I recently reported on why the Supply Chain contributed to the theft of over 800,000 thousand dollars in Nike product. In that same post I discussed the problems of loss prevention for all companies and why storage yards across the country have been getting robbed. I followed that discussion with information on the Railroad strike that could have sent the country spiraling had a solution not been found by September 16th. While the railroad strike didn’t happen, the supply chain is still a serious issue as port authority workers are also considering striking on the West Coast. If the ports continue to be backed up, more containers will be placed into non-policed overflow yards. It’s important to explain why the thefts continue to take place in port cities and distribution centers across the country. What does StockX have to do with this? In the sneaker world, the theft of coveted product no longer gets fenced on the street. While it seems illogical for stolen goods to be sold on a digital platform that can be tracked, third-party resale platforms no longer function as they once did.
eBay used to control the marketplace, but the addition of privately held companies like GOAT, StockX and resale channels like Flight Club and Stadium Goods meant that sellers no longer had/have to publicly list products. Those privately held companies don’t have to divulge information on sellers or any internal aspects of their business. This has allowed StockX and other private resale companies to operate as facilitators of transactions. Sneakers that may have been sold early or stolen, could move through the system without any issues. This was seen in the Air Jordan 1 Trophy Room scandal and on any number of sneakers sold on the platform since its inception.
Brand Gating
Brand Gating is a form of inventory control where brands with Registries (on a third-party platform) can require any seller to provide proof of where the products being sold come from. I once wrote that all of sneaker resale would be shaped by the strategy:
Brand Gating Will Hit Sneaker Resale In A Big Way This Holiday Season
I wrote this post in 2016. StockX was about to be launched. When StockX opened for business, my prediction was slowed down considerably. An exodus of sellers shifted from Amazon and eBay to StockX. Brand Gating became less important as the seller no longer engaged with the buyer. The speed and ease of use with StockX allowed the site to grow faster than any other sneaker platform not named Nike. This has empowered the company and driven the business to unicorn status. The logical next move for StockX is to IPO, as another funding round would value the company at a price too high to justify. That’s not what this post is about. This post is about the Air Jordan 11 Retro Cherry 2022. The model flooded timelines and social media marketplaces after the theft of the containers in Memphis. Many sellers utilized StockX to sell the kicks. It seemed like a logical decision as unreleased sneakers have always been a major aspect of the sneaker marketplace. Right now, on StockX the Jordan 1 Retro High OG Lost and Found – DZ5485-612 – US (stockx.com), has been sold 75 times. The shoe doesn’t release until October. The first sale shows up on August 17th.
Slippery Slope?
At this moment StockX has suspended all sales of the Air Jordan 11 Retro Cherry 2022. The site doesn’t allow any transactions and has scrubbed all data of sales on the platform. The high-profile robbery has obviously affected the decision making of StockX as sellers have had funds removed from their accounts for selling the sneakers. No investigation was made on how the sellers acquired the sneakers. StockX’s decision to cancel and fail these sneakers while still selling the Air Jordan 1 Lost and Found is questionable, but the issue is compounded when a person considers these details:
- StockX made a profit on the initial transaction
- StockX removed the funds from the seller’s accounts
- StockX will not send the products back to those sellers
Sellers could have acquired replicas or fakes and attempted to pass them off as legit pairs. If those pairs are replicas, StockX’s policy is to send those shoes back as “Failed”. They have never kept sneakers that failed an inspection. StockX does not have a brand gating policy. They do not require sellers to provide proof of purchase of any products. While it may seem obvious that any of the Air Jordan 11 Cherry sold was a stolen product, without the requirement to verify authenticity of the shoe with a purchase receipt from an authorized account, none of the product on StockX should be sold. eBay and GOAT are still allowing the Air Jordan 11 Cherry to be sold on their platforms. Items are currently listed on both sites. StockX’s decision, although understandable has placed the platform in a precarious position. If authenticity and anonymity are the foundations of a business, undercutting the trust of the seller could lead to big consequences for the business overall. Could the lawsuit with Nike have made StockX into Sal in the Godfather?
eBay Sold and Active Listings
eBay and other marketplaces continue to sell the Air Jordan 11 Retro Cherry 2022. On eBay there are completed sales using the style code and there are still active listings with much higher prices than the sold listings. eBay is avoiding any potential kickback by allowing this product to be sold. Just as GOAT made a conscious decision to keep the listing open. StockX has been the fastest growing site in the history of sneaker resale. The platform went from 3 million visits a month in 2017 to more than 40 million visits a month at their peak. The only other site to grow at such a dramatic rate has been Nike.com. The 800,000 dollar theft, may have been the straw that broke the camel’s back in resale. The average price according to my data had been declining until Covid introduced a hiccup in the chart. As brands increase the price of their shoes (UltraBoost is now 190, not 180 and the Air Force 1 is 110 vs 90 dollars) the margins on retail general release product are much smaller and buyers are no longer feeling pressed to buy the latest drop as a new drop is always around the corner on a street that might as well be two feet long.
Resale was once a place where arbitrage allowed for the resale of closeout shoes or sneakers consumers didn’t have in their city. Somewhere along the way it became about unsustainable bubbles created by bots sucking up inventory of a few coveted releases. The bubble is contracting, and the consumer is getting smarter. Nike is opening more doors and every brand is either partnering with a resale platform like adidas with ThredUp, or they are launching their own versions of resale like Nike Refurbished. This leaves resale platforms in a position where they will have to offer more of a community-based service ala Tradeblock. These are interesting times… especially for StockX.
