Poshmark, An American Version Of "Leisure Fish", Is On The Market

On January 15, poshmark Inc., known as the American version of "idle fish", was listed on NASDAQ. The fashion e-commerce platform, which mainly deals in second-hand clothing, shoes and accessories, issued 6.6 million shares and raised $278 million. On the first day of listing, the stock price soared 141.67% compared with the issue price of $42, and the market value once exceeded $7.4 billion. How does a start-up enterprise, which has been established less than ten years ago, become popular overnight? Can second-hand consumption become a new trend?

Simplify business and play social cards

In an interview with Barron's, poshmark's chief executive, Chandra, said the company's success was mainly due to its adherence to three major trends: the accelerated development of e-commerce; consumers' embrace of social shopping; and the growing market for second-hand goods. In his eyes, there are huge opportunities behind all these three, and poshmark is just beginning to dig into the "corner of the golden hill".

Mr. Chandra stressed that poshmark emphasized "simplicity and order.". "We have been providing a simplified shopping experience for buyers from the time the goods are put on the shelves and delivered to the logistics." The seller first takes a picture of the item to be sold and then uploads it to the website along with a brief description. Then according to the transaction database on the website for similar commodity reference, set the price for the commodity. Once someone chooses to buy, poshmark sends the seller an express label for next day delivery to the buyer. After the seller confirms the acceptance, poshmark will take 20% commission from the total price of the goods and charge 80% of the remaining payment to the seller's account; if the transaction price is less than $15, it will charge a unified fee of $2.95.

Poshmark, a fashion e-commerce mainly based on second-hand consumption, had a market value of over $7.4 billion on its first day of listing. Information map

However, if we just simplify the e-commerce business process, poshmark, as a "latecomer", will no doubt be able to compete with other large-scale "predecessors" e-commerce. Poshmark also recognizes that differentiation is the fundamental competitiveness of the platform. As a result, it launched a new model called social shopping. Different from the mainstream e-commerce platforms based on search products, poshmark's unique feature is that it creates a shopping social network for consumers. Similar to Facebook, users of the platform can not only share the second-hand fashion products available for purchase, but also pay attention to other users with similar tastes and hobbies to establish their own "shopping circle of friends". After the transaction is completed, the buyer and the seller can become fans and friends of long-term concern and contact with each other, thus increasing the probability of users' long-term repeated purchase of goods. According to Forbes, the beauty of poshmark is that it further enhances the "social attributes" of shopping methods and greatly increases the stickiness of users. Coupled with the "asset light" model without sales pressure and inventory costs, poshmark developed rapidly.

Comply with sustainable Internet economy

For poshmark, in the post epidemic era, in addition to the fact that the market downturn has led to a shift in consumer mentality to high quality and low price, the main user groups of poshmark are millennials and generation Z who prefer circular economy, which also brings "assistance" to the development of the company.

Some analysis points out that since the financial crisis in 2008, affected by the U.S. economic recession, people's consumption habits gradually tend to be conservative and rational, and even hope to get extra income by selling idle goods. Among them, clothing category accounts for half of the second-hand resale market. According to global data retail, the size of the second-hand clothing market will reach $64 billion by 2028, while the fast fashion market will be $44 billion. In addition, second-hand goods are becoming more and more important in the minds of millennials, which are expected to account for 17% of their closets by 2029, compared with 3% in 2009. According to Chandra, poshmark currently has 70 million users and takes an average of 27 minutes to browse the website. In 2019 alone, users will have more than 20.5 billion comments and interactions on the website. Since its establishment, poshmark has a total turnover of more than 130 million times. About 74% of the goods sold on the platform are second-hand goods. In 2019, poshmark is still at a loss of $2.81 per share; however, as of the first nine months of 2020, it has successfully turned a loss into a profit, with a profit of 45 cents per share, and its total revenue also increased by 28% to $192.8 million, compared with a loss of about $34 million in the same period of 2019, and has realized a net income of $21 million. Chandra is also confident that the company will remain strong after the epidemic. He told CNBC that he did not think the return of consumers to physical stores after the outbreak would pose a threat to poshmark's business. "45% of the goods we buy and sell on our platform are clothes, so people will go out to parties, go to the office and participate in various activities more, which we think will promote the vigorous development of our business."

In addition to being a second-hand clothing trading e-commerce platform, poshmark's social shopping mode also conforms to the current popular trend of "online shopping with goods", providing opportunities for the development of many fashion online celebrities and independent brands.

According to business insider, a stay at home mom from Los Angeles came across poshmark ads selling second-hand goods when she was browsing Facebook in 2013. After selling out her spare handbags and clothes through poshmark, she suddenly realized that she could also make money by selling clothes on the platform. As a result, she started browsing the "closets" of other sellers on poshmark and designed her own online "Wardrobe" styles of clothing and accessories. Then they sell their own style fashion items carefully selected from the Los Angeles boutique to other online buyers. Inhavong stressed that poshmark's social model was the key factor that made her stand out. Through the community mechanism, inhavong has established contact with many other people who buy her goods on poshmark. They know each other and trust each other like friends, instead of just talking about the style, size or fit of clothes. In 2017, after building a solid buyer network and optimizing sales inventory, she has started to work full-time at home in poshmark with her net income close to six figures in US dollars. Similarly, Suzanne canon, another online celebrity on poshmark, was also an early user of the platform. By April last year, she had become the first poshmark seller with total sales of $1 million and opened her first offline brand store in Florida.

Second hand resale, "money way" bright?

According to Cowen & company's latest data forecast, the volume of the second-hand resale market will increase from $7 billion in 2019 to $37 billion in 2025, and consumers will spend more than 52% of their money on second-hand goods in the next five years. Such a potential second-hand resale market undoubtedly attracted the attention of many second-hand e-commerce of the same type, and even appeared the spectacle of "piling up" IPO. The real real real, a luxury consignment website, completed its initial IPO in 2019, while thridup, an e-commerce retailer for second-hand goods, submitted its IPO application in October 2020 in secret. Stockx, a five-year-old second-hand trading platform for sports shoes and street wear, raised $275 million in December 2020, with a current valuation of $2.8 billion, which analysts call suspected "pre IPO behavior.". Sarah willersdorf, managing director and partner of Boston Consulting, told vogue business analysis that whether poshmark and its peers can maintain vigorous development in the future largely depends on the two indicators of inventory and user growth, as well as maintaining competitiveness in identifying authenticity and providing personalized service process technology. No inventory has been a big advantage of poshmark, but whether it can maintain the continuous optimization of technology and the continuous growth of users will determine how far the brand can go.

According to the real real real's 2019 IPO documents, 79% of the company's spending is spent on improving operational technology, including completing the identification, certification and sale process of commodities in the most appropriate time. Similarly, rebag, a second-hand handbag trading platform, has raised $68 million to develop a software to evaluate the pricing of luxury goods. Charles Gorra, rebag's chief executive, stressed that technology was "crucial" for reselling companies, because each product had to be handled separately, and without the technology that could help companies deal with the same magnitude of technology, it would not be possible to do so on a large scale. Tracy sun, senior vice president of poshmark, said that continuous optimization of technology, especially the improvement of the platform's social e-commerce experience, is also a long-term focus of poshmark. In April 2020, poshmark launched stories, which allows users to display their products more vividly. At the same time, the rich content attributes of stories make it easier for users to stay on the app and continue browsing. In the future, she said, it is possible to try video shopping and improve the learning ability of machines to better match sellers with buyers.

Forrester analyst sucharita Kodali told fortune that poshmark's challenge is actually more about how to attract a wide range of customers and continue to achieve sustained revenue growth. Kodali said that once most start-ups cut their marketing costs, their sales would fall, and the customers they paid for became a "past perfect tense.". Poshmark has a long history of investing heavily in marketing. Between 2018 and 2019, the flying TV and social media ads cost $221 million, about two-thirds of the company's total revenue during this period. In contrast, competitor the real real real has been keeping its marketing expenses below a third of its total revenue. A spokesman for poshmark declined to comment, while chief executive Chandra pointed out that poshmark intends to continue to lean towards different categories in the future, expanding its business scope to furniture and beauty, and avoid focusing on the most competitive clothing category at present.

Tracy sun believes that the business model of social e-commerce is not limited to the resale industry or the fashion industry. "Social e-commerce is a global phenomenon, it's not just technology trends," she said. That's the way people want to shop, and we're at the forefront of social e-commerce trends. "