Generating Returns: Stock Market Investors and Ecommerce & Marketplace Sellers

Are (re)sellers of brands on ecommerce and marketplace platforms, like? Amazon? and StockX, respectively, able to generate comparable returns to a person investing in companies listed on a stock exchange, like New York Stock Exchange??

Yes…but how??

Today, there are viable, vetted and verified alternative platforms, HBR: The Platform Economy,? to stock exchanges, like New York Stock Exchange,? Nasdaq? or London Stock Exchange, for the ‘consumer investor,’ ie, a seller (of brands), to generate alternative asset class returns!

Reselling Brands Legal on Third Party Platforms?

Simply answered, yes, it's legal based on First Sale Doctrine, after an item/product is acquired, the purchaser has the right to resell it as long as sold in unchanged condition, ie, if the purchaser buys the brand as a new product, they must sell it in new condition.?

However, platforms have strict rules with (quick trigger) enforcement (ie, suspension) in place for reselling brands, and one needs to get approval to sell. Thus, recognized brands, like Nike, and the consuming public, have trusted Amazon and StockX to do their job in listing verified/authentic? products.?

Trust & Traction for Platforms

For platforms to have traction, they must have brand and public trust and confidence, and a rules based self regulated protections with enforcement mechanisms is a good beginning.? As platforms are about gaining buyer trust, brand resellers and private label brands must undergo vigorous authentication against fraud/fake products (vetting) to attracts consumers, which, in turn, attracts more sellers (network effect), hence, resulting in almost friction free transactions (via card to cryptocurrency), delivery (of product), and return (of product, where requested, and return on products, margins/ROI).

From Harvard Business Review, ‘GlobeScan, a research and advisory firm, reports that 74% of global consumers shop resale…All sorts of major brands, from Apple and Nike and Rolex to Walmart and Lululemon, are moving into the market. The resale market for sneakers alone today is estimated to be more than $5 billion, with international markets outselling the U.S. market. Rare pairs sell for thousands of dollars—a situation that has prompted some financial firms, among them TD Cowen? to identify sneakers as an “alternative asset class.” HBR: The Resale Revolution?

Sneakers as Alternative Asset Class

‘Cowen’s … research note carried a provocative title: “Sneakers as an alternative asset class.” In the note, the authors wrote: “We propose the idea that sneakers are now an emerging alternative asset class that 1) earns illiquidity premiums; 2) provides diversification—non-correlated with traditional asset classes; and 3) earns favorable risk reward characteristics.” Sneakers are not just shoes, they're an asset class.

Nike: Jordans

For example, globally recognized Nike is Listed on NYSE, and its products are not only available in physical stores, but also on Amazon: Nike? and StockX: Nike by resellers.?

For example, from Big Facts: Current Culture Index 2023 - StockX, Nike (linked to Jordan) were ‘2022 Winning Sneakers.” Thus, brand recognized companies, listed or non-listed, are trusted/blue chips, because of their product acceptance by (growing base of) paying customers, ie, an opportunity to generate returns by investing in the stock, be it as the listed company (for investors) or their products listed (by resellers) on trusted marketplace platforms.?

Thus, selected sneakers (handbags, wine, etc) are asset classes like equities, bonds, real estate, commodities, etc., making for a further diversified portfolio.

From Side Hustle Onwards…

On the platforms, sellers can achieve comparable returns to investors in the stock market. Thus, having an Amazon store or account on StockX, either do it yourself or managed by a third party (to be discussed in next article), could further diversify an investor’s wealth management portfolio (see not above from Cowan).

‘Selling on Amazon can be a very lucrative business for many — more than the average side hustle...Most Amazon sellers make at least $1,000 per month in sales, and some super-sellers make more than $100,000 each month in sales. 40% of Amazon sellers make $1,000 to $25,000/month, which could mean $12,000 to $300,000 in annual sales.’ How Much Money Do Amazon Sellers Make? (2024 Update) - Jungle Scout

“Much of the buying and selling happens in online marketplaces, and StockX says it’s the largest sneaker resale marketplace in the world, surpassing even eBay…What makes StockX different than competitors isn’t just its size, but its ambition. The company bills itself as the world’s first “stock market of things….Most shoes selling on StockX are reselling for between one and two times their retail price, according to a Cowen analysis, with only a subset earning higher premiums.” Sneakers are not just shoes, they're an asset class?

Stock Exchange v StockX & Amazon

The below comparison table showcases a sample of attributes of a stock exchange to ecommerce platform, like Amazon, and marketplace, like StockX.? In this? short note, the focus is on (1) trust from (self) regulations of the sellers, (2) product research, reviews and ratings, and, as result, (3) millions in traffic generating billions in sales.

Platforms’ Rules Based Self Regulation & Enforcement

Confidence in stock markets comes from government regulations, protections for the general public, and, in the US, there is the US Securities & Exchange Commission rules for listing a company, Listing Standards, and the exchanges themselves have rules and regulations, NYSE Listings Requirements and? Nasdaq Listing Requirements.?

For ecommerce companies, like Amazon, there is an in depth application to open a ‘store’ to list products on the platform, called Amazon Seller Central, and Amazon will suspend the account if violations occur. Similarly, for marketplace companies, like StockX, there are verification processes, Verification - StockX, where violations have suspension consequences.?

For example, StockX takes the vetting process seriously, as they understand their reason for existence and expansion is buyer’s trust and confidence.

Research, Reviews & Ratings

Stocks listed on stock markets are well researched by Wall Street analysts, and (fee generating) reports are shared/sold with opinions of (generally) buy, hold or sell. In the case of? platform/marketplace companies, focus is on the transparency of the customer testimonial/review process.??

For Amazon Review Process? and ?StockX Reviews, Testimonials, reviews and ratings are in the public domain, ie, ‘town square’ about their purchase and experience, hence, comments both on the platform and (re)sellers. The process of allowing/publishing reviews/testimonials is done with eye on due diligence and due care, hence, the seller cannot ‘game’ in their favor by having allies/bots write a large number of positive reviews or negative reviews on competitors.

Millions Generate Billion$

The magic then happens when millions in traffic (visit the platform) produce billions (of dollars) in transactions, because there is confidence in the stock market or platform/marketplace.? In both cases, stock exchange and marketplace platform, they have sought after companies/products which have (been) researched, reviewed and rated for investors/paying consumers to make informed decisions. The cycle not only repeats itself, but expands, including international sellers and buyers, with more traffic and transactions.??

[From 2020, VC are partnering with Amazon sellers ‘....Amazon has more than 2.3 million sellers currently active on its marketplace. There are roughly 25,000 sellers on Amazon with more than $1 million in yearly sales, and 200,000 sellers with more than $100,000 in sales. Every year, more than a million new sellers join Amazon…From AccrueMe’s vantage point, funding through a partnership instead of a heavy debt load can free up Amazon sellers to focus on growing their business. With double the capital, sellers can purchase inventory with higher margins, thereby becoming a stronger competitor and maintaining enough of a balance to capitalize on a greater rate of buying opportunities.’ VC Firm Brings Partnership Model To Amazon Sellers]

For example, Amazon gets 2 billion visits per month in the US, has 310 million active users, vast majority (90%) of consumers are satisfied with Amazon’s customer service, and, when putting it all together, the company is forecasted to have $746B in sales (2023), which is about 38% of ecommerce in the US.

Thus, the Amazon platform is a massive and expanding ecommerce ecosystem: 61% of searches begin on Amazon, for previous buyers on Amazon, 88% begin their next purchase on Amazon; 41% read reviews before purchasing, and 48% of shoppers purchase something on Amazon each week. Thus, Amazon is the ‘platform’ for sellers to make money as 89% of seller stores are profitable! 42 Amazon Statistics Sellers Need to Know for 2024

Caveat for Aggregators

Venture capital/debt applied the aggregator model to Amazon sellers, as their thinking was the pandemic spike euphoria would continue for on-lines sales, and focused on financial engineering rather than operational understanding, ie, needs of the customer, ‘... Ninety-nine active players collectively raked in a staggering $15 billion in funding…At its height, Thrasio, the poster child of Amazon aggregators, now preparing for bankruptcy…was acquiring 3 businesses a week, earning profits of $100m on sales of $500m…Macro issues aside, some aggregators turned out to be worse at being Amazon sellers than the Amazon sellers they acquired…’ The trouble with Amazon aggregators

More Discussions Needed

Here are a few issues to discuss going forward:

1. Do Amazon sellers need another software to Jungle Scout & Helium 10
2. What are the ideal attributes for a course for selling on Amazon
3. What are the important criteria in finding a third party to open and manage your Amazon store?
4. Does your Amazon store have capital appreciation over time

Conclusion:

Mutual Funds and Exchange Traded Funds (ETFs) democratized access to the stock market for the retail (little guy) investor.? Amazon and StockX, platform ecosystems, democratized opportunities for the reseller (little guy) to generate sales based investment returns.??

“As (the first) StockX CEO and co-founder Josh Luber put it at the 2018 Benzinga Global Fintech Awards, "Maybe one day you can invest in the Jordan Index instead of the Dow Jones…" Sneakers are now an emerging alternative asset class: Cowen?