How the StockX Co-Founder Builds Hype for New Products

0:00The idea of using variable pricing can be used. it doesn't have to be the most expensive stuff. It can be used on discounts. It can be used on how much a discount you want to take. It's just a way of flipping the idea of the demand problem, of not knowing how many people will buy something. Hey, everyone. Welcome to Shopify Masters, your companion for starting and building a business. I'm your host, Adam Leventer. It almost doesn't matter what market you're in. If you want to make it big, you need hype. You have to convince people they need something and there's no guarantee they're going to get it.

0:30In the collectibles world, hype is the name of the game. And our guest today, Josh Luber, is the master of it. He's the co-founder of StockX, the first sneaker resale marketplace to reach a valuation of more than a billion dollars, and Fanatics Collectibles. He's now working on a new venture called GhostRite. Josh is here today to tell us all about it and how other founders can build hype for their products. Josh, thanks so much for being here. Thanks for having me, Adam. This is going to be fun. What is on your back wall? What's behind you for those listeners that cannot see you? It's pretty animated, I would say.

1:03Well, even more so is all the other walls, all the other rooms in the whole house. The camera can only capture a very small piece of it. Right now, it's primarily Ghost as the new company we're starting is Ghost, right? Yeah. But this is kind of part of the fun of being in this industry. There's a room for sneakers. There's a room for trading cards. Most of this room is collectible toys. Yeah. You know what? I was reading a white paper that you penned back in 2021, which we can talk about in a bit, called Trading Cards Are Cool Again. And you describe this room in your house with all of these cards and sort of the smell of the plastic cases, the sort of smell of nostalgia slash plastics.

1:43But when did you get into all this? Yeah, it's the smell of new nostalgia because I've collected trading cards since I was a kid. But all, by the way, all this stuff is just all the stuff I wanted to own as a kid. I'm 46. I have the same story as every other 46-year-old. I grew up playing basketball and Jordan played. I always wanted Air Jordans. My mom would never buy me Air Jordans as soon as we got some money. We all have the exact same story. For me, I collected trading cards early on, sneakers. The new smell of nostalgia is that back then, trading cards weren't graded. The grading of trading cards, the leading companies called PSA, but there's others.

2:22They encapsulate the cards in this plastic. And that's what really creates the value, standardizes them. And so anyone who is a serious card collector has a room full of these PSA slabs. And so you walk in and that smell of plastic hits you. And so it's sort of transition. Sneakers, by the way, have a different smell. Some maybe not so good if they're warm, but you know, the smell of like a new pair of Nikes, that also is a very distinct smell. Yeah. And we'll dive into all of that today. And I'm so interested in all this. I can relate to all of it firsthand. iTunes 46. So all of our Gen X tendencies will show throughout this podcast.

3:00There you go. But aging aside, what is GhostWrite and how do you explain the business to your mom? the collectible toy industry, it's big enough to matter. It's big enough to work with all the most important brands and artists and companies, but it's not so big that it has the monoliths that are in the space and sneakers and trading cards and these other similitudes. All these categories, which we refer to sort of in a macro sense as the hype economy, all these products that are supply and demand driven, that have collectors and resale value and sit in that space where they're equal parts, consumer good and financial asset.

3:37They're all the same. And so sneakers and trading cards, you have Nike and Adidas and the NBA and NFL. Collectible toys have the same opportunity to engage with culture, to work with all these most important people, but didn't already have this big space. So for us, StockX was a marketplace. We sold all these products, started with sneakers. The business after that was Fanatics Collectibles, where we created the trading card business. So now we get to take all the learnings of sneakers and trading cards and apply it to collectible toys, which is kind of like starter art. It's not kids' toys. It's not fine art that sells for millions of dollars.

4:20But it's a space where we get to actually create products with the widest possible aperture into culture. And that's what all these products are, they're all the intersection of culture and commerce. And in terms of brand building and the hype economy, it's just, this is where I've built my whole career. So now we get to create a brand with the widest possible lens of creating all different ones. Think of this like, like an Air Jordan 1, right? An Air Jordan 1 is this classic silhouette, but the value and the cultural relevance of each Air Jordan is depends on what color it is. When was it released?

4:55Who was the collaborator? Was this the 1985 Air Jordan that Michael wore during the first year? Was this a collaboration with a Japanese streetwear brand in 2020? And they all have different stories and they all have different values. And that's what we're doing for collectible toys, right? We're creating that same lens of storytelling, but by using just a different canvas rather than a pair of Air Jordans or a trading card. This is with collectible toys. Yeah. And given your history with StockX and Fanatics, you've got this deep knowledge of shoes and streetwear trading cards, as you mentioned.

5:27What was it about toys, like that particular category? What was the due diligence and or the thinking there? Yeah, well, you know, it is that the due diligence was directly related to the experience at StockX because we started with sneakers. We launched in early 2016, and we were always looking for what other products might make sense to add to the site. We added streetwear and watches and handbags. And in mid-2018, we added collectible toys. We started with a brand called Bearbrick that's made by a Japanese company called Medicom. And they're probably the leader, longest running, most successful collectible toy franchise.

6:02This company's been making them since the year 2000. And overnight, we became the leading seller of Bearbricks. And then we added the other sort of main toys, Cause and Astro Boy and these other collectible toys. And we overnight became the leader because the collectible toy space, it's very fragmented. You don't have Nike and the NBA and these massive companies that control it. So we became the center of it. I've always collected the stuff. I've collected all these sort of products. By the way, I also really love vintage toys. So like G.I. Joe and He-Man and Transformers and Star Wars and all the toys from our childhood.

6:40And so we always had a lens into that industry, the brands of the industry, the size of it, and sort of got to the point in my career, we're ready to create a brand. And that just for me was the most interesting and also the biggest opportunity. Okay. And on the partnership side, so when you look at your growth strategy for GhostWrite, what are the types of partnerships you look for? What makes a partnership successful? How do you make this all happen and turn this into an actual business model? The important part of GhostWrite is that GhostWrite is what we call a blank canvas collectible. It's a blank canvas toy, meaning that almost all collectible toys are IP.

7:21It's characters. It's cause. It's Astro Boy. It's Spider-Man. It's Iron Man. But the leader, Bear Brick, is just a bear with a human head. And you could put Spider-Man on this, or in this case, this is just a random design that goes on this. And because of this idea, because of this idea You have a blank canvas where the bear itself is not a character. And this is the same thing for Ghost, right? Where the ghost itself is not a character. What it does is it allows you to collaborate with so many more brands and people and partners. And so your question, the partnership aperture is so wide because a ghost can be anything.

8:00Ghost itself is not, it has no face. It has no gender. It is whatever we create it to be. And so we started making sort of very similar ghosts. There's a Ghost Right branded one. There's a couple, you know, random designs like a pencil and an NBA basketball. But we have licenses with the WNBA, with the NBA, with Major League Baseball, so that we can then create, you know, players. And we have a big release coming up with the WNBA, what will be the first licensed product where we go down that path. But, you know, to date, one of the most successful and one of the most interesting ghosts we've done is with a brand called Eastside Golf.

8:36Eastside Golf is a relatively young golf apparel brand started by two young African-American professional golfers. This brand has deals with Jordan brand and has sort of made an important part of culture. And we took their logo, which was this guy swinging a golf club. We turned him into a ghost. And then we used that ghost as tee box markers on the course. So it's super cool where you had these, the ghosts of the Eastside Golf logo on the course, and then they were given away to the players and everything else. So it's just really the flexibility and the ability to work with all these different partners.

9:15And then you're actually selling these collectibles, right? This is, you know, like any other toy company, you're selling them on the open market. There's a limited edition. I would imagine that is what creates the demand, right? You've got the limited supply happening. You have this uniqueness around the product that you've developed in partnership with an Eastside Golf or otherwise. And then your job is to what? Create sufficient demand and drive pricing up? Is that the idea? One of the most simple parts of commerce that I think most companies take for granted is the idea that, yeah, we just make a product and we sell it.

9:51We actually made Ghost for one year. We started making Ghost in August of 2023. And we didn't sell any Ghost until August of 2024. All we did for a year was make ghosts for brand building. Small partnerships, promotional, one-off, friends and family, the Eastside Golf Fund, which was just for the golf tournament. And then we finally started selling them in the end of 2024. And there's been four public releases. But for us, the important thing is that these are true collectibles. We care about the long-term value of it. We care about the transparency of how many are produced, how many exist, how many have been sold.

10:29And so actually everything is sold directly on GhostRite's website. And we use what's called a blind Dutch auction, which means that we don't set the price for the product, for the ghost. We tell everybody how many exist. We give all the marketing information, whatever you need to know. And this is not something we made up. This is something we've taken from parts of finance that uses to create variable pricing for certain equities that get released in the market. The economics of it doesn't matter. What's important is that we don't set the price. the market sets the price. And we let the market set the price for the products because we think we're making true collectibles and we tell everybody how many exist.

11:05So it says on the bottom of every foot, you know, for the pencil one here, right? There were 50 that were made. There were 20 that were sold, but there were 50 that were made and everybody knows exactly how many exist. So as we continue to grow, that will be the through line of this. Transparency of supply, transparency of pricing, and market-based pricing to let the market set the price for the products that we create. And then do you rev share with the partners or how does that work? Yeah. I mean, everything is, um, everything is a separate business deal. So there's a lot of ways to do it, but the most of the collectible toy industry and I imagine the, uh, primary toy industry, um, works off of licensing.

11:42And so most of our deals are just a, uh, a license. Sometimes it's a profit sharing, whatever, but at the end of the day, it's a partnership with that company and that brand. And we get to figure out how to split the pie with them. One of the topics that you talk about in your paper is this idea, which is directly related to this, but this idea of managing this sort of stability and careful management of the supply side. And your ability to do that drives demand, of course. Is sort of one of your unique capabilities that you can forecast demand with products like this? Do your partners ask you to forecast demand?

12:21Are you close when you do so? How does that all work? This is like music to my ears to talk about. This is my favorite topic to talk about. So in all forms of commerce, demand is the unknown, right? We know supply. It's however many widgets the company wants to make, right? But demand is an unknown. It's a forecast. It's an estimate off of last year's sales. It's a prediction, right? I mean, there are certain things that pre-sell. But for the most part, you make products and then you hope people buy it. The reason that we are using what we call market-based pricing, where you let the markets at the price for it is so that you don't have to forecast demand.

12:55We let price be the variable, right? So if you think about sort of traditional commerce, you know, Nike makes a pair of Air Jordan 1s and an Air Jordan 1 sells for 150 bucks and always sells for 150 bucks. But depending on how many they make and depending on who the collaborator is with, if it's a Travis Scott Air Jordan 1, I mean, that's a$2 ,000 shoe, right? So price is always constant in traditional commerce, right? Air Jordan 1 is always 150, But that's illogical. It shouldn't be. That price is actually variable based on all these other factors. So we have flipped that. Price is the variable, right?

13:28We go in there. And so demand doesn't matter. We take demand as an input, which is we put the product out there. And then however many people want to buy it, can buy it. And price ends up becoming the variable. So this is at the tip of the iceberg of the paper we wrote in 2021. We're actually writing a book about this right now. And it's one of the most fascinating parts of my whole career over this past 10 years. because the entire hype economy, all these products are products that fundamentally should not have a fixed price, right? They fundamentally should be based on the demand that's out there.

14:02And the demand, by the way, is not only the product itself, but who the collaborator is and the value and all these parts of it. So like, this is like the core of all of this. And truly like the purpose of Ghostwrite, the brand has to matter. We have to collaborate with great people and make great products and market it. But the purpose is to be able to show that we can run a brand using market-based pricing? Because of this, the question is, no one ever knows demand. And that creates all sorts of problems around it. So anyway, I don't end up in a economics lecture on this, but this is the really interesting thing from a macro business standpoint.

14:37If one pillar of the hype economy is this idea that a product should not have a fixed price, what are the other pillars and or variables that go into the quote unquote hype economy? Yeah. So there's the way it works today versus kind of the way we think it should work. Even at the very beginning at StockX, everything we've done is take parts of how finance works and apply it to certain consumer goods in certain ways that make sense. So StockX, for example, the business at StockX is not sneakers. The business is the bid ask model of how somebody buys or sells a sneaker, how somebody gets to the price and how you get to that fair price.

15:16That's the real business at StockX. It happens to be that we started with sneakers and happens to be that's the biggest category. And so having variable pricing, having demand as an input, having full transparency of supply, that's a huge one. Most consumer goods companies do not say how many units they produce of something. And that's intentional. And sometimes there's good reasons for it. But if you want to have a true market price, you need to tell everybody how much supply exists. And it can be okay if the difference between how many exist and how many you sell. And we're even fully transparent.

15:52When we made this pencil ghost, which has been one of the most successful, this was a friends and family release. There were only 20 that we sold as a blind Dutch auction on Ghost Rider. It was only open to about 300 people. The clearing price, the market price ended up being$417 for 20 units that we sold. But we told everyone that we made 50. Some were seeded. I have some. The company has one. And the last couple of sales in StockX have been$2 ,500 for this, even though the initial clearing price was$400 because it's so rare and because everyone knows there's 50 that have been made. There will never be any more of this particular one made.

16:28And that level of transparency of supply, that's everything. By the way, that exists in all of finance. You never worry how many shares of Nike stock have been issued into the market or like the whole economy would collapse if all that information was secret. And we think that that's how these type of products within the hype economy should also be run. What about the term collectible? So when people refer to the collectible space, and you did this in your paper and talk about sort of the meteoric growth of the collectible space, what are we talking about here? Are we talking about products that have limited runs or limited supply?

17:05Do we talk about like asset classes of collectibles? Like what is the definition of the collectible space? Yeah, that's a good one too because the word collectible or limited edition or rare is thrown around so much in traditional commerce. And that's fine. People want to use marketing buzzwords to sell products. We internally sort of talk about GoStrate as a true collectible. And look, we're very lucky that we get to build a brand from scratch in 2024 and take all the learnings from these other industries and other companies. You know, there are many Nike shoes that we would say are collectibles.

17:47But Nike didn't start as a company specifically trying to create collectibles. They were trying to create sneakers. Along the way, there are some products that became collectibles. So for us, we have to take that into consideration as we're creating the brand. So some of the things we've already talked about, transparency of supply, taking demand as an input, but even like the packaging. So this is the first Ghost that we ever sold publicly. It's called the GhostRite 1. It was the first one we sold. There were only 20 units that were available. But this is the standard packaging for Ghost, which is that it's completely clear, which means that collectors can keep it sealed and still display it.

18:26The idea of collectors who want to keep products brand new in the original packaging, not open them, which is just when you look back at some of the most valuable collectibles, iPhone 1s are reselling, but the ones that are still sealed from 2007. So we made the packaging very specific around that idea so that people could display it and still enjoy it, but not have to take it out of the original packaging and reduce its seal. So it's a lot of these little decisions that go along. All these things that go into it, we think is making a true collectible. When you talk about the run-up in the collectibles market between 2019, 2020, so the obvious factor here is the pandemic.

19:06but was there other factors at play that sort of added to the rise of the collectible space during that time period? Well, you know, if you just look at valuations of companies, you know, all the valuations were going up. So then people had more money, markets going up, and then people are looking for other places to put that money. It's very relevant to the first topic you and I were talking about, which is that our generation are now the people that are creating the businesses for these products. And we all grew up as consumers of this product, right? We were the ones who were obsessed with Air Jordans and with sneakers and toys and are now creating companies related to sneakers and toys.

19:51The generation before us didn't have that. Phil Knight wasn't a sneakerhead growing up because he hadn't created Nike yet, right? Steve Jobs wasn't an iPhone enthusiast because he hadn't invented it yet, right? That generation generation invented these industries and these products. And then we were the ones that grew up with it. Now we're creating those businesses around it. So the fact that trading cards came back, by the way, after sneakers, after toys, some of these other businesses that are already grown was not a surprise to any of us because we were already in there, you know, going back into all these things that we liked as a kid.

20:20You know, the cyclicality of commerce is not new. And we just happen to be that generation at the tip of it, creating these companies today. This idea of building a business on top of a personal passion from the past, like something you were into as a kid or into when you were in undergrad, let's say. But I mean, you're doing this, it seems like. You probably know a lot of folks that are building on the back of a passion from the past as well. Do you think that's a good sort of quote unquote startup strategy to pursue if you're thinking about launching some sort of venture? It's a really interesting topic.

20:58I am fortunate I get to speak all over the place, all over the world, in many different places. And whenever I get to speak at schools and colleges or high schools, this conversation always comes up. And there's always six kids in the audience that love sneakers or love something else and they all want to build businesses around it. And I think that's great. I think it's great to sort of have a direction. you know when I graduated college in 1999 the internet barely existed the word entrepreneur didn't exist there was certainly no iPhone there was certainly no social and you know I almost intentionally avoided creating any businesses around sneakers almost out of fear of creating a business that was just an excuse to play with sneakers like what business really was there I could open up a sneaker store maybe but you know there wasn't this you know the number of different options.

21:48So today, there's just so many ways that you could be a content creator, you could run a marketplace online, you could build brands so much easier. So I do think it's a good place because it's still work, right? And you want to show up every day and work on something you like. And by the way, beyond this, people talk about the idea and the passion and the industry first, and that's fine. And that's the sort of big idea or big place to start. But beyond that, Really, a business is just people. And the opportunity to work with the people you want to work with, that's, I think, even more important than whatever the industry is.

22:24Because you got to show up and hang out with those people every single day. For me, when I left StockX, there were 1 ,400 people. When I left the NX Collectibles, there were probably close to 2 ,000 people. Now it's me and 10 other people at GoStray, and it's exactly who I want to work with. They're all people I've worked with before. And so the industry is one thing, but I think people is even more important. Yeah, that's a great point. I mean, the flip side of that are the folks that are somewhat concerned about getting into business with good friends, you know, in fear of, out of fear of sort of like ruining the friendship or what have you.

22:56I assume what you're talking about is just surrounding yourself with great people in general who you've worked with in the past to create something net new. Yeah, that's right. And by the way, that's a really good caveat, right? It doesn't necessarily mean that you should go into business with your best friend or your spouse or something like that. But when you find people that you either work really well together or have a great relationship and, you know, hold on to those people. Like I said, there's 11 people that work at Ghostright with me. And I think all but three I worked with at either one or both of my last two companies.

23:30and that's because, and by the way, some of them had worked with me on companies before that, right? So it's like, once you find those people, then you hold on to them and you continue to create things together. And it becomes, there's exponential value in that because you don't have to learn how to work with a new group of people every time, you know? So it's good stuff. Okay, I want to swing back to the whole collectibles market for a moment and ask you about sort of asset classes. So, you know, what I saw, at least in my experience as a collector, is that a lot of folks were treating these categories, whether it be trading cards or collectible toys or Pokemon or vinyl records or whatever, treating these as financial assets and categorizing them as such.

24:17Some investors were sort of looking at, say, watches as an inflation hedge, like gold. And others were saying, well, I'm collecting cards because they're like growth stocks, but I can actually touch them and they're tangible and I can have fun with them and I can move them more efficiently or whatever. Some folks were saying, no, no, these are like blue chip Dow Jones equity players, whatever. They would categorize these different collectible categories like a financial asset. In your experience, do you think that there's a through line here. Yeah. So I 100 % agree that there are certain collectibles, there are certain consumer goods that do sit in that area of being a financial asset in every single way that we think about it.