StockX, GOAT, and Stadium Goods compete for sneaker vertical. What factors will determine who wins the largest market share, and what can other specialty retailers learn from the fight of the sneakerheads?

For the past decade, specialty eCommerce marketplaces have grown. As I've discussed before, when online marketplaces thrive, they crowd out linear retailers due to network effects. Take for example mid- and late-aughts darling Zappos.com, which is currently being pushed out of the shoe market by its own parent company, Amazon, whose marketplace platform allows many more vendors to sell many more shoes to many more people. Slice Intelligence ran the numbers on Zappos' and Amazon's market share, and the results have industry experts wondering if Amazon will close down Zappos in the near future.

But the news isn't all dire for specialized, linear retailers. To compete, retailers must engage in two battles. The first battle is to adapt by either building or acquiring a marketplace of their own. The second battle, and the one we'll examine more closely in this article, requires that retailers understand how marketplaces compete.

How marketplaces compete

Let's take a closer look at the sneaker marketplace space. At their core, StockX, GOAT, and Stadium Goods are all making the same pitch to sneaker fanatics: come buy or sell authentic, limited stock sneakers on our platform at a better price, and we'll make sure there's no fakes.

All three companies also have authenticity verification processes. Sneakerheads only want the real deal, and at a bargain too. On the other side of these platforms, many sneaker collectors have pristine shoes they're willing to sell. The platforms connect private buyers and sellers over a shared passion for authentic fresh kicks.

Sneaker Startup Competitors

StockX

GOAT

Stadium Goods

Founded

2015

2015

2015

Funding Round

Series B

Series C

Series A

Latest Deal Amount

$44m - Sep 13, 2018

$60m - Feb 8, 2018

$4.6m - Jan 12, 2017

Employees

251-500

251-500

51-100

Legal Status

Private

Private

Private

Transaction Fee
(charged to seller)

8.0% to 9.5%

9.5%-20% + flat fee ($5/$20/$30)

20%

Source: Crunchbase, company websites

Thus, they have two types of users they need to attract. Marketplaces compete for two markets: buyers and sellers. This holds true for all platforms that connect producers (or vendors) and consumers. Think of how Uber, Lyft, Juno, and other ride-hailing platforms have to balance the tension between the consumer's desire for cheap rides, and the drivers' desire to get paid. Without vendors, there's no reason for consumers to visit your platform, and the reverse is true too.

Pricing in a dual-sided market

How StockX, GOAT, and Stadium Goods stack up on pricing

Just like in linear retail, buyers want the best price. When it comes to the sneaker prices on these platforms, the prices vary widely by make and size. For example, one search for adidas Yeezy 500 on Stadium Goods found prices as low as $275 and as high as $1,130 (an outlier, the median price was $462.50). That same shoe on GOAT ranged from $235 to $265, and on StockX from $154 to $242.

StockX, Goat, and Stadium Goods have a different approaches to transaction fees

On the other side of the market, each company takes a very different approach to vendor fees.

StockX takes a carrot approach. Initially, sellers pay a 9.5% take rate on each sale, but the fee may be reduced as low as 8.0% for sellers who sell multiple items or who sell more than $10,000 in merchandise. This is consistent with their vendor-focused approach, which we discuss in more detail below.

GOAT opts for the stick approach, charging 9.5% + a flat fee ($5 in USA/$20 in Canada/$30 in other countries). However vendors who cancel sales frequently may be penalized and see their fee climb as high as 20%+ the flat fee.

Stadium Goods levies a flat 20% fee with no variable.

Beyond Pricing

It's no surprise that vendors may prefer StockX. Based on our search of all three sites, StockX consistently had more stock per search than its competitors. But lower transaction fees are only part of the reason why vendors likely prefer StockX.

StockX brands itself as "The Stock Market of Things." While it doesn't behave like a stock market at all, it does present sneakers (and now apparel, handbags, and watches) as though they were stocks with a ticker for gains and losses. StockX even has a portfolio page where vendors can be sorted by their "gains" and "losses," and total "portfolio", which in truth is more of an arbitrage brag zone, and an inventory value total, respectively.

Nonetheless, "the stock market of things" works wonderfully from a marketing perspective, and puts the focus squarely on vendors. StockX markets to sellers' ambitions even more than it does to buyers' desires. That's quite a departure from linear retail marketing, which focuses almost exclusively on buyers.

GOAT has taken a very different path to growth. Rather than branch out to other products, GOAT doubled down on its vertical and now offers sneaker cleaning services. The services benefit both collectors who want pristine sneakers and buyers who are looking to sell used shoes that could use a good scrub. By staying focused solely on sneakers, GOAT maintains a niche and can build a network purely around sneakers. It also expanded its inventory by merging in early 2018 with another sneaker marketplace, Flight Club, which also has a popular physical store presence.

Stadium Goods, like StockX, also branches out to apparel, and focuses on identity through celebrity fashion lines and luxury goods. Its blog speaks to urban consumer subcultures, which follows the more traditional approach to retail marketing. Its emphasis on collectibles and 'trophy case' items suggests a focus on upmarket collectors.

What's the 'right' marketing strategy for marketplaces?

In short, and as of writing, StockX has taken a vendor-focused approach, Goat has a vertical-focused approach, and Stadium Goods has a consumer-focused approached.

If we analyze pricing, Stadium Goods has a problem. It charges both buyers and sellers more, and its culture and identity branding strategy can't paper over that fact. Additionally, GOAT has a similar user experience and design to Stadium Goods, and at a cheaper price.




GOAT homepage screenshot taken September 20, 2018.






Stadium Goods homepage screenshot taken September 20, 2018.

StockX's attractiveness to resellers creates value for consumers too by giving them a wider product selection at a better price (aka network effects).

Meanwhile, GOAT maintains its brand by doubling down on its vertical and becoming a one stop shop for all sneakerhead needs. Bundling linear services alongside its marketplace may appeal to sellers and buyers alike if GOAT can create incentives to buy, sell, and clean shoes all within its platform. Etsy has found success with a similar seller-services approach in the craft goods market. The risk would be that users buy shoes elsewhere, then come to GOAT just for the cleaning, a type of platform leakage.

There is no outright 'best' approach, and a combination of competitive dual-sided pricing, buyer incentives, seller incentives, and doubling down on the vertical will help marketplaces beat out competitors.

Of course, how much to focus on what requires extensive research and planning, as well as proper platform design. Due to the the winner-take-all dynamics of marketplaces, specialty retailers have little time to get up to speed. With vertical ecommerce growing fast and squeezing margins for traditional retailers, they should be looking at how to build or buy their own marketplace now.

Published on: Sep 21, 2018