Why Cleveland Cavs owner Dan Gilbert cofounded a 'stock market for sneakers'

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Dan Gilbert

REUTERS/Rebecca Cook

Dan Gilbert, founder of Quicken Loans

Cleveland Cavaliers owner Dan Gilbert doesn't really wear sneakers, but he loves them as an economic idea.

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In fact, he loves the idea so much he's actually cofounded a "stock market for sneakers" in Detroit called StockX.

Before StockX, Gilbert had been toying with the idea of building a stock market for consumer goods for awhile, StockX cofounder and CEO Josh Luber tells Business Insider. But Gilbert didn't know what to start with until he saw his teenage son selling sneakers on eBay, and realized sneakers would be a perfect test for a stock market for tangible things.

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Sneakers had everything he was looking for, including a passionate fanbase and a $1+ billion resale market.

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StockX

StockX CEO Josh Luber

At the time Luber, a former IBM consultant, a sneakerhead since age eight, and founder of sneaker-pricing startup Campless, had already been working on the concept. So Gilbert's people flew Luber out for a Cavs game, where the pair talked about their respective visions for what a sneaker stock market could become, and then decided to go into business together.

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Luber moved to Detroit and StockX launched earlier this year, built around the premise that stock-market style pricing could improve the marketplace for sneakers. StockX connects buyers and sellers, and serves as an intermediary between them that guarantees the legitimacy of the product.

There are two ways to buy a sneaker on StockX. The first is to click the "Buy" button on shoe's product page, which purchases the sneaker at the lowest "Ask" (seller listing price). The second is to place a "Bid," which makes an offer that a seller can choose to accept - presumably lower than the "Ask." Like in the stock market, sellers and buyers can update their "Asks" and "Bids" based on supply and demand.

As a buyer on StockX, you don't know who is selling you the sneakers, but you know two basic things: the price, which is dynamic, and that the sneakers are authentic. StockX holds the money you pay for sneakers in escrow until it validates that the sneakers are both new and real, then it ships them to you and gives the money to the seller.

StockX

StockX

And the market can heat up: a pair of Yeezy's, the Adidas shoe line created by rapper Kanye West, recently sold for more than $4,000 and sought-after Jordans also routinely fetch thousands of dollars.

The authentication feature has made StockX valuable to sneaker collectors from the get-go, Luber explains. Sneaker sales online, even on places with reviews systems like eBay, can be complicated to navigate because of fakes floating around. StockX takes the same 10% commission as eBay, but does the certifying work itself.

Portfolio management

Besides authentication, StockX pushes toward its "stock market" branding by helping sneakerheads manage their shoe collections like they would a stock portfolio. On StockX, you can track a digital representation of your collection (portfolio), as well as follow the fluctuations in the market for particular pairs of shoes. Basically the type of tools you get with an online brokerage like Schwab, Luber says.

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StockX

StockX

Though StockX bills itself as a "stock market for sneakers" it isn't an SEC-regulated exchange. As long as StockX is selling physical products, they won't need to worry about regulation, Luber says. If they start selling sneaker futures, however, that would be a different story.

Watches, toys and other goods

So then why call it a "stock market?"

"The efficiency, credibility and liquidity of the financial markets have been foundational to the largest economy in the world," Gilbert told TechCrunch. "We believe this is the right time to extend this fundamental concept to appropriate sectors of the online consumer marketplace." StockX wants to put those three big elements of the stock market into physical goods.

And Luber says it won't stop at sneakers. He lists off watches, handbags, and collectible toys as areas StockX could grow into in the near term.

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But right now, Luber is focused on opening up StockX to international buyers, which is slated to happen on July 7, if all goes according to plan.

Check out StockX for yourself.