Nike currently has a lawsuit pending over problems with workplace diversity and sexism. While many sites and news outlets are focused on how this case will affect the recent resurgence by the brand, I moved to a different discussion based on the recent third party sales I’ve had utilizing the StockX website. Last year I gave StockX a test run for the year.
My goal in utilizing StockX was to deliver information to people on YouTube who were considering using the service to sell shoes. At the end of the year I made $14,615 on 85 sales for an average of 171.94 per pair. I’ve utilized this information to make analysis about how the service could improve and to begin working on data sets that will help small retail accounts figure out how to recapture the sales that are being lost to sites like StockX, GOAT, and Flight Club or consignment shops. I’ve continued my use of StockX this year in a much greater capacity. I won’t give details of my current sales because I will do an end of the year video to show what it looks like to utilize StockX for an entire year treating it like a business vs treating it like a hobby. Full disclosure: Last year I operated StockX as a consignment shop. I sold shoes for people who had left over pairs or they didn’t want to spend the time packing and shipping or buying ink to print labels. They simply wanted to get money for pairs.
This post is purely hypothetical and for discussion purposes.
Nike’s current issues always cause me to think about how Nike is shaping the entire sneaker industry. In October of 2017 Nike laid out their direction for the future in their Investor’s Day:
2017 NIKE, Inc. Investor Meeting | The Scale of Sport Highlights – A Detailed Breakdown
During Investor’s Day the brand stated clearly that in North America they would gain an 80/20 control over the delivery of their inventory to the public. Their goal in doing this is obvious. It is going to increase margins. To do so Nike will only have about 40 retail partners. In 2015 I wrote an article discussing the slow removal of mom and pop accounts. Many retailers removed themselves (The Sports Authority), Sheikh (impending bankruptcy). The reduction in wholesale accounts creates an interesting dynamic that has already begun to play in the digital space with Nike’s brand registry on Amazon. While I originally thought Nike was going to go all in on Amazon, the reality is the registry was a play to gain control of the third party market. As Nike has been adding inventory, certain models on Amazon have been brand gated. (To understand brand gating take the time to read through the articles on the site that mention the term.)
There is an extremely important element that has been overlooked in Nike’s CDO. This element exists for every brand as they are all moving towards a DTC format. In particular a brand like adidas has taken a keen interest in monitoring it’s footwear via RFID. This monitoring hasn’t been done by Nike yet, but considering that Nike controls such a large share of the market if the brand decided to utilize the technology they would no doubt take the time to utilize investigators to follow the trail of where sneakers entering the market via third party are coming from. This takes me back to the purpose of this post.
Stadium Goods is a reseller that has garnered an investment from Louis Vuitton. Stadium Goods does not have an account with Nike. StockX in the matter of two years has more website traffic than City Gear, DTLR, Villa and Hibbett Sports combined. These are physical stores, one publicly traded, and a private startup that launched via a blog is now pulling in more traffic than the online platforms of established stores. GOAT recently acquired the oldest and best resale shop in Flight Club giving GOAT, an app for resale, and two brick and mortar locations. The investment round GOAT attained has the app moving towards opening a series of stores. GOAT does not have a Nike account. HBX is the online store for Hypebeast. Hypebeast is a blog that is publicly traded on the stock market in China. HBX does not have a Nike account. There are countless small sneaker stores in the local Memphis area Step By Step Sneakers, Swift Kickz and Faircrest that are replicating stores that are popping up in every city. None of these stores have accounts with Nike. What they all have in common is that they are making a ton of money on Nike without having to deal with the purchase of Jordan Brand products to get retros. They don’t have accounts.
These stores operate as consignment/resale shops. They buy and consign shoes. GOAT and StockX have received over 50 million dollars in investments for platforms that are without a doubt disrupting traditional brick and mortar stores with Nike accounts. While the numbers aren’t considerable enough to disrupt Foot Locker or Finish Line, those millions are being siphoned off at a steady rate. How can I say this? Like I mentioned I won’t do an analysis of StockX until the end of this year, but at this point of the year I’m easily on pace to do half a million dollars on the platform and I am by no means the biggest online seller in Memphis. That title belongs to at least ten other people.
The disruptive nature of blogs turned online retailers is possibly the biggest issue for sneaker retail and it’s my belief that Finish Line, City Gear, DTLR and Hibbett Sports aren’t even aware that they are in competition with these apps and websites. Most execs at these retailers don’t even know these places exist, yet a quick comparison of website traffic should be troubling:
StockX 10 Million visits per month
Hibbett Sports 2.41 Million visits per month
Stadium Goods 1.58 Million visits per month
City Gear 391,000 visits per month
Goat 2.5 Million visits per month
Flight Club 4.2 Million visits per month
DTLR 431,000 visits per month
Finish Line 8.8 Million visits per month
Right now StockX has authentication facilities in several locations to expedite the verification process of footwear. Imagine if, like GOAT, StockX decided to scale in a similar fashion and open small boutiques in their authentication facilities. Although Nike is scaling back on wholesale accounts do you think Nike would not extend StockX the chance to carry the brand if they decided to apply for an account? They have online traffic comparable to Finish Line.
Part 2 How Will Stores Adhere to Nike’s MSRP and Recapture Sales Lost To Third Party?
