years of running the business, we probably had about, I don't know, $6,000 of revenue and it was all sort of selling a couple data reports to people. But that idea, you know, surprisingly when we started Campless in 2012 was a, there was a lot of noise in the space, like the amount, number of fake sneakers that were sold on eBay, the amount of variance in, in pricing. If you would ask somebody, you know, what is this pair of shoes worth in 2012 and 2013? Well, you know, Flight Club, which was the sort of first really prominent sneaker consignment shop, which was, you know, based in New York and, and, and super, you know, any real sneakerhead would know that Flight Club was wildly overpriced based on what you could buy it on eBay. But if you were going to go and buy it on eBay, you would have to be able to navigate the fakes and all the other listings. And, and so it actually became from a data and analytics exercise fairly easy to identify the outliers, to, you know, to figure out sort of what were fakes and to get to sort of a pricing model where we could understand what is the true market value of a sneaker at any given time. And so that's what people were using Campus for before we launched StockX. So that was sort of core to the business. And if you just go the most basic tactics of creating a marketplace and dealing with the chicken and the egg and dealing with trying to get customers, You know, everybody goes through a period where, well, what else can we, what other value can we give our customers other than the pure commerce, right? What can we do to keep them on the site? What can we do to give them value other than that? And so for us, it was a price guide. And then what else can we create around the price guide? And the sort of 1B to the price guide's 1A is we created what we called portfolios or like sneaker collections where someone could look at their entire sneaker collection The same way you'd look at a stock portfolio and sort of check its value and look at it over time. But it was an extremely simple and basic application because if you understand the value of one pair of sneakers, it's pretty easy to show someone what their entire sneaker collection is worth. Just choose your sneakers and, and put in there. And so, you know, that was like literally the very first thing that we built when we were transitioning Campless from purely the blog and price guide into StockX, the marketplace, was we wanted to be able to just engage more customers and have that while we were building a larger marketplace. So that when we turned it on, we had more people. There were other things to do. And, and so like I said, that, that goes all the way back to, to the DNA. And so when you look at a, at a product page on StockX, and to be clear, for anyone who's not, doesn't know, I left StockX in 2020 to create Fanatics Collectibles with a trading card business. And I've now created another collectible toy business called Ghostwriter. But even today, A decade after we launched StockX, a lot of the core product page data is still there. You can still see, you know, average 12-month price and volatility and average resale premium and a lot of this. And this just goes back to the beginning, which was, well, what are any data points that might be interesting based off of really just sales data? There wasn't a whole lot of other data we were pulling in. It was just sales price and time. That was about it. And so what are the half a dozen, you know, unique things? And some of those things are still on those product pages at StockX. My guess is people just, you know, it's not a priority to take 'em off. That's why they're still on there. But like a lot of those are, are, are campus stats that are there for, from, you know, from 2012 really.

You definitely do, do a great job of keeping people to kind of come back, right? And engage as far as buyers and sellers and then also making more informed kind of, you know, buying and selling kind of decisions on the marketplace. So, and then you did mention that as far as like authentication, right? From the very beginning. And you know, we were, you were definitely like early in the space. And I think like one of the kind of case studies and examples that we typically kind of look at when it comes to marketplaces for being able to offer authentication and So could you share like, you know, how you were initially able to offer that and then how you're able to kind of scale it up?

So, you know, Dan Gilbert, who was a true co-founder in this business, sort of in every sense, he and I had the exact same idea independently. And when we started there, our 4 desks were like literally right outside of his office, but he still, you know, owns and running 100 other companies in the whole city of Detroit. So he was highly involved in the beginning, but obviously not day to day. And one of the core questions, like the day I got there was, you know, are we going to authenticate. And this was, you know, core to every question about the business because it deals with fulfillment.

Does the—

is the seller going to send it directly to the buyer? If the seller sends it directly to the buyer, then how do you deal with customer service issues? How do you deal if, you know, if it's fake? How do you deal if it's the wrong product and everything that goes in there? And so it became pretty clear pretty quickly that the right way to do it was for us to stand in the middle of the transaction. And I was the one who raised my hand and said, I think this is— how can we do this? This just seems like massively complicated and expensive. And like, this is, you know, and Dan, in all of his wisdom, said, you know, Josh, it's not actually that complicated. He said it was complicated when we took 50 different regulatory bodies and put all of the mortgage industry online to be able to buy a mortgage on your phone. He goes, that was complicated. He's like, this is just process. He's like, and, and by the way, if it's, if it comes to process, he goes, we'll win. He goes, we'll have a head start. We'll invest the money to have great authentication centers and, and train people. And he was right. And, and it really is just process. It was annoying and it took time and we made a ton of mistakes and we had to go buy warehouses and then they were too small. We outgrew 'em and couldn't, I mean, you know, all the things that you deal with. with moving physical products around the world and sales tax and, you know, shipping costs and currency. I mean, just, you know, but it's all just process and you get through it and you, and now that we have this network of authentication centers around the world and, you know, it was the right decision and it was absolutely necessary to be able to build the marketplace we wanted to build, which is a product-based marketplace that used bid-ask And if we hadn't done that, we wouldn't have been able to do the latter and it wouldn't have worked.

Really cool to hear about all the kind of early, I would say like the early kind of, you know, stages for StockX and some of, you know, what was kind of key for getting off the ground. And if we kind of, you know, pull through the story a little bit more, I'm sure we could probably have an entire kind of conversation covering each stage. But could you walk us through, you know, how StockX was able to kind of scale and, you know, maybe what some of the pivotal moments for growth were as well?

We launched in February of '16. And the business really blew up in holidays of '17. So about like 18 months later. And, you know, the sneaker industry, like any, you know, e-commerce, you know, retail is, you know, it's heavy, you know, Q4 holidays, Black Friday, Christmas. And then for us, you know, starting with sneakers, then the question was, What other products can we expand to? And the, the real question that we started with and maybe over-indexed on was what other products does this model work for? And we thought that watches and handbags were kind of like the perfect second and third categories to be in because they had a lot of the sim— same traits and higher price point. And, and so we really pushed to, to launch watches and handbags as quick as we can. But from just like a basic, you know, Business 101, Marketplace 101, you know, issue, it was a different customer base for us. So all of a sudden we were finding ourselves marketing to 3 different customers, creating content for 3 different customers, you know, having customer service for 3 different customers. And those businesses also, there were some other like really small nuances where the model didn't work quite as well. For example, for watches, You know, there kind of is no such thing as a brand new watch because it doesn't come like, you know, and people would want to have, usually want to see the actual watch they're going to get. So there's a lot of nuance to that. But at the end of the day, it's as simple as this, is that when we launched streetwear, which was the basically the October, September, October of 2017, right before we hit the holidays. That was the exact same customer as our sneaker customer. And we launched with a brand called Supreme, which, you know, people are, are maybe familiar with, sort of one of the OG streetwear brands. And when we added Supreme to the site that day, we thought we were gonna maybe do, you know, 40, 50, 60 sales. We sold 1,100 pieces in like 6 hours. So much so that like we were calling up people to show up at the office just to help us unload trucks because it was, and then that was part of the kickoff of that holiday season of just hitting this like this mat. Like that was when we hit the real hockey stick growth. And it was a function of having 18 months of sort of marketplace buildup where you finally get to that growth. And then the business grew 5x in 5 weeks over the holidays. And then we were off and then it was a much different business after that. But, you know, it was, it was step function from, from February '16 to how it is in '17. And then it was just exponential.

Sounds like quite the, quite the growth. So, and I'm glad you actually mentioned, you know, category expansion, you know, with kind of existing customers or having to acquire new customers. That's something that we're, you know, often discussing here in the community. So do you maybe have any tips for founders when it comes to that and thinking about like category expansion?

Yeah, I mean, look, there's no question that was the single biggest mistake that And it was, it was all me. In fact, one of our investors sat, sat us down and, and tried to sort of ask the question and he said, well, have you really won sneakers yet? And it felt like we had won sneakers yet. But just for context, when we were having these conversations, which was, you know, sort of like middle of the year 2016, we were selling about 70, 80 sneakers a day. When I left in 2020, we were selling about 35,000 sneakers a day. So like we were nowhere near winning sneaker. We were like we you know it and so and you know the the investor was right. He's saying you know should you really be splitting your time and focus and all that? And so it's like you know startup one o one here, right? It's like focus, focus, focus. You know sell more things to the same customers before you go and try to bring in new customers and all things about it. I mean it's basic and and there's no question that like if I could have had that one back, I would have, I would have chosen differently. But yeah, that's how it goes.

Yeah, those are going to be helpful tips here and learnings for others. And another topic that I wanted to chat about briefly here is fundraising. And, you know, while you were there, you raised from some pretty awesome investors, I think, you know, some notable names early on and then some also, also top venture funds like Google Ventures. So, you know, what was the early fundraising journey like and what are some of your key fundraising learnings?

If you can have a billionaire as a co-founder, that's helpful. You know, I highly recommend that. Actually, maybe not. That cuts both ways. You know, we, when we started, I think we never, we didn't have a fundraising plan because at the beginning Dan was funding it and it was just like, can we even get this thing off the ground? Can we even find product market fit? And So Dan put in the initial money, but then we very quickly realized just the cultural intersection of sneakers and StockX. As Campless, we went out into Mark Wahlberg's house and valued his sneaker collection and this whole thing where a month ago I'm sitting at a cubicle at IBM and now I'm at Mark Wahlberg's house going through his closet with him. Right. And so One of the best things that we could do was is to allow some of these people to invest. I mean, you know, we met Paul Rosenberg, Eminem's manager, because he was in the office talking to other people around Detroit stuff, and we happened to sit right next to Dan and meet these people. So we kind of created this round that ended up being this, you know, all these big names, small checks around the relationships with with Mark and and Eminem, and then that round ended up including, you know, Drake and and Ted Leonsis and Steve Case and. Tim Armstrong and, and a whole bunch, Ron Conway, a whole bunch of others. But it was all small checks, you know, big names. And, and that was very much, you know, a sort of typical strategic round, except that, you know, the list of people on our list was, was, was pretty long. It was pretty crazy. And then, you know, it wasn't, it was because we had so much growth that we then were in a position where it was like, well, as co-founders, Greg Schwartz and I, Greg, who was the COO when I was the CEO, he's now the CEO now. You know, he and I were, were co-founders and, and running that company and really co-CEOs doing that. We had the conversation, well, we're going to need more money. We have the opportunity as we now have all this inbound from every VC in the world who sees the growth and sees all the high-profile, you know, people. And so we went to Dan and said, you know, maybe we should explore and take some of these meetings. Would it make sense to have other people on the cap table other than just you? And if it was up to Dan, he probably would've been like, don't waste your time. But for Greg and I, it was a good opportunity, if nothing else, to sort of get out there and network and figure out what's going on. And then it just worked out really well that David Crane, who's the head of Google Ventures, he is just like a huge sneakerhead and like gets the culture and gets a part of it. And so a lot of it was sort of very organic around him and David's still on the board and a friend. And so that sort of led to that. And so it was Battery Ventures and Google Ventures. were the 2 that co-led our, whatever, our first outside capital round. And the one that, you know, Greg and I really were quarterbacking at that time. So, you know, a lot of it is like, if you're doing well, the big VCs will find you and, you know, it can be the other way around, of course. But so we were fortunate to be in that situation. But again, a lot of it is organic around the product, the culture, and the industry.

Yeah, that is actually a great transition into Ghostwriter. It definitely sounds super interesting, so I want to make sure that we can have time to discuss it here. But, you know, right before we jump into it, do you have a few key learnings from StockX that you could share with us?

We didn't like plan it this way, but it's really the transition to Ghostwriter and to Fanatics Collectibles, which is why I left StockX. But is the, like, the number one learning across all of this is that All these products are the same. Like, let's talk about it as like what we call it as the hype economy, which are our easiest way is like, just look at all the categories on StockX, but like sneakers, streetwear, collectibles, trading cards, kind of like your big 4, but, you know, fashion and, you know, electronics and video games and all the products that sit in the hype economy, they're all priced wrong at retail. Right. And StockX being a resale marketplace, there was only so much that we could really do to sort of move that forward. And we tried, you know, we early on we started to try to figure out how would we do a retail release? How would a brand release a product on StockX? And it became a very complicated question because StockX is about market-based pricing, right? There are no retail pricing. And so then we spent years talking to economists and professors and market makers to try to figure out Like, how would we price this? And what we came out with is what's called a blind Dutch auction. And we can go into the economics of it and, and, and talk through it, you know, if you want. But we didn't make this up, just like everything else. StockX, again, we just sort of take sort of different parts of finance. And the first time we ever did a release at StockX using a blind Dutch auction, we made a pair of slides with a celebrity jeweler named Ben Baller. Now, Ben Baller is a, is almost a comical figure, but he's a brand, right? It's not Nike, he's not Adidas, but he's a brand. He makes some stuff people want to buy. So we make these slides with him. This is January of 2019, and the release works perfectly. Like it works exactly the way the economics says a blinded auction is supposed to work. So much so that after the release, some professors from Harvard reach out to us and they say, hey, we saw this. We think this is a really ingenious way to price scarce assets. They end up doing a case study that's in Harvard Business Review that's now like taught at business schools. They invited me to Harvard to like teach the first case. It such good validation for this larger idea that market-based pricing is how all of these products should be priced across primary and secondary markets because they're all products that are supply and demand driven. That's in the intersection of culture and commerce. Having an arbitrary retail price is just fundamentally incorrect. Now, there's a million reasons of why the retail economy works off of fixed pricing and And you can imagine every one of those, but it doesn't mean that it's right. And so we started down this path, and particularly when I stepped down as CEO in the summer of '19, where I was spending all my time trying to figure out how do we do more of this? You know, like, is like, what is here? How do we change this part of the world? Because the economics of it are true. And that led to me creating a number of different releases that we did on StockX. We did about half a dozen. We called them IPOs or initial product offerings. We sold sold everything using a blind edge auction. And we did one with Adidas, one with New Balance. We ended up doing one with Topps, the trading card company that got me really back into trading cards. And really trading cards were like this perfect product for this idea that led to me leaving StockX in September of 2020 to start Fanatics Collectibles, which is the trading card business with Michael Rubin. I left that company after, after we built back up, that company was bigger, faster, crazier than StockX. I mean, StockX was a rocket ship. That company was a whole nother level. But I left to create Ghostwriter, which is also based on market-based pricing, blind-edge auctions. Like everything we sell at Ghostwriter, including we today, we launched a new blind-edge auction. We just opened a couple hours ago that will close on Friday for Major League Baseball. It's a Major League Baseball product. that it's a blind box product, but everything we sell is as a blind Dutch auction. And so the learning, which was a, you know, more like an uncovering, right? Because it's a, you know, we didn't create it, we, you know, discovered it or whatever, is that is the truth around market-based pricing. And I look back and I'll give you guys a really short anecdote and then we can move on to Q&A is I didn't realize this until years later, but my first week at StockX, Dan took me and about 10 other people with him to Baltimore to visit Kevin Plank. And in August of 2016, Under Armour was, you know, people thought they were going to overtake Nike. It was like, you know, it was massive. And they just released a sneaker, a rare shoe for Steph Curry's first season. And this shoe was Under Armour shoes. They're normally not very valuable. They don't resell for a lot. And this shoe happened to be reselling for a lot of money because it was this one rare shoe. And we go in as a way to tell everybody in the room about StockX. We explain, hey, you have this shoe that Steph Curry shoe is now reselling for $500 on eBay. And Kevin Plank stands up and says, I knew we should have made more. And I was like, no. I was like, no, no, no, no. That's the exact wrong takeaway.

I was like, what?

Like, and I had to explain in this big conference room with 30 people to Kevin Plank and all these other people that no, no, no. Like, This is great. Look at all the hype and the marketing, all the other stuff that's going on for us. You left what, a couple thousand dollars on the table? And then you have 50 articles in every sneaker blog and everybody's talking about the shoe and people are lining up for it. Like all of the, the, like the, the logic of like, oh no, well we should have just tried to maximize, we tried to sell it. Everyone, like every part of that was just, was absolutely incorrect. And that I didn't even remember that story until years later. And like the short version of that is like, That shoe should not have had an arbitrary retail price, right? If that shoe had been sold at a market price, they could have captured all the marketing and the hype and the brand around it and still had the amount of financial return that they needed out of it. And that's not how retail works. That's not how retail people think. That's not how the whole thing works. That's how we as marketplace people think, because that's the nature of particularly secondary marketplaces, that market-based pricing we just sort of take for granted. But the learning out of all of this is like, man, the whole retail economy is broken for these products and I think we can fix it. Right. And so we'll see. That's a whole nother story. But it's a really interesting thing and it's taken a decade of working in marketplaces to figure that out.

Yeah, no, yeah, definitely. It's super interesting. I'm sure we could have probably, you know, entire kind of conversations going super deep into it and definitely like a really kind of big idea, you know, as well. So really cool to hear about that. what you're building with Ghostwriter. So, so on that note, we're going to get into the group Q&A. Otherwise, you and I could probably just go on chatting about topics here. Hey, Wally, you want to help us kick things off?

Josh, thanks for giving that insightful overview. I'm Wally Demaine, co-founder of WheelPrice, a two-sided marketplace for car enthusiasts to buy and sell secondhand. So intersection of culture and automotive. But one of the questions I wanted to ask was, was there one specific lever that you guys pulled On StockX that really helped to drive or catapult the business?

In any businesses we're trying to grow, and particularly deal with the chicken and the egg, we're trying to look for that. What's that magic bullet or how do you— so there's never one thing, but we launched in February of '16 and from February of '16 through September of '16, the releases that came out from Nike and Yeezy were all okay. They weren't like great, they were okay. And we kind of just like, we sold 10 shoes, now we're selling 12, now we're selling 14. It was just very, very good. And by September we were selling about 60, 6-0 shoes a day. And it'd been this very, very, you know, like this. And then in September of '16, Nike released or Jordan released the Air Jordan 1 Bred, the black and red. This is like OG, like 1985, one of like the classic shoes. Like there's like, you know, top 5 most like classic Jordans. Like this is one of them. And what we saw for the first time since we launched was a lot of liquidity in the market at one place because Nike had released all this shoe and From the moment, from the morning, from the second we woke up, we saw we were on a much different path from sales that day than we'd ever been. And we ended that day selling 301 pairs. Now again, we were selling 60 the day before. So this is 5x. I mean, this was like, it was, it felt like we had like won the lottery. There was no moment in my entire career that was more triumphant than that day. Because first of all, you know, it, like, we didn't think that we were, we, we didn't know we were going to do anything at that point. We, we, but that was like, oh, the model works. Like now that there's all this liquidity that's come in on the supply side, 'cause this drop happened. So you have all, and there's all these people scrambling for it that like you could see bids and asks going off the board. The, the closer the spread was, the quicker products are going off. And so like, that was the day that we know that like the model works and the model was better and this is the right way to have a marketplace and that we eventually, you know, turned that into a marketplace. But it's like, and it wasn't us, right? It was like we had done the work and built the infrastructure and then Nike drops all the supply in the market. But like, that was the day. And we all like, yeah, anyway, we go on forever. Everything about that day was amazing and sort of just like magical. But like, Yeah, but it's not us. Like, it's the model. It's the model that works.

So, hey, Chase, saw you raise your hand. Do you want to jump on here?

Yeah, we'd love to. My name is Chase, co-founder of Bezel, and we're super inspired by what you guys built. We essentially tried— are trying to build StockX for watches, and we actually talked to Reg Brock at the very beginning to learn a lot about how you guys did watches, the pitfalls, the successes. And we have some mutual investors too. So really awesome to be on here. How did your seller fees evolve over time and how did you think about changing those? Where did they start? Where did they end up? Like, how did your leverage over sellers change? Were you worried about fee increases? Like, we'd just love to know that trajectory. It's something that we think about a lot.

You know, I don't even know where they're at anymore because there's a lot of nuances to them. But I remember in the very beginning, we wanted it to peg the fee at 10% total. So it was 7% plus 3% payment processing. So we just sort of like, Yeah, you just sort of guess and you're like, all right, this kind of feels right. And, you know, we had no idea what the unit economics would ultimately be because we didn't know what it was, the cost to run authentication centers and, and what the average price was going to be. Like, there was no way to, like, so we just sort of guessed and, and we'll sort of say, okay, you know, we'll, and sort of felt about right. And at the time there weren't a lot of other marketplaces for sneakers where people were paying in order to sell. So even just comparing to like, you know, other options, So, okay, it was working for a minute and then we realized quickly that like, oh man, like we really need to be closer to 10%. And we raised, when we raised prices from 7 to 10, we didn't take it nearly seriously enough. We kind of just like thought it was like, okay, we sort of put out this like blog post. We had like jokes in the blog post. And like we got destroyed. I mean, I have never had more vitriol from people. And you know, and then like you sit down and you realize that like you're messing with, you know, the profit people's, you know, the money they, they used to, to pay their mortgage with. And, and, and so that was the start of like, okay, this is much more important than that. You know, not that, not that we shouldn't have realized in the beginning, but, and then from there we then realized that we needed to be able to start segmenting tiers. Right. And that was the start of having tiered pricing for, you know, if you sell more, obviously you should have lower. Because at the time it was all just like sort of private deals behind closed doors. Like, oh, okay, we need to get this person on. But like, we didn't have a seller team like specifically focused on sellers, you know, until, I don't know, it had to be at least like the second or third year I was there. And then, you know, since I've left, I mean, that part of the business is just, you know, wildly, you know, expansive and very, very data-driven, right? The whole part around it. But, you know, the last thing I'll say about that You know, when I came, when I stepped down as CEO, one of the first things that Scott Cutler did, the new CEO, was he added a buy-side fee to try to offset some of that. As at that point, we were finally, and this is '19, you know, we'd been out, we'd for 3 years. At that point, we finally had enough data, enough understanding of our cost structure to actually be able to tell, okay, what are the unit economics? Because if you don't know that, you, you don't know what price you need to charge and go back into it. And so it was very much a trial and error as we were developing. And now, you know, it's much more data-driven and linear. But, you know, a lot of it in the beginning was just, hope this works and all that. But like, you learn very quickly that it needs to be much more specific. So yeah, you sort of figure it out.

Appreciate it. Hey, Josh, I actually had a question that I found I wanted to make you ask, and it was added to the doc in advance, and it was around category overlap. This is, you know, somewhat related to expansion. So they were asking, were there any categories that had like buyer and seller overlap? And, you know, were there any specific ways that you encourage this?

Yeah, I mean, I talked a little bit about sort of the differences between watches, handbags, and streetwear. I mean, streetwear and sneakers are basically the exact same customer. But, you know, if there's one sort of thesis for the customer over the last decade of doing this, It's just the convergence of that customer. And the difference between trading card and sneaker customer is kind of the best example because when we started in 2015, sneaker and trading card customers were buyer and seller were completely different worlds and completely different worlds. And now that's converged a lot and there's still not direct overlap. But the first year that we got into trading cards and I collected trading cards as a kid, so I sort of had, you know, sort of personal stake in it. The first National, which is the largest trading card show, the first one that I went to was in 2018. And I walked around and like any sneakerhead, I walk around, I look at people's feet first, you know, go through airports or walking down the street. And there wasn't a single person in the whole place wearing Jordans or any shoe that we would sell on StockX. Like it was very clear that, you know, and I was just there Last week, and and it's just it's all right. It's like and it's all kids, and it's all you know that like that fifteen-year-old kid, like that's the customer, right? And now they care about sneakers and trading cards and and all. But and again, it's just the intersection of culture and commerce, and sport is at the the forefront of that for both sneakers and trading cards. And so like that's been the biggest change in this. By the way, convergence across the board from high fashion and streetwear and and retail and resale and and. And, you know, the fact that, I mean, it was 2017 when Louis Vuitton did the collab with Supreme, right? So that idea of customer convergence is, and by the way, it's only going more. You're only going to get to the point where it's even more converged.

So great points there. Cool. Hey, Chen, do you want to jump on? So I raised your hand.

Hey, Josh. So this is Chen. So I'm the co-founder CEO of Palm Street. So we are a live shopping marketplace for rare plants and reptiles. So we are the biggest in the live plants and animal industry. My question is really about category expansion. Like, when did you know, like, it was the right timing to expand to a different category? When did you decide, like, it was too early versus too late?

Yeah, I mean, it was always too early. Every time we did it, it was too early because, you know, we were just We just wanted growth. And, you know, the reality is we didn't know for a long time how big the market could be for our core markets, for sneakers and streetwear. And I think that drove a lot of it. And look, in fairness to the decision-making, we grew, we expanded the market when we launched StockX. When I first started working with Dan in April of 2015, We had just got done sizing the market and we sized the entire sneaker resale market at $1.1 billion. You know, I don't know what it is today, $20 billion, $30 billion. I mean, it's like, it's, and we helped grow that, not just us, but other people that were, who were coming at the time. So it's hard to tell where you are in that cycle to then make the decisions around category expansion. But I will say that Once we had the the expertise around how to launch categories and understanding, you know, it then became easier to do it. I'll give you the best example of that, which was in I guess it was nineteen when we added electronics. But we understood that demand demand is created by these big drops, and there was a new Xbox and PlayStation coming out that fall. Whatever it is, I'm not a gamer, so I forget the exact timing of it. But we knew like okay. We now have an opportunity to go in because all of this commerce is going to happen around these 2 consoles that happen at this moment. And if we can have— so then we got ahead of that and found experts in that category and figured it out. But we also had more bandwidth and dollars and people and resources to go after those categories. But we like— we had identified that there was enough crossover in the customer itself. We knew how to To, to add it. And then we identified the right timing for it as opposed to the beginning where it's just like, you know, just, yeah, you're, you're a mess. So I, I, I know Chase talked about having met Reg. Reg was the only guy at the company who knew anything about watches. We had to go hire, like, I don't even wear a watch. I haven't worn a watch my entire life. So we didn't find, we had one guy, you know, he hired one other guy. That was it. That was the whole marketplace. So probably not a, not a surprise that we didn't, we didn't win watches.

So.

Yeah, well, cool. So I want to ask one last question that Paolo actually just sent me. And he was asking, you know, this is a question that's very kind of topical right now, which is AI. So if you were to go, you know, go back and start StockX, you know, today, what are some ways that you think you could leverage AI?

I definitely have not given that one a whole lot of thought, but I'll tell you what comes right to mind, which is obvious, is, you know, we built— just go back to the very beginning. StockX is a product-based marketplace. So we have to create the product page, we have to create the catalog. And we did that by hand. You know, I, we literally, we hired a guy who was an intern for me at Campless and Greg, it was a senior in high school, in college. And his first out, he, he literally was in charge of by hand and then he would hire other people to go do that. And the number of times that small brands would, would Email us or hit me up or DM me and say, "Hey, can you put my product on StockX?" We'd love to. We just—it's literally a physical process today. That whole thing could be done by AI in a minute, and you know, and I mean dozens of people doing that, you know, by hand for for years. So like that alone would cover. And then secondly, I imagine, and you know, because I left five years ago, so I don't know, but I imagine that they are integrating AI into the authentication process. In order to, you know, just capture, you know, what they learn on each sneaker. And, you know, even just today, you can see on StockX some of the pictures are sort of have 360-degree view and you can turn them over. We didn't have that. We had like just a really simple camera that we would stitch together. And you can even just tell the quality of the pictures and then what you learn from that in authentication and the things you can learn. So I'd imagine there's a lot of learnings on that side of it. But, you know, 5 years ago there was none of that.

So yeah, definitely cool to think about what's possible with it now as marketplaces. Well, so we're almost out of time, so I want to be conscious of that. But, you know, really appreciate you taking the time to join us here today as a special guest. This is long overdue and, you know, awesome to hear about all of your experience and learnings with StockX. As I mentioned, you know, you've led the way with us all here building resale marketplaces. So we really appreciate it. And actually, I had one last question for you, and this is my typical kind of parting question, which is if you could go right back to before you started StockX, what would you tell yourself about marketplaces specifically?

Well, we've covered some of the big mistakes and, and big learnings. You know, I'm not so sure I would've changed much. You know, we talked about category expansion a lot, right? And that was a big one I, I wish we had had back. But a lot of the other stuff we, you, you learn by doing. So like, we never would've gone down the path of trying to do a release with a brand If we hadn't had the opportunity where we had this small brand that walked in the door one day and wanted to try to release a product with us. And we were just, we wanted to take advantage of any opportunity we could to get customers, to get awareness, to, to get growth. And, you know, a lot of that stuff you would say is, is not how you would run a marketplace. And we spent whatever extra time and focus going down this path, but it leads to, to other parts of it. I think we did a pretty good job of sort of keeping that on track. And by the way, I'll also say that, and this is sort of a perfect thing to leave on, one of the most important reasons of why StockX was successful was Greg and I were essentially co-CEO and we were perfectly complementary in every way. And I didn't know him. Dan had brought him to the table. We'd never met before. And it could have gone wildly the other way because a business is people. And I've worked with a lot of people that, you know, didn't work out well, but he was very focused on all the things that I didn't, you know, performance marketing and engineering and product and all this stuff. And I was great at all, you know, marketing and public speaking and all the other stuff. So we were really good But it allowed us to cover a lot of other spaces and go down these tangents of saying, hey, you know, I'll spend a couple weeks trying to figure out, is this an interesting thing to go after this brand release? Because Greg was still there driving the core business and we weren't losing that. And so it's not an easy sort of thing to recreate, but to have co-founders, co-CEOs that were really complementary in doing that, like We don't, there's no question that, that we don't have that success if without that.

So that's going to be great parting advice also too, as I'm glad you mentioned, you know, sometimes you have to learn by doing, but I feel like the second best is learning from founders like you that share your experience with us. So we really appreciate it. And then last but not least, time for a quick, quick plug. Where can we keep up with you at?

Yeah, thanks. So the, the new business is Ghostwrite, which is a collectible toy brand. And You know, the, uh, it's ghostwrite.com. And, and today we're doing a release with Major League Baseball, um, which is a blind box set, meaning you don't know what players you're gonna get. As you might get, you know, Shohei Ohtani. This is a WNBA set we did before. See this gold crown on Caitlin Clark? Um, there's a, a $30,000 bounty on the Caitlin Clark 1 of 1 that came out. There's now a $20,000 bounty on the Shohei Ohtani 1 of 1. So all we did is take how trading cards work and apply it to collectible toys. But here's the thing, just like StockX was not about sneakers, it was about the pricing model. Go Straight is about the pricing model. Everything is sold as a blindage auction, and eventually this will also evolve into a marketplace. That's, that's the, that's the real business. And there's a ton of similarities to StockX, but at the end of the day, like, this is about pricing and it's always been about pricing for the last decade. So.

Awesome. I'll be sure to include links here in the, you know, in the recap post and the recording. You'll probably have lots of founders kind of jumping off the Zoom. And going to catch the trying to get the drop as well. So, you know, we once again really appreciate taking the time to join us here today for the awesome group chat. And thanks everyone for the great questions as well.