Peer-to-peer marketplace Poshmark’s core business is simple: sellers list unwanted, gently used items for sale on the app, which customers then browse and buy. Poshmark then handles the logistics around shipping, returns and merchandise disputes.
Since Poshmark doesn’t specialize in luxury consignment, its volume is massive. Customers can shop used Forever 21 or Alexander McQueen, with items marked as low as $8 or as high as $1,500.
A fashion marketplace that does not discriminate against any brand name, however low-brow, opens the trade to a wide demographic of both sellers and buyers. But that glut of volume has a downside. Resale value is built into luxury items like Chanel or Birkin bags; T-shirts from J.Crew and shorts from Old Navy decrease in value over time. Secondhand e-commerce platforms doling non-luxury goods have had to convince online shoppers that a $45 used shirt marked down to $15 is a smarter buy than a new item.
“It’s very much beyond online consignment,” said Poshmark co-founder Manish Chandra. “We’re not getting America to sell through a flea market.”
Poshmark and its peers, secondhand e-commerce or “re-commerce” companies like ThredUp and Vinted, all claim monthly user counts in the tens of millions and have raised even more in several rounds of venture capital. They also see a near-constant flow of secondhand items: Poshmark says that it receives enough inventory to restock a Nordstrom store every seven days, while Vinted says it currently has 23.2 million items listed on its site. ThredUp sends sellers empty bags to fill with their unwanted goods, which the company then sorts through itself to decide what to sell on the site and what to do donate.
“Everything on these sites has very, very low market value,” said Lorena Shiff, founder of consignment boutique Lorena’s Worth and blogger behind the moniker “The Consignment Princess.” “But it’s accessible, and collecting inventory is very easy.”
The race to scale
Poshmark, ThredUp and Vinted have all survived a shake-out that saw similar competitors either shutter or get bought by bigger companies. Still, after a race to scale their companies bigger and faster, none of them are profitable.
“These companies have raised a lot of money, have been around for a while, and they’re not yet profitable,” said Caryn Neary, founder of fashion incubator Bene Rialto. “There are so many pain points that you have to consider: the condition of the product, how resellable is it, its value, and is the customer going to actually want to buy it used. When you’re buying a luxury item, even secondhand, you’re investing. The lasting value of anything else is much less.”
Discount and mid-level consignment, when sold online, raises a lot of questions around how much work people are willing to do in order to try to sell something they might not make any money from.
ThredUp’s solution is to take all of the burden off of the sellers. After potential sellers send their closet clean-outs in a pre-paid ThredUp bag, a team at one of the company’s four warehouses sorts through it to determine what will go up for sale. They then handle the photography, product details, pricing, shipping, and returns for sellers. In addition to those warehouses, ThredUp also has nearly 1,000 employees.
“Convenience will reign supreme when it comes to the amount of work it takes to make cash,” said Oliver Lubin, ThredUp’s co-founder and COO. “While we don’t pay the most, we make it easier than any other option.”
Getting people to shop secondhand
Lubin said that ThredUp’s challenge, however, is not in recruiting sellers, but in acquiring new buyers. The company is figuring out how to curate its product feeds for customers so they’re not overwhelmed by the amount of inventory sold through the site.
“There are less people who are willing to throw down a large amount of money for a handbag than there are people looking for a deal on everyday clothing,” said Lubin. “But it’s a very delicate balance between choice paralysis and FOMO. It’s not easy, but it’s necessary to unlock that next level of appreciation from our customers.”
To move non-luxury inventory, these marketplaces have to build their offerings beyond a platform to buy secondhand goods.
Poshmark’s Chandra said the company’s play for appealing to customers beyond secondhand clothing deals is to focus on building the social element and partnerships, which add value to consumers. Poshmark claims its app is opened 25 times per day on average.
“Posh Parties” are real-time private sales that take place within the app on an invite-only basis. Poshmark invites fashion designers, bloggers and stylists to put together digital closets from a variety of sellers’ outfits, which can make a used Old Navy striped T-shirt selling for $10 more interesting to buyers. Most recently, Poshmark announced a partnership with brands that will allow them to sell excess inventory to users on the platform.
This last feature was pointed out as a “key growth initiative” in Goldman Sachs’ recent dotCommerce report, which recognized Poshmark alongside Everlane, Revolve and Asos as an emerging brand winning online.
“Poshmark is setting itself up to have a longer shelflife,” said Shiff. “To be competitive, you have to offer something extra. Poshmark is giving a touch of buzz and trendiness to selling. Otherwise it becomes, why am I even doing this?”