StockX lays off 12 percent of its staff in drastic cost-cutting measures
StockX, the giant resale market for sneakers, streetwear, and other fashionable goods, has laid off 12 percent of its workforce, sources familiar with the matter tell Input. According to multiple people, who spoke under the condition of anonymity because they weren't authorized to disclose StockX's plans, these cuts account for about 100-150 staff members in total. They include employees who worked in the quality assurance, engineering, product, and operations teams in the Detroit headquarters, as well as the Arizona office that opened in 2017, among others.
After publication, the company confirmed Input's report. More details in an update below.
GOING PUBLIC — Founded in 2016, StockX quickly rose to popularity thanks to its easy-to-use, stock exchange-esque hub for buying and selling shoes, apparel, and accessories from brands like Nike, Supreme, Off-White, Adidas, and even Pokémon. Last year, the company was valued at $1 billion after securing a $110 million funding round from DST Global, General Atlantic and GGV Capital, per The Wall Street Journal. (Bustle Digital Group, Input's parent company, has also taken investment from GGV Capital.)
But, in the midst of a global pandemic caused by the COVID-19 novel coronavirus, demand for sneakers has plummeted in recent weeks — and now StockX may have to face the effects of a world economy that's in free fall. Owler, a data firm that collects insights of private and public businesses, estimates that StockX had around 800 employees as of 2019, making the layoffs of 100-150 staffers quite significant for the company.
In an all-hands video presentation given to StockX employees on Thursday morning, sources told Input, CEO Scott Cutler informed them about the layoffs as he cited the need to cut costs and become profitable. Cutler, a former eBay executive who took over the StockX reins from co-founder Josh Luber in June of 2019, last year told CNBC in an interview about the company eyeing an IPO — which could very well be the main reason behind these personnel cuts. “We have world-class investors, including Dan [Gilbert], that are in this and I think wouldn’t that be great if we ended up with that [public] outcome, that’s certainly our objective as a company,” Cutler said about turning StockX into a public company.
Sources also told Input that Cutler and his "new leadership team seem to not want to be in Detroit," where StockX is based, and this is just "them forcing their hand."
The message was a far cry from the tune Cutler was singing just a few weeks ago, during a March 27 interview:
“The recent events over the last couple of months has been a benefit to our business. We’ve had more and more traffic and buyers coming to our site because in some respects, traditional retail in some geographies is not available. We thought we’ve always been a marketplace of scarcity, but now you can’t actually go into a real retail location, so you’re coming to StockX. So on the one hand, it’s been great for our for our business and for our growth.”
MORE CHANGES — Just last week, StockX announced that it would implement a notable pricing change for buyers starting on April 22. Those who use the site in the U.S. now have to pay an extra 3 percent processing fee on any item they buy, along with the $13.95 shipping and tax (in some states) that customers have paid for years. Outside the U.S., StockX tacked on an additional fee of 1 percent for purchases, on top of other processing fees it already had in place.
"As our marketplace continues to grow, so have our investments in the platform, customer service, and our verification process," StockX said in a statement on April 15. "This fee increase will allow us to continue these investments and provide the best possible service to our millions of customers in 197 countries and territories around the world."
CONTROVERSIES — StockX hasn't been without controversy; in August of 2019, StockX sent emails to customers asking them to reset their passwords, citing "system updates" as the reason. But, after being pressed by journalists and its buyers and sellers, the company eventually admitted that those emails were being sent out of "caution" after being "alerted to suspicious activity" — a fact that StockX chose to omit in the original notices sent to customers.
Days later, StockX finally confirmed it was hacked, which exposed the data records of nearly 7 million of its users. The company is still grappling with the aftermath of that breach, with some customers claiming they've been dealing with fraudulent purchases on their accounts ever since, and that StockX has repeatedly ignored their concerns.
PROFIT, PROFIT, PROFIT — Based on an April 2019 report from Recode, StockX isn't a profitable company, and the company is seemingly doing everything it can to make that happen. In addition to the aforementioned layoffs, sources told Input that StockX was trying to "cut costs in a lot of different areas," including with software vendors, various optimizations to code bases, and more.
"[StockX] was very growth-oriented initially, and now we're in a phase where we're emphasizing reliability, quality, and just making sure we're profitable," one source said. "The new CEO [Cutler] came in, and so they brought him on because he's experienced in taking companies to IPO, and that's what the general angle is for what they're trying to go for in the next couple of years or so."
As for the people laid off, sources said, StockX has told them they will have their jobs until the end of the April, after which the company is said to plan to give them a severance package of "one month, possibly more" and health coverage until October. What's more, sources told Input that StockX will try to find employment for those affected in one of the other "family" companies from Dan Gilbert, who also owns Quicken Loans and the Cleveland Cavaliers NBA team.
Update: In a blog post on the company's site, CEO Scott Cutler said that today's layoffs, "while difficult," are about "ensuring we remain a strong marketplace" in the present and the future. "While on a journey like this, you often have to make difficult decisions to ensure long-term sustainability," he said. "This is important even in the best of times, and given the uncertainty of COVID-19, our sense of urgency to do so was heightened. Today was one of those occasions, as with a heavy heart, we said goodbye to 12% of our StockX family members."
Cutler's full message can be found here, and below is a statement from the company:
As a global startup that has experienced hypergrowth, it is important to reflect and pivot to capitalize on future operations. For StockX, this means a shift from a growth-focused mentality to one rooted in operational efficiency. As we continue to provide the highest level of service to the millions of global customers who rely on us, purposeful structure, unwavering determination and hard choices are required. The current climate coupled with the need to optimize for future success led to the prudent but difficult decision to reduce our workforce by 12%. We are grateful for the contributions of these impacted team members and are working with them to find opportunities within and beyond the Rock Family of Companies. Effectively navigating today’s new normal requires investment in long-term sustainability to better serve our customers tomorrow and in the years ahead.