April 6, 2019

What happens to StockX & GOAT if Nike embraces counterfeit technology?

Nike RFID StockX GOAT Authentication
Source:

StockX and GOAT are the two leading sneaker reselling platforms focused on providing a simple and secure selling process. Beyond matching buyers and sellers, sneaker platforms have taken on the responsibility of authenticating sneakers. But what if sneaker brands implement measures to authenticate sneakers straight from the factory floor? adidas and Nike are both looking into RFIDs to prevent counterfeiting.

What are RFIDs?

RFIDs (Radio-frequency identification) have been a point of discussion around supply chain management for the last 20 years. It’s been cost-prohibitive to implement at scale but as pricing decreases it’s a viable option. RFIDs work through electromagnetic fields and allow readers to capture electronically-stored data associated with tags. The image above is an example of a new RFID tag from Nike that aims to verify authenticity and reduce counterfeiting.

How would this work with sneakers?

  • Shoes would come attached with an RFID tag that contains a unique ID
  • Tags would be traceable and the unique ID would be virtually impossible to spoof
  • In addition, its believed that copying  RFID tags would be cost prohibitive
  • Here’s a presentation from 2014 that shows a potential application, as you can see the process isn’t exactly new

Should marketplaces be worried?

Marketplaces like GOAT and StockX have  heavily invested in authentication systems and processes. Naturally, for buyers and sellers, this comes at a cost to GOAT and StockX; the burden of proof is neither on the seller nor on the buyer. For GOAT users, the seller fee ranges from 9.5% + seller fee compred to StockX users where fees are 14.5% base + 3% payment processing. Naturally, these costs are often passed onto consumers. Marketplaces like  GOAT and StockX may be thinking ahead, but what they bring is more than just authentication. These platforms enable convenience and scale while reducing fragmentation. There’s still a lack of foresight into the speed of authentication and whether the investments from GOAT into machine-learning have paid off. But unless a cheaper, more convenient marketplace arises that guarantees authenticity across multiple brands, GOAT and StockX still have control.

Does it even matter?

Going to these highly-trafficked platforms provides you a quick overview of availability. But another point of interest, these platforms aren’t solely reliant on the hype. There’s a need and interest to match buyers and sellers of more generic long-tail offerings. And having said that, these offerings are comparitively of less interest for bootleggers.

If RFIDs go mainstream, can new opportunities arise?

Could we see the emergence of marketplaces that have fewer fees? Imagine a marketplace that features modern, tagged shoes. There may still need a middleman to accept payments and release shoes, but the authentication process would be removed. Likewise, can brands create their own secondary-market channels? Would Nike allow a marketplace section on SNKRS or would they prefer to not have that liability?

Let’s recap all the questions looming

  • Will RFID copying truly be cost-prohibitive?
  • Will this be a function only available for new, unworn, tagged sneakers (or will people wear it like the New Era hologram sticker)?
  • Does the role of the middleman change (less authentication, more escrow)
  • Or will peer-to-peer opportunities reemerge (like the good ol’ days)?

 

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