The new capital brings Udaan’s total funding to date to US$1.15 billion. Indian Business-to-Business (B2B) ecommerce startup Udaan announced on January 6 that it has raised US$280 million in additional financing from existing investors Lightspeed Venture Partners, DST Global, GGV Capital, [...]
By Alvin Mak
How two emerging startups are transforming the sneaker shopping game.
Long gone are the days of the utilitarian sneaker—defined simply as something to wear on your feet for walking. Footwear is now an artistic choice, a fashion statement, a lifestyle.
The footprint of sneakers on popular culture is apparent. Internet shows revolving around sneaker culture such as Sneaker Shopping with Complex—where celebrities are interviewed while shopping for footwear—have risen to immense popularity.
This culture has also penetrated music and art; Wing$, by Seattle rapper Macklemore and producer Ryan Lewis, is an entire song crafted to explore the value of sneakers in the lives of youth.
Yet, none of this is entirely surprising. Ancillary to sneaker culture’s prominence in popular culture, the intrinsic rarity of some exclusive, limited edition sneaker models has birthed avid sneakerheads and sneaker collectors, who drive the market alongside the average consumer.
This phenomenon is known as “drop culture”–the sweeping excitement and demand for the release of a product, available for a very brief time. “Drop culture” drives prices skyward, simultaneously building rapid momentum for a brand. The sneaker industry owes a large part of its success to this effect.
The industry has also received an extra boost coming from the abundance of celebrity partnership designs that have flooded the market in recent years. Kanye West, Michael Jordan, and Pharrell Williams are just a few of the influential celebrities who have released custom models in collaboration with sneaker manufacturers.
By attaching these big names to exclusive shoes, manufacturers are able to achieve profit margins far beyond the industry average. A pair from West’s Yeezy line can set a customer back by an average of $300, while classic Air Jordans can make an even bigger dent—up to $2000—in a fan’s wallet.
High-end footwear retail stores such as Stadium Goods have been steadily growing as a result. Stadium Goods and sneaker reselling competitor Flight Club are each valued at a whopping $250 million. The former was hence acquired by online fashion retailer Farfetch in 2018. Flight Club, while only having three stores across the United States, has seen its stores become somewhat of a tourist destination, especially at its New York branch.
Yet, an evolution of the sneaker shopping game has risen from the noise—the ship-to-verify model. It has been hailed as the pathway toward the inclusion of more sneaker brands, while at the same time limiting rampant counterfeiting. Paving the way are the leaders of this model—GOAT and StockX.
With a name based on the sports acronym “greatest of all time”, GOAT has a lot to live up to. The platform is a trading platform for sneaker collectors and casual shoppers alike.
The company’s ship-to-verify model revolves around its verification process. When a buyer makes a purchase, the seller ships the pair of shoes to GOAT. Money paid by the buyer is first held by GOAT and remains with GOAT until the sneakers are received and authenticated by the company. After certification of authenticity, the sneakers are shipped to the buyer and the money is transferred to the seller. GOAT is essentially a sneaker industry middle-man.
It is this business model that has earned GOAT its 8 million loyal users as of June, 2018. The company now employs over 350 people to manage its extensive collection of 35,000 SKUs. This infrastructure has allowed some sellers to redistribute a value of over $10 million in shoes.
GOAT’s reliability has been one of the company’s strongest selling points. Each shoe bought off of the platform comes with a certificate of authenticity—given by an in-person sneaker expert who can identify a fake in 10 seconds.
Yet, not only does GOAT specialize in in-person authentication, but it is also exploring AI assistance through image recognition. GOAT’s experts constantly contribute data to the company’s AI systems in hopes of further streamlining its authentication process. In addition, data from fake shoes and GOAT’s multiple neural networks for select brands are also pushing for the automation of the company’s rigorous authentication process.
The platform has also recently added an industry-first AR feature to its mobile app. With “Object” mode, users are able to view selected shoes rendered via AR on flat surfaces. This allows GOAT’s customers to gain a more intimate look at its sneakers, their texture, and their material, all virtually.
In October, 2019, the company expanded its AR functionality to include a “Try-On” feature, where shoes could be rendered directly onto the feet of the AR user. Users are able to see what certain Air Jordan, Air Force 1, or other Nike models would look on-feet, all without having to try them on physically.
The company’s pioneering AR features solve a common problem consumers have with online shoe shopping, which is the inherent inability to fully understand detail and visualization. However, perhaps GOAT’s technologies are a prophecy for the future of online sneaker shopping—all powered by AR.
In competition with GOAT is StockX, another online ship-to-verify marketplace. According to StockX’s website, “StockX is the world’s first stock market for things–a live ‘bid/ask’ marketplace.”
Launched in 2015, the company not only offers the usual authenticity checks on purchased items, but its platform also features live price updates on sneakers–an aspect of StockX which created the company’s signature mockup stock market theme.
This unique theme contributes an element of market analysis to sneaker culture. With StockX’s easily-accessible visualizations of price trends in the fashion industry, sellers have the opportunity to dictate when they want to list their product, making profits easier to come by. Buyers are also consequently more informed when deciding whether they wish to invest in a certain item.
Additionally, StockX provides a portfolio to each user—which tracks the value of all past transactions, making market trends in the luxury goods industry even more accessible.
StockX has thus grown to be the titan that it is today. Not only has the company seemed to remain unfazed by the Covid-19 pandemic, it also achieved record-breaking numbers, with sales growing at double digit rates. Yet, none of this is surprising when one thinks about how StockX sold $2.5 billion in sneakers so far in 2020.
The company was able to capitalize on the release of Michael Jordan’s Netflix documentary The Last Dance. A record number of over a million pairs of Air Jordans have been authenticated and shipped by the company since January. Specifically, the “Flint” Air Jordan 13, the “Royal Toe” Air Jordan 1, and the “Fire Red” Air Jordan 5 accounted for over $25 million in StockX’s gross merchandise value from May to June 2020 alone.
StockX also sells designer clothing, wrist watches, handbags, and other collectibles in addition to sneakers. The pandemic has also seen a rise in more niche designer products–products that StockX has also been able to capitalize upon. The company saw a surge of 300% in face mask sales since the beginning of the pandemic. In fact, the face masks from streetwear company Off White were selling for $160 a piece on StockX’s platform.
“Many of these things are not accessible in a retail environment. We provide access to consumers that otherwise cant find this hyped product anywhere,” says StockX CEO Scott Cutler, explaining the seemingly miraculous growth of the ship-to-verify company.
While the ship-to-verify model was originally conceived to combat rampant counterfeiting in the sneaker industry, it’s evolving to become something more than that. Not only have GOAT and StockX proved the model’s viability in the future of the designer goods industry, but they’re also pursuing innovation in tech to push the model toward redefining sneaker culture itself. The seeming immunity of these platforms to the Covid-19 pandemic further reinforces this idea.
More evidence is suggesting that it might be time for sneakerheads to lace up for a retail future powered by tech.