Behind the Scenes of a Sneakerhead Startup
The business side of sneakerhead culture won’t be denied. For the lovers of all-things sneakers, especially those who spend tons of energy collecting and posting about their favorite limited-edition kicks, the industry is on fire.
According to analysts, the secondary sneaker market is valued at $2 billion and is expected to grow to $6 billion by 2025. The two largest online marketplaces for buying and selling popular pre-owned sneaker styles and brands, GOAT and StockX, raised nearly $400 million in the second half of 2020. StockX alone is valued at $2.8 billion, and is expected to have an initial public offering in 2021 to begin selling its stock to the public.
This month, we sat in on a presentation by a company competing in the New Venture Competition, a pitch competition for early-stage ventures, designed to showcase a new generation of Black innovators. Among the top 10 finalists, pitching to a panel of judges during the virtual Whitney M. Young Jr. Memorial Conference (put on annually by the Wharton School’s African American MBA Association), was a new platform for the sneaker community with a strategy to disrupt the market.
With the help of co-founder and CEO Mbiyimoh Ghogomu, we take you behind the scenes of Sneakerhead startup, Tradeblock. Would you invest?
The idea. The company is billed as the first platform built specifically to unite the social and economic aspects of sneaker culture. “Sneakerheads have been trading with each other for decades, but despite the emergence of multiple billion-dollar marketplaces, nobody had built a platform where collectors could trade shoes for shoes. That’s the problem we set out to address,” said Ghogomu, who has been talking sports and sneakers with his co-founders Tony Malveaux and Darren Smith since they were together in middle school. Tradeblock also wants to build and cultivate a sense of community on its platform. “On Tradeblock, sneakerheads create a public profile that shows off the kicks they have and tells other people about the kicks they want. They can then secure new kicks by engaging in fantasy sports-style trading negotiations with one another.”
“Your average sneakerhead is not trying to sell the vast majority of the shoes in his or her collection. Thus, marketplaces are only capturing the shoes that people are actively trying to get rid of.” — Mbiyimoh Ghogomu, CEO, Tradeblock
The numbers. Tradeblock launched its beta Web app in August 2020 with 300 users and just under 5,000 total shoes. “Since then, we’ve grown to over 12,000 users and over 63,000 total shoes and inventory,” said Ghogomu, who was born in Cameroon and is the content and strategy lead for the IBM Research brand team (his day job). “We’ve also closed 346 trades as of yesterday, generating just under $30,000 in revenue. When a trade is agreed upon, we charge both parties a $40 service fee, for a total of $80 of revenue per trade. After the cost of shipping and authentication, our margins are anywhere from 50% to 60%.”
The vision. “Why did we start with trading? For one, trading is just inherently a highly engaging and highly social activity. It basically turns sneaker collecting into a game, giving users a ton of reasons to return regularly to our app and engage with one another,” said Ghogomu. “The second reason: trading unlocks inventory that marketplaces simply aren’t capturing…Your average sneakerhead is not trying to sell the vast majority of the shoes in his or her collection. Thus, marketplaces are only capturing the shoes that people are actively trying to get rid of. We surveyed our users and we found that 83% of them had three or fewer shoes total posted to these resale marketplaces. Keep in mind, these are people with dozens if not hundreds of shoes in their actual collections. Meanwhile, those same people are adding an average of nine shoes to their Tradeblock closets.”
The roadmap. Tradeblock is planning to launch its iOS app in March 2020. “That will kick off a series of promo campaigns from people like Qias Omar, a shoetuber who garners 100,000+ views on nearly every one of his videos. In parallel, we will be rolling out an automated trade recommendation program and aggressively expanding our [sneaker] authentication capabilities by building in-house authentication centers in strategic cities around the country.” And while Ghogomu and team are laser-focused on sneakers for now, trading streetwear, handbags and even gaming consuls may not be far behind. “From day one, we were very intentional about building and architecting our platform in such a way that it would be really easy for us to add additional goods when we’re ready for it. [Jeff] Bezos started with books and we’re just starting with sneakers.”
Related Links
- IBM Chief Storyteller Mbiyimoh Ghogomu
- New Venture conference
- The Wharton School African American MBA Association
- Glossy: Inside the Marketing Strategy that Fueled StockX’s International Growth
Conversation Starters
Are you a sneakerhead? How does this business model sound to you? What are its strengths and weaknesses?
What does Mbiyimoh Ghogomu mean when he says, “[Jeff] Bezos started with books and we’re just starting with sneakers?”
Do you think there’s room for a startup like Tradeblock in an already crowded sneaker resale market? Does the business have enough of a competitive advantage to survive?
sneaker heads are just people who invest in best shoes
As an avid sneakerhead who doesn’t own many pairs of expensive shoes himself nor has friends who do, Tradeblock sounds like an excellent idea and one definitely worth investing in. Since I have no desire to sell any of my shoes because I don’t have pairs upon pairs, trading is a better alternative to upgrade without having to go shopping. Additionally, with a new format of trading available, it’s a refresh from the same old selling websites like the ones mentioned in the article, StockX and GOAT. Also, Tradeblock would be a great investment option because it’s something that the sneakerhead community greatly needs and hasn’t seen before. Seeing that it also has stable revenue and user base, adding it to your portfolio wouldn’t be a bad idea. Supporting this claim are their plans to expand Tradeblock to other goods besides shoes. Considering Tradeblock is a pioneer app for the sneakerhead community, it could affect other goods in the same way as well by making them more available and affordable to the public. Expanding their inventory would also mean expanding their user base, leading to an increase in revenue. While this all may sound great, we still have to view how long people will use Tradeblock, or if people will go back to primarily using StockX and other websites. Considering their progress so far, I think that the future of Tradeblock is looking bright.
These three entrepreneurs that weren’t really businessmen before starting up Tradeblock are influential for other cultures and markets besides the secondary shoe market. They will inspire members of these cultures to step up and break the norms that other members have been following and make improvements for the betterment of their cultures. Many people probably had the idea of a trading website in mind, but didn’t have the motivation to begin a project. But as Ghogumu, Malveaux and Smith have shown us, all you need is a spark to get started with. The rest will come with hard work.
Although I am not a sneakerhead, I have many friends that are passionate about their shoes. Some would start huge collections, while others would often trade shoes with others to make a profit or simply because they found someone willing to trade one of their shoes that they didn’t want anymore. Either way, sneakerheads have developed a large industry with a projected to be $6 billion in 2025.
When first reading about Ghogomu’s plan to start a business in an already crowded sneaker resale market, my first thought was “What makes Ghomomu’s company, Tradeblock, unique? Ghomomu’s said he noticed that no one had “built a platform where collectors could trade shoes for shoes.” This type of thing is exactly what founding a successful business needs, a unique idea. Tradeblock successfully found a niche opening in the market and gradually built a business occupying that niche. Given that the niche they occupy is unique, I think that they will thrive if they continue to develop and expand to other platforms such as IOS as mentioned in the passage.
I think that Covid-19, to some extent, has exacerbated the process where people use this app. During quarantine, they grew from just 300 users to 12,000. This growth was probably because their app made a common social activity, like trading shoes, available online. Now one can not only trade shows virtually with friends but also with people from all parts of the country giving customers more options. Based on the number of trades occurring each day, and the growing user base, if I had to invest in this company I would.
One weakness about Tradeblock that first came to my mind was the price they charge. I think that $40 for a trade fee is way too high and probably results in only a low number of trades a day. Even though that number is very impressive I think that if another company comes along and offers the same platform but at a lower trading cost, Tradeblock will lose a lot of customers. If possible, I think that Tradeblock should charge a lower fee and advertise their app so that there are more trades occurring. If they charge trades at the right price they definitely have the potential to bring in way more profits. I love the fact that Ghoogomu compared himself at the end of his article; I think that this shows that he is very ambitious and that one day he hopes to expand his business into a field beyond just sneakers as Bezos did. Some ideas of potential branches they can allow to be traded on their platform are collectible cards and signed jerseys or signed balls by athletes. This will unquestionably attract a wider audience, like me, and not just sneakerhead. Outside the business aspect, I think that the whole story of this fountain is very remarkable. Just from reading the article, I can tell that the three co-founders love what their company is built on, sneakers. This again reinforced the idea that if one is passionate about something and very dedicated, they can build a successful business out of it. I am very excited about the future of the company and its founders.
As a sneakerhead who has sold, bought, and traded hundreds of shoes, Tradeblock is a revolutionary idea. This idea is both unique and heavily desired. Before Tradeblock, there was not an official website for people to trade sneakers. Instead, sneakerheads must ask to trade with sellers on Ebay, Facebook Marketplace, etc. However, this was extremely inconvenient as people did not know who was willing to trade their sneakers. THis led to problems such as haggling.
Tradeblock has expanded the sneaker market to more than just sneakerheads. People do not need money to trade their sneakers. People that do not have a lot of shoes may not want to sell their shoes. Instead, trading can allow them to upgrade without having to spend any money.
Tradeblock also plans to expand their inventory to more than just sneakers, which will only increase the number of users on the site. This makes Tradeblock an amazing investment option. Unlike a trend, Tradeblock will not die after a couple of months or a year. Tradeblock can keep up with all trends and also has limitless potential.
Many of the top corporations and companies in the world have pushed to limit the amount of pollution and waste in the world. Statistics estimate that 20 billion pairs of shoes are produced annually, with roughly 300 million pairs ending up in landfills. Tradeblock assures that your shoes will be used by someone else. Using Tradeblock will help reduce the amount of sneakers that end up in landfills. Overall, I think Tradeblock would be a great investment option with a bright future.
Although I am not one myself, I know many sneakerheads and would most likely be willing to use Tradeblock to exchange shoes that they no longer want to keep. For me, I was told that part of the appeal of being a sneakerhead is not wearing the shoes, but rather displaying them as a trophy, as a sign that they own something rare and pristine. In some cases, they wouldn’t even wear the shoes outside. Maybe it’s the quality, maybe it’s the perception that someone has good taste, but whatever it may be, there are plenty of sneakerheads in the current market. This number will definitely rise as more and more people join in, either as a sneakerhead themselves or one’s looking to make a profit. On this end, Tradeblock is an innovative design that exploits the small niche left by an already crowded sneaker resale market and has enough of a competitive advantage to survive.
The problem with the current sneaker resale market is that it relies entirely on the trade of cash and item. However, that is where the major problem arises that Tradeblock can solve. Generally, if there is a high demand and low supply of a shoe, buyers would rush to claim one order, then raise the price of that shoe by a couple of hundred dollars to gain some value. Now, some person that was unfortunate enough to be slow and still wants the shoes has to pay more money than it originally was to acquire. I had one friend that was involved in this process; in school, he would refresh a website constantly to check if the item is up yet, and then when the time came, he quickly placed an order, showing me that after a minute, there were no more in stock, and then go to an online marketplace to sell it at a higher value. However, this only works if the shoe is in high demand. Sneakerheads that want to discard old shoes would often find themselves debating on which price they should set it. The selling price involves many variables, including the conditions the shoe is in, the demand for it, and how old it is. Set it too high, and no one will buy it. Set it too low, and the seller would lose a lot of money. Tradeblock solves this because by acting as a barter system, the satisfaction of both parties would be higher compared to a regular money exchange.
The system behind Tradeblock is well thought out and unique. “as the first platform built specifically to unite the social and economic aspects of sneaker culture,” it can connect the sneakerhead community better than Amazon or eBay. One of the first weaknesses that popped up in my mind would be the shipping: “How can scam be prevented? What happens if an object is lost or stolen?” The first question was answered quickly; by charging a $40 service fee from each party, the shoes are sent to a Tradeblock authenticator, who can verify the items. For the second question, during the shipping after the authentication, one way could be by requiring the package to be accepted through a signature. The $40 dollar fee can cover this signature verification so clients on the app won’t feel like it is too expensive and would feel more assured that their package would arrive.
Additionally, if this wasn’t already implemented, maybe set up chat rooms or private message functions to have a higher sense of community. People are also maybe to negotiate better; maybe someone wants two shoes for the price of one. Outside of these small nitpicks, the foundation of this company is really strong. The founders have shown clear interest and passion in this project, and in their guidance, Tradeblock can expand, both in their customer platform and additional goods.
Before anything else, I want to applaud Tradeblock and its founders for announcing such an exciting platform for all of us sneaker-lovers! It is exciting to see young entrepreneurs turning their true passion into business. Thank you, Wharton Global Youth, for introducing yet another inspiring entrepreneur.
For most sneakerheads, sneakers are not mere fashion items but a way of life. This is why Tradeblock, compared to other secondary shoe markets focusing on quick and easy purchases, can be an especially attractive marketplace and social hub for sneakerheads. It allows and encourages users to share personal stories behind each pair of sneakers and to turn an otherwise impersonal transaction into a fun, friendly trade and feel a sense of community.
Yet again, a $40 fee charged to both traders per deal is likely to be considered a bit pricey. This may possibly lead users to find ways to bypass in-application trades by personally contacting other users. However, it may be difficult to make meaningful changes to the charge as authentication and delivery do amount up to a hefty cost. Authentication, especially when it comes to luxury goods, is a sophisticated process requiring expertise and trained professionals.
In order to make easy and bring down the cost of authentication–which is considered the single most important process in secondary sneaker trades–, I propose that Tradeblock apply the concept of facial recognition technology and object scanning to develop an innovative authentication technology. Existing facial recognition technology is sophisticated and accurate enough to be used in airports. If Tradeblock can apply object recognition technology to replace costly services and human counterparts, its service will be a much more attractive option for sneakerheads all over the world.
With this said, developing such a technology can be expensive and time-consuming. In order for Tradeblock to have a sufficient amount of seed money, it should consider replacing per-trade charges into membership fees. Users can access and enjoy the service and community by paying monthly or annual membership fees. Moreover, most designer brands are very protective of their brand value and take the issue of knockoff products very seriously. Tradeblock should try to work on bringing these brands on board to create and launch an authentication technology.
All in all, I believe that Tradeblock has come up with a creative and fun approach for a secondary shoe market. By applying more innovative ideas, I am confident that Tradeblock can soon become the biggest marketplace and community for avid sneakerheads everywhere.
The term sneakerheads are for people who are deeply into sneakers, and I could think myself as one. It doesn’t necessarily mean you must collect a lot of sneakers to be a sneakerhead, but if you do then you will be the absolute finest of them. Owning a lot of sneakers would be an accomplishment most sneakerheads dream to be, and I think this type of market could be an interesting way of accomplishing it.
This type of market does the trading system, which is definitely a unique type of market nowadays. But it does make a new opening for early sneakerheads. By trading, they could get some information about the worth of sneakers, it’s authentication and it’s qualities. They could even get profit by trading a less valuable sneaker with a more valuable sneaker that the owner just wants to get rid of, just like Ghogomu said. This trading system could also be a way towards massive collections. For example some people have stocks of multiple units of the same sneakers and would like to own more of other sneakers that they hadn’t previously owned. They could also be generous and sort of “give them away” by trading it for a very low worth sneaker. Yes they would still pay the company and other fees but for only about $40 is pretty acceptable.
Ghogomu also mentioned that “Bezos started with books” as a nod to Amazon being a successful company as an online store whereas Tradeblock could be the same, having sneakers as their “books” In other words this trading system is such an excellent way of purchase for sneakerheads, and not only sneakers but it could go a further range like streetwear and others as long as both sides agree to the trade and its items they’re trading.
Though there is something that questions me, are the sneakers that are traded real? Sometimes open markets that sell sneakers could offer “mirrors” or fake shoes and still sell them at its real original price. While here in Tradeblock people trade sneakers from their own collection or their stores, so that isn’t much of a difference. Sometimes the people who trade could be honest with what they offer in their sneakers but that isn’t always guaranteed. Though the trade are between two parties and Tradeblock just provides the marketplace as well as delivery so i don’t think it would matter anyway, just have faith and trust that the sneakers traded are authentic. Although a way to make up for it could be via refund. When a sneaker traded is proofed to be unauthentic, They could give a refund and give either a strike or straight up ban the user that trades fake sneakers.
Either way Tradeblock is highly recommended especially for sneakerheads to try a new approach of sneaker colecting