What Poshmark’s IPO Says About the State of Resale, Social Commerce

The story of Poshmark, leading up to its filing for an initial public offering last week, has been one of innovation and good timing. The marketplace sits in the overlap of two of retail’s biggest trends: resale and social commerce. Both areas showed growth even before the coronavirus pandemic struck, […]

The story of Poshmark, leading up to its filing for an initial public offering last week, has been one of innovation and good timing.

The marketplace sits in the overlap of two of retail’s biggest trends: resale and social commerce. Both areas showed growth even before the coronavirus pandemic struck, but perhaps more impressively, they’ve managed to maintain strength as the global health crisis hamstrung other areas of retail and drove more shoppers online.

For Poshmark, the “future of online shopping is social,” the company stated in its S-1 filing. And it’s not alone in this belief.

Social commerce sales in the U.S., estimated at $22 billion in 2019, are expected to reach $84.2 billion by 2024. That scenario drives platforms like Facebook, Instagram, Snapchat, Pinterest, YouTube and others to pursue shopping features, and they’ve done so at a rapid clip over the past year.

The effect also seems clear in Poshmark’s numbers. According to the IPO filing, the company managed to turn around previous net losses and post profits of $20.9 million over the last three quarters. The platform channeled sales of more than 130 million products, for a combined value topping $4 billion.

As many as 20.5 billion social interactions swept the platform last year, and that was before the company introduced major updates to make selling and connecting easier for users.

In April, it launched Posh Stories, a feature that lets users create and share shoppable video clips and photos. A new Just Picked feature uses machine learning to scan listings and match them to shoppers for personalized collections, while another called RePosh makes it easy for beginners to create a new listing with one click.

“We enable buyers to discover, connect and curate their network and news feed with that of other users who share similar styles and personal preferences, creating a fun shopping experience,” the company said in its IPO filing. It also noted that 87 percent of purchases in the marketplace last year were preceded by a like, comment or offer.

Alone, social commerce has become an area of deep investment for established and new platforms. But for Poshmark, it’s become a particularly powerful blend coupled with the company’s resale orientation.

Pre-COVID-19, secondhand goods had already found a powerful narrative for fashion sustainability and an eager audience in Millennial and Gen Z shoppers, especially for high-end products. The luxury fashion consignment market hit $24 billion, with projections expected to notch $51 billion by 2023.

Enter the pandemic. Economic anxieties caused by mass layoffs and furloughs hit some consumers hard, while others simply took a more conservative approach to spending due to travel lockdowns and other issues. Apart from China — where luxury goods are expected to grow by 48 percent this year, according to a report from Tmall and Bain & Company — the market for core personal luxury goods has actually contracted for the first time since 2009, falling by 23 percent.

Brands are now reconsidering ways to push excess inventory, and stores — including Macy’s, Nordstrom, Neiman Marcus and The Gap — are tapping into the resale market.

On the consumer front, the prospect of more affordable goods has cast new light on re-commerce contenders like The RealReal and ThredUp, both of which have stepped out with IPO ambitions. In 2019, The RealReal’s IPO raised $300 million off of 15 million shares priced at $20 each. ThredUp’s confidential filing in October may land between $200 million and $300 million, when its IPO debuts next year. Poshmark is apparently hoping to raise $100 million from its IPO, though that figure could include some placeholders.

Either way, it presents a different sort of model, with an added dimension for individual sellers.

On Poshmark, as well as rivals such as Mercari and Depop, the users are the sellers. Such communities act as self-propelled commerce engines, with no inventory to bog down the companies, while appealing to individuals looking to earn money by clearing out their closets. The concept has drawn more than 15 million people to Mercari since its launch in 2013, and more than 21 million to Depop, which was founded in 2011.

Meanwhile, Poshmark has drawn more than 70 million users since its debut in 2011, and as of Sept. 30, the company had 31.7 million active sellers. The reason for the difference: deep investments in technology, according to the company.

“We rely on data science to personalize every user’s feed while offering powerful, easy to use tools to drive seller success,” the company explained. “The result is a unique ecosystem built for social commerce, which leverages social tools to humanize the online shopping experience and harnesses community engagement, while providing an integrated end-to-end system across the transaction cycle, from shopping to shipping.”

Poshmark makes its money by taking a flat cut of $2.95 for transactions under $15, and 20 percent for sales over $15. So its biggest vector for growth lies in boosting the size of its community and the time people spend in the marketplace, mulling over a variety of goods.

Last year, users spent 27 minutes per day on average. This year, the figure could grow, thanks to new features like the video-driven Posh Stories.

At a virtual PoshFest event in October, founder and chief executive officer Manish Chandra explained, “We believe video is going to be essential to the selling format, as people connect more and more over the internet or through the app and less…in physical life.”

That has certainly panned out during the global health crisis. As for which shopping habits will stick around post-pandemic, that’s hard to predict. But at least some behaviors are expected to remain — and Poshmark is willing to bet that its tech-driven, social-selling approach to resale will be one of them.

Sign up for WWD’s Newsletter. For the latest news, follow us on Twitter, Facebook, and Instagram.

Source Article

Next Post

Growing number of lawmakers decline early access to COVID-19 vaccine

Tue Dec 22 , 2020
A small but growing number of lawmakers are declining early access to a COVID-19 vaccine that’s being offered to them under continuity of government policies.  A handful of lawmakers in both parties, including Reps. Brian MastBrian Jeffrey MastHouse Republicans who didn’t sign onto the Texas lawsuit Five Republicans vote for […]