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StockX CEO: Nike waging 'meritless' case over counterfeit sneakers

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StockX CEO Scott Cutler joins Yahoo Finance Live to discuss Nike’s allegations of counterfeit sneaker sales, the platform’s authentication process, the NFT crossover, and the outlook for reselling platforms.

Video Transcript

[MUSIC PLAYING]

- Online sneaker and streetwear resale platform StockX is out with a new report today on its sneaker authentication process, which comes as the company deals with legal troubles from Nike over claims of counterfeit sneaker sales on StockX. Joining us now is StockX CEO, Scott Cutler. Scott, good to see you, as always, here. Look, you move a lot of goods through StockX. Is there any merit to what Nike has been claiming at your company?

SCOTT CUTLER: Well, we believe the original case has no merit. Their recent amendments are equally meritless. We have the right to use a brand's name and trademark when selling products. And that's well established under current law. But I think what's really the focus here is really the process that we go through, which is a very rigorous process that's backed by over 500 people and millions of dollars invested in a global network to authenticate products. In fact, every single product that's sold on the platform every day.

- And so, for Nike, what they had alleged was that they had ordered pairs of Jordan 1s, and what they received were counterfeit. Is there a percentage of some of the goods that move through that the company still does have to acknowledge are counterfeit, because of customers who have come forward and recognize those discrepancies.

SCOTT CUTLER: We put out a report today to drive total transparency over our process around authentication. So the facts are simply that we've authenticated over 35 million products that have gone through our authentication process since 2016. In that process, we have rejected more than $400 million worth of products that didn't meet our authentication standards. I think if you just look back at the last 12 months alone, we've protected consumers by rejecting more than 300,000 products worth more than $100 million.

And that's-- and that's really the focus of what we do every single day. And in the rare event where, if we don't do our job of meeting that standard, the customer has the opportunity to get their money back, or we actually replace for a different pair. So we're putting every single effort that we have, and we're putting out this report to-- really to highlight the work that we do as a marketplace, which we think is the highest standard among any marketplace for authentication.

- In the marketplace right now, and kind of switching gears here just a little bit, because I think about what we've heard from retail companies over the course of this earnings season. And where customers, quite frankly, are pulling back on some of that discretionary spending. You know, system-wide within StockX, are you seeing that within the data, and the values even, of the number of customers who are coming in, or used to come in and purchase more wholeheartedly, perhaps that they're kind of pulling back on some of that spending.

SCOTT CUTLER: Well, StockX as a platform over the last number of years has grown tremendously. We have buyers in over 190 countries and territories around the world. But these are consumers today that are impacted by the war in Ukraine, supply chain issues, interest rates, inflation, and but at the same time, we're growing on top of the incredible growth that we had over the pandemic period.

So where we're focused, is providing a great experience for the consumer. But I think as you've seen across all e-commerce experiences, the consumers are in a much more challenged state, and a more unpredictable state, than we've seen today. All that being said, we continue to grow on top of the record growth that we've had over the last numbers of years.

- Scott, since we last spoke, it looks like you've built up a pretty sizable NFT marketplace business. Now, do you view GameStop's impending rival into this space as a credible threat?

SCOTT CUTLER: Well, it's not a credible threat to us. The NFT marketplace is an exciting new area. Web3, decentralized, providing a new opportunity, for we think, for investing in alternative asset class. Our take on NFTs is different than GIF images or digital art. Are NFTs are essentially a claim certificate to a physical item that's stored in a vault at StockX premises. And so, the NFTs that are available on StockX essentially represent the right of possession of a physical product, which is very different than most other applications for NFTs.

So we're excited about this area, but it really expands on something that's been an exciting trend for us over a number of years, which is, this area of sneakers and collectibles and current culture is now an asset class that this next generation of consumers is really excited to invest in.

- How many people have you seen buy into the NFTs, and if somebody was to take possession of what they essentially have the token for, does the value of that then depreciate? Because I'm not-- I don't know if somebody wears the item once they finally take possession of it physically.

SCOTT CUTLER: Well again, so going back to the process itself, the NFTs are tied to physical products. And the products that we chose to launch, were essentially in demand, highly liquid, highly traded products. They're stored in a facility in a StockX vault. And effectively, the right to possess that NFT, trades. And we have had a few transactions where people have chosen to redeem that product, to be able to pull it out of the vault, which they can do at any point in time.

But what you'll see over time, much like you see across most of the products in the catalog, is that over time, these items that have never been worn become more and more scarce over time, which has shown that the value of these products typically has increased over time. This isn't a market like crypto that's not tied to anything. This is actually tied to a physical item. And as you look at those physical, scarce items, they've grown in value faster, and grown faster, than even the S&P.

- Scott, before I let you go, real quick. Has this market volatility, does that mean you will not be going public this year?

SCOTT CUTLER: So I'm not going to comment on speculations or rumors around that. We are 100% focused on execution of the business, which for us, in which we've highlighted today, a focus on the product, the technology around authentication, those standards, continue to expand our business globally. And expanding as we have so aggressively into other categories.

- All right, I've been a customer on more than one occasion, I will say. StockX CEO, Scott Cutler, thanks so much for taking the time here with us today.

SCOTT CUTLER: Thank you.