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StockX expands authentication footprint by 50% amid COVID-19

Yahoo Finance’s Alexis Christoforous and Scott Cutler StockX CEO, discuss retail trends leading up to Black Friday.

Video Transcript

ALEXIS CHRISTOFOROUS: Are sneakers on your holiday shopping list this year? I'm not talking about just any sneakers. I mean those coveted, you know, Jordans and the Yeezys, the hard-to-find sneakers, pre-worn sneakers. It is big business-- currently a $19 billion industry, expected to jump to $30 billion over the next decade. The resale platform StockX says business is booming.

And here to talk about it is StockX's CEO Scott Cutler and our resident sneaker guru Reggie Wade. Hi to both of you guys. Thanks for being with us. So Scott, just tell us how business is right now. We're in the middle of the holiday shopping season. What does it look like?

SCOTT CUTLER: Well, 2020 is a new normal for holiday shopping. As you know, online shopping has been accelerating over the years, but the pandemic has caused shifts for consumer behavior that, quite frankly, accelerated maybe 10 years of e-commerce activity just in the last couple of months. So sales will primarily be online this holiday season. And with consumer preferences changing, more people will be shopping on the secondary market.

And for us, it's really about having great products that are available to customers, and we can talk about what those trends are. But it's really being driven by a next generation of consumers. For us, that's 75% of consumers under the age of 35. These are the trendsetters. These are the ones defining what's hot, what's not.

REGGIE WADE: Scott, Reggie Wade here. I wanted to know, do you guys see that the secondary market is actually turning into the primary market? I know for myself and a lot of my fellow sneakerheads, if we see a big-time drop, we're like, you know what? We're probably not going to be so quick on the draw, so we're going to go straight to StockX to get them. So are you seeing that more and more people are doing that?

SCOTT CUTLER: So we're at the center of a couple of different convergent streams. In this space, and when we look at this next generation of consumer that wants access to items that represent current culture, there's convergence happening between sneakers and fashion and now even new categories, such as electronics. And what's happening in this is that there's so much demand for these products that consumers are now going to the secondary markets as their first place to purchase because the secondary markets and platforms, like StockX, provide those customers access to products that you can't find from the brand or from retailers. And they trade live in marketplaces like ours. And so that notion of getting access to those great products for these consumers has been a real driver for this convergence between primary and secondary in the mind of the consumer.

REGGIE WADE: Scott, how has the pandemic affected the authentication centers? I know when it comes to clothes and sneakers, that's probably the biggest part of the entire transaction. So what's going on in there now?

SCOTT CUTLER: So we stand in the middle of the seller and the buyer in our platforming. We authenticate every product on the platform. And for us, that involves a very complex supply chain and operations around the world. We've expanded our authentication center footprint by 50% just this quarter. We've opened up Toronto and Hong Kong. We'll be in 10 authentication centers around the world.

But that process of authentication means trust for the consumer in these high-demand consumer categories. And for us, delivering that experience that the customer expects for great products is the value proposition for us when we're getting supply from hundreds of thousands of sellers all around the world to, again, power this marketplace.

ALEXIS CHRISTOFOROUS: Scott, you mentioned the opening of that authentication center in Hong Kong. I know you also launched a localized business in mainland China. Tough time to be doing something like that, I would think, during a pandemic. Why do that now, and why China?

SCOTT CUTLER: So when we look at the opportunity, we're servicing customers in over 200 countries and territories around the world, and most major brands are releasing product out to those consumers around the world. And so the reason that we're authentic-- open up authentication centers in other places is really to provide an opportunity for sellers to be able to provide product to us in those regions. We have the opportunity to authenticate those products in region and then connect those sellers with buyers in the same region. So the reason that we go to Hong Kong, Canada, the reason that we're so large in Europe has been that we've had a strong base of sellers and buyers in those regions. And so it's really a part of expanding that customer experience.

We've had to open up these authentication centers virtually. These are team members that are joining us, opening up these authentication centers in the middle of the pandemic and in the middle of surging volumes in the marketplace. And so it's been dynamic for us to be able to operate with our frontline team members around the world in this environment.

ALEXIS CHRISTOFOROUS: Scott, I'm mesmerized by this, you know, rotating Jordan over your shoulder. Talk to us about what is in demand right now on your platform when it comes to these sneakers.

SCOTT CUTLER: So 2019 was all about Jordans and Yeezys. I think this year-- I think the most popular brand of sneakers will still likely be the Jordan. The Jordan 1 Silhouette that you see here rotating behind me, there's been a new recent release-- the Jordan 1 Retro Mocha Black Toe-- Reggie knows this sneaker-- patterned after a great release called the Travis Scott Jordan 1. We expect that Mocha to be a top seller.

In women's, there's a Jordan 1 Retro High Lucky Green that's really based on a colorway back in the 1986 Bulls versus Boston Celtics. That's going to be hot for women. We're seeing Telfar bags-- a shopping bag, a small black bag-- represented by your own AOC, worn with style. This is really driving a great amount of demand. Oprah had this bag in particular on her favorite things, most coveted holiday gifts.

And for us, just last week, we introduced something new into the catalog, electronics. So this year, Playstation 5 and the Xbox Series X consoles are trading on StockX. We're trading thousands of consoles every single day. This is likely the holiday gift of this season in electronics, and it's largely only available on StockX.