If there was a market crash what would happen with your investments?
Doug discusses the emotional turmoil and the possibility of real monetary loss in the event of a market crash. Some investors just can’t take the uncertainty of the stock market. But since market crashes are a likelihood that must be taken into, if you can’t tolerate risk, consider more conservative investments. For those who can’t imagine weathering a market crash, Doug suggests some safer options for investing your money.
StockX is changing how business is done
Josh Luber, co-founder of StockX.com, shares how a stock market based model can be used to sell any luxury item… including sneakers.
StockX is the place to find the latest brand name sneakers. He explains the 3 principles of how StockX works and how anyone can use his site to sell a commodity.
To check out StockX, visit stockx.com.
Note, mentioning a product or company is not necessarily an endorsement of the product.
Interview With Josh Luber
Josh Luber, co-founder of StockX, discusses the sneakers market and how the sneakers’ “stock exchange” parallels the regular stock market. Why are sneakers such a valuable commodity, and how does this market work?
Douglas Goldstein: I'm very excited to have Josh Luber, who is the co-founder and CEO of StockX, on the show.
For those of you who don't know what StockX is, Josh is probably one of the world's foremost experts in the business of sneakers. Josh, it’s a pleasure to have you.
A lot of the times on this show, we talk about things like stocks and bonds, and mutual funds. I've been getting a little push back from my producer saying, "Why are you bringing this guy on?" He's like, "He's a sneaker guy."
Help me construct a good answer to that.
Josh Luber: I run a company called StockX, which is the world's first stock market of things. We are a consumer marketplace, just like eBay or Amazon, but we connect buyers and sellers in the exact same way that the world stock markets connect buyers and sellers.
The Correlation Between Selling Sneakers and The Stock Market
We can go through a lot of the details but it’s all about the transparency of data, and all of this comes back to data whether it's for sneakers, or the other things that we sell on StockX, like watches and handbags.
The stock market has been probably the most efficient form of commerce for hundreds of years. Why can't we use that for consumer goods as well?
It just so happens that we've started with sneakers and that sneakers fit really, really well. People already buy and sell sneakers and treat sneakers as assets. People acquire them and hold them and they increase in value, making money in a very traditional sort of arbitrage opportunity.
There's a lot of threads here between sneakers and data, and finance, and stock markets.
Douglas Goldstein: When I started on Wall Street about 25 years ago, I was in what I like to refer to as a stockbroker school, which took place in the Twin Towers - may they rest in peace. One of the things that we did is we had assimilation. They actually brought in a guy who was a floor broker from the stock exchange and we pretended to feel what it's really like to trade stocks.
Half of us were buyers and half of us were sellers, and he had a little book that he would use to keep track of the buyers and sellers.
He even matched us like what happens on the floor of the New York Stock Exchange. Is that what you are referring to when you're talking about a marketplace?
Josh Luber: Absolutely. StockX is a true live bid, ask market. As opposed to eBay, where if you search for any one shoe, there will be thousands of listings, there's one listing for every pair of shoes, just like there's one ticker symbol. Every bid and every ask are right there.
A new shoe comes out, pretty much every weekend. There's a lot of new sneakers that come out, but when a new Air Jordan comes out, you can see hundreds, sometimes thousands of bids and thousands of asks, all at the same place.
You can see that same single product page, that same stock ticker coming off the board matching real time. The transaction happens automatically, and the congruence to the stock market is not only the pit where you have two people matching, but it's totally anonymous.
You are not buying from another person, you are buying from the exchange. You’re just matching bids and asks at that dollar amount, and when they meet, the transaction happens and the next ones come up on the board.
Douglas Goldstein: This is what we refer to as “price discovery,” which is that the true value as what the market thinks the true value is of whatever it is, is what's being discovered in this event where you master bid and ask.
What Price Discovery Is All About
Josh Luber: Absolutely. There's no clear true market value for any consumer goods than what happens on StockX. Everybody is at the same place. You never have to worry about centrally channeled arbitrage or about some misinformation where certain people understand supply or certain people understand demand and the others don't.
It's all there, it's completely transparent. Product pages on StockX don't look like consumer ecommerce pages. They look like young finance, like market pages where you can see not only all the live bids and asks that are happening, but historical sales too.
You can see every sale that's ever happened for that shoe, the same way you'd look at the price history for Apple stock.
Douglas Goldstein: This really does sound exactly like how we analyzed stocks. I understand that you trade a lot of different things, but for someone to trade sneakers, it has to be that he's trading exactly the same sneaker, the same Air Jordan as the next guy. It's not like, "Well, my sneakers are a week old or there's something different about it."
It's almost like a commodity market where everyone says, “I'm buying an ounce of gold,” and that one ounce of gold in theory should be the same in New York or Chicago or Jerusalem.
The Three Main Tenets of StockX
Josh Luber: Absolutely right. We think that there's three main tenets of what stock market commerce looks like, and we talked about two of them already: Transparency, just the transparency of data and the process of what a live bid, ask market looks like.
Then there’s anonymity, the fact that you're not buying from a person, you're buying from the exchange. The third one is authenticity, but it's the accommodation of authenticity and standardization of understanding that this particular sneaker is valuable.
We only allow the sale of brand new, unworn sneakers on StockX, because if a shoe is unworn, then you don't need a description, or pictures. You don't need to have someone explain to you what that is.
That is a commodity, and people know exactly what that is, but unlike, say, a digital certificate for a share of Apple stock, which we have commoditized and we've understood exactly what that is, with consumer goods you also have to check the product.
Every pair of sneakers that's sold at StockX gets shipped to us here in Detroit, and we physically authenticate every pair and then we ship it on to the buyer. There's an extra layer of operational process involved.
Douglas Goldstein: Expense.
Josh Luber: If you are a 15-year-old, this is the greatest value we offer. We authenticate sneakers. You're never going to get a fake sneaker, but to your original point, this is fundamental of the market as a whole.
This is like table stakes for us, because if there's any doubt that what you're getting is not what you think you're getting, then it's a standard.
If it's unworn and it is authentic, it changes the perception of value, and it changes how much someone is willing to bid for something, and the whole market starts to fall apart.
It really is around that authentication and standardization of what that product is.
Douglas Goldstein: When people buy sneakers and sell them, do they always take delivery or do they sometimes just buy and then wait for the price to go up, and then sell the sneakers without even dealing with physicals?
Josh Luber: That's a phenomenal question. Today, our primary business is connecting buyers and sellers to exchange a physical sneaker, for that buyer to then own that pair of sneakers.
The way that the market is set up, you could actually facilitate day-trading and consumer goods without ever taking possession, and we've done this once so far.
We actually worked with Nike and the Cleveland Cavaliers to release LeBron James’ first retro sneaker. This is the shoe that he wore during his rookie year in 2003, and Nike was re-releasing it.
Nike released it first on StockX before any other retail channels, which was a huge deal not only for StockX but just the fact that they were working directly with the secondary market, but we created this package. It was in a sneaker box made out of wood for the Cavaliers championship court, and it included an actual Cavaliers championship ring.
There were 46 of these packages available. There were seven people that chose to resell them, and they resold those packages without ever taking possession of them; we just maintained them here at our facility.
When they resold it to the new purchaser, they took possession. Some of those seven people, made thousands of dollars without ever taking possession of the product. We don't do that on a daily basis with everything, but it is absolutely the bigger idea of where this can move to, as you move closer down that path of becoming more of a true marketplace.
Douglas Goldstein: Your marketplace is an unregulated market, meaning you're the one in charge, and you make the rules.
Josh Luber: Yes.
Douglas Goldstein: If you have no regulation, how does that compare to the regulated stock market?
How Does StockX Compare To The Regulated Stock Market?
Josh Luber: Well, that's exactly why that we don't do this at scale today. This was a one off and with the projects with Nike and LeBron and the Cavs, half the money went to charity and it was mainly for the PR aspect.
If we were to cross that line and allow people to buy and sell consumer goods at scale without ever taking possession, we may very well be in the situation of having to work with the SCC or the FTC or CFTC or someone to make sure that we aren't crossing those lines and going down there.
Again, our business today is a marketplace, where our better direct competitor is eBay rather than New York Stock Exchange, but at some point, it may actually make sense to have those conversations and maybe become registered or figure out what we have to do in order to facilitate this, because the bigger idea here is way bigger than just being a place for people to buy and sell sneakers.
Douglas Goldstein: I can't say that I know much about the sneaker field, but the way you're describing, you've created it into a commodity.
What other areas do you think this actually may go into, that can have a practical impact for normal people who are investors? Or is it just for buying, it's just a different way of buying stuff?
StockX Is A Different Way of Buying And Selling
Josh Luber: It's a different way of buying and selling, and by the way, if you were to separate StockX in just the way that we've changed buying, there's more efficiency and you have data to make better decisions.
It's definitely a better process, but it is really about the selling, that for a lack of a less clichéd word, is the revolutionary part of this as a consumer marketplace. Once you have a commoditized product and once you have all bids and asks in one place, it enables what we call “sell now”.
The concept in consumer goods is that if you want to sell a product, you have to go list it and try to get people to come buy it.
However, if you want to sell a share of Apple stock, you don't have to go list it for sell, or find buyers. You simply go to the market; there's a market price and you can sell immediately; whenever you want.
Everything else we've talked about enables that for consumer goods as well. It changes the process of selling anything and makes it easier for you. You don't have to be a power seller on eBay, you don't have to be a professional sneaker or watch or handbag seller.
You can very easily sell a watch or handbag or sneaker, literally within one click. You don't have to list anything, or write product descriptions. You don't have to upload any pictures. You simply have to click sell.
Douglas Goldstein: As long it's brand new obviously.
Josh Luber: As long as it's brand new and you have all the conditions around what the product is.
There are standing bids. It's a live market, so we are talking about the kind of bids that are tied to their credit card or their PayPal. That is, you can sell it immediately, and that's how the market works. You never have to worry that you can't sell or share Apple stock because there's always standing bids and that becomes the bigger idea around how that expands, and becomes a better place for people to buy or sell.
Back to the specifics of the question before I went to that, half of it is, watches and handbags come next because they look almost identical to sneakers in consumer behavior, in the way that certain brands dominate the exclusive space and the resale and the secondary market.
When you think of Nike, Jordan and Adidas, you think of sneakers. Channel, Louis Vuitton, you think of handbags. Rolex, Badec, you think of watches. It is similar and you have a big collective community and you have a lot of fragmented secondary market buyers and sellers.
There's a lot of reasons why it looks together, why it looks very similar, why we're moving there next, but the hypothesis is that it can work with anything that's not already a purely commoditized product, or ready like plastic water bottles or toilet paper that essentially have infinite supply. There's an infinite supply of toilet paper.
Douglas Goldstein: Right.
The Pros Of The StockX Concept
Josh Luber: You can build this concept around anything that's not a unique, one of a kind item, like a work of art or a house.
If you understand the demand against that supply, you can have a consumer marketplace around it.
That becomes the idea in what products might work. We'll go out slowly from sneakers and those that look most closely to sneakers, like watches and handbags.
Douglas Goldstein: I especially like the fact that it's interesting to younger people, so younger people who want to begin to learn how the market works may say, "Hey, I want to buy a pair of Air Jordan. This is a great place to go."
Josh, in the last few seconds, tell us where people can go to follow you and follow your work.
Josh Luber: Sure - at https://stockx.com/. Not only do you have the marketplace to buy or sell everything, but we do a lot of data analysis and insides around the market and around this larger concept, around the stock market of things. There's a lot there, in addition to just buying and selling sneakers, watches, and handbags.
Douglas Goldstein: Fantastic. We will put a link to that at the show notes of goldsteinongelt.com. Josh Luber, thanks so much for your time.
Josh Luber: Thanks for having me.