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Eddy Lu is the cofounder of GOAT, which currently has 20 million global members — which they grew from 12 million users in less than a year — and 400,000 global sellers on its platform.In October 2019, they also announced direct distribution partnerships with various popular brands like Versace and Bergdorf Goodman, as well as an app.But Lu and his cofounder Daishin Sugano’s latest business idea at the time was GrubWithUs, a social dining app that ultimately failed.Lu shared how he made such a successful pivot, which included trusting his gut, doing his research, and learning from his past business’ mistakes.Click here for more BI Prime stories.In 2014, Daishin Sugano, a big sneakerhead, accidently bought a fake pair of Air Jordans on eBay. It was this defeating experience that lead him to turn his hobby into a career.Determined to create a better way to buy sneakers from online marketplaces, Sugano and his cofounder Eddy Lu decided to ditch their latest business idea at the time, a social dining app called GrubWithUs, in favor of working on the business that would eventually become GOAT.”We created GOAT in order to bring trust to the sneaker market and solve for the problem of counterfeit sneakers being sold online,” Lu explained.After a few initial wobbles, the company has become a wild success. They started out by simply validating sneaker purchases to make sure the shoes weren’t fraudulent using a ship-to-verify model, which meant that sellers had to ship their shoes to GOAT warehouses to be authenticated before the product would be mailed to the buyer. At the time, the largest sneaker marketplace was eBay, which didn’t guarantee product authenticity.
But Lu and Sugano didn’t stop there: GOAT recently expanded to selling other apparel and accessories from luxury brands. They currently have 20 million global members — which they grew from 12 million users in less than a year — and 400,000 global sellers on their platform. They also announced direct distribution partnerships with various popular brands like Versace in 2018 and Bergdorf Goodman in 2019, as well as an app in 2019 (available in China). The company has raised nearly $200 million to date in funding, with Foot Locker having invested $100 million in the platform earlier this year.Lu shared with Business Insider how he and his cofounder successfully made the pivot from one business to another drastically different one — and his advice for other founders looking to make similar moves.Lu and Sugano experimented with dozens of business ideas before landing on GrubWithUs, which was meant to break social norms by helping users find people to eat with at restaurants. While the cofounders were initially excited about the app and it got a good amount of attention when it launched in 2011, they started to run into problems.”There were a lot of friction points with coordinating people, dates, food, and restaurants, and we eventually realized it was a hard business to scale,” Lu said.For him, one major flag that it was time to move on was that he stopped enjoying working on the project.”Beyond the normal stresses, if there’s no more passion and enjoyment from working on the problem at hand, then I know it’s time to make a switch,” he said. “With our social dining app, we tried so many things to make the idea work that we lost passion for the dining experience. That’s when we knew it was time to pivot.”GOAT reignited Lu’s passion because it was solving a problem he and his cofounder faced themselves. The idea felt inspiring, and nothing like it existed at the time.The basic idea for authenticating online sneaker purchases came from Sugano’s personal experience, but Lu and Sugano knew they had to do extensive research to figure out exactly where to spend their energy before they really jumped in.”We knew there wasn’t a marketplace out there that ensured trust and safety when purchasing sneakers online,” Lu said. To understand the true problems with the industry as well as stake out any potential competitors, they stalked subreddits, social accounts, and blogs, all of which were built around how to spot fake merchandise. Lu explained that they needed to learn about what solutions currently existed and what might need to be updated.
“[At the time], consumers had to piecemeal information together to find and purchase authentic sneakers,” he said. “On the demand side, we heard from investors that sneakers were a growing category on marketplaces like eBay.”Once they felt confident about their expertise and sure that there was enough consumer demand, then they knew it was time to seek venture funding.Lu said that the duo’s previous experience in the app marketplace and creating apps was a huge help in getting their second company off the ground. Even though GrubWithUs had technically failed, the learnings from that business helped to make GOAT a success.For example, Lu recalled that when they launched GrubWithUs, instead of perfecting the model just in one city to start, they spread themselves thin by opening the app in dozens of locations — and this ultimately led to quality issues and problems that had to be fixed over and over again. This learning played into their launch strategy with GOAT, where they decided to start small and really nail down quality first.”We decided to focus and start with becoming the best sneaker marketplace in the business,” he said. “It’s amazing the complexity involved with authenticating and shipping sneakers to a global audience.” After four years of perfecting their model for sneakers, an effort that started in 2015, Lu announced in October 2019 that GOAT would be expanding to additional apparel and accessory authentication.By focusing on quality of experience, the cofounders were also eventually able to establish partnerships with high-end, luxury brands like Versace, which further fueled their growth.”In 2018, Versace turned to us to help launch their Chain Reaction sneakers, which were exclusive to GOAT and Versace’s Soho boutique,” Lu said. “They sold out in minutes. Earlier this year, we worked with Chloé to do the same with their Sonnie sneakers. And most recently, we partnered with the iconic 5th Avenue department store Bergdorf Goodman for an exclusive pop-up experience during New York Fashion Week.”Because they’d taken a good amount of time to establish brand recognition, Lu said that these partnerships felt natural.When GOAT launched in 2015, the ride was bumpy at first. On Black Friday of that year, for example, they decided to offer a promotion where they discounted popular sneakers (many of which were selling at two or three times the price elsewhere) back to their original price. Because very few people knew about GOAT, this seemed like a good marketing plan — until all the extra attention crashed the website.”Thousands of customers sent us angry messages, and even a couple of death threats,” Lu remembered.How did they recover? “After much apologizing and regaining the consumers’ trust, we’ve been able to rapidly grow ever since,” he added. The publicity, while bad, was still publicity. And because they had handled the incident with great customer service, interest in GOAT began to grow organically.
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