Poshmark: A Social Media Platform for Fashionable Resellers and Buyers

Poshmark’s Business Model

Founded in 2011, Poshmark is an online marketplace where fashionable clothing is resold. [1] Sellers and buyers alike can leverage well-known social media tools to share and like items, as well as to follow certain sellers whose inventory is of interest to them. The model is easy to use and benefits from both same-side and indirect network effects. Accordingly, it’s not surprising that the platform has attract millions of buyers and over 1.5 million sellers, who are so engaged that roughly 3 million dollars worth of inventory is added daily to the site. [2]

 

Value Creation

Sellers

For sellers, the platform creates value in several manners. The intuitive app-based interface makes it easy for sellers to upload inventory. After creating an account and filling in profile preferences, sellers:

• Upload photos of what they would like to sell
• Provide both the retail price of the item and what their proposed price is
• Submit a description of the item (e.g. size, brand)
• Select relevant category tags

Accordingly, sellers retain much control over the selling and buying process. Unlike some other site such as ThredUp [3], Poshmark sellers set the prices of their items, manage when items are listed on the site, and keep the inventory on hand until it’s shipped to the buyer. Poshmark also provides the seller with prepaid postage labels, so that shipping the item out is seamless.

As a result of doing most of the selling “leg work,” sellers capture a great deal of the selling price. Funds are deposited into the seller’s account once the buyer has “accepted” the item or 4 days after the package has been delivered, whichever milestone occurs first. Sellers can then have the funds deposited via direct deposit into a bank account or they can receive a printed check in the mail.

To generate interest in their items, sellers can leverage various “Posh Parties” on the platform. [4] Push notifications alert sellers to when certain themed parties will be taking place (e.g. “Everything Kids Party” and “Best in Outerwear Party”). Sellers can then join these parties and share relevant merchandise. Another benefit that sellers reap (but to Poshmark’s detriment) is that sellers can multi-home on similar platforms (e.g. eBay) since inventory is kept on hand.

 

Buyers

For buyers, the platform creates value by making it extremely easy to find items, to stay informed about price drops on certain items, and to negotiate with sellers. For instance, because sellers leverage category tags when they post an item and share items with specific “Parties,” potential buyers can easily search and compare items.

Additionally, by liking and commenting on merchandise, the potential buyer can easily learn more about an item, communicate with the seller, and be notified if the price of an item they “liked” has changed. Buyers can even privately negotiate with sellers on the price of an item. Merchandise can be sold at the “advertised” price, a price the buyer proposes, or a new price the seller has countered with. Offers expired within 24 hours of being made, however the negotiation process can last much longer.

Once the buyer and seller have agreed on a price and the item has been sent, the seller will “accept” the item within 3 days of receiving it (and thereby confirming the item arrived in the expected condition), or they can open a “case.” When a case is pursued Poshmark looks into whether or not the item matches the seller’s description of the item. If Poshmark believes the item aligns with the seller’s description, the buyer will keep the item and the seller will receive the funds. If Poshmark agrees with the complaint, the item is returned to the seller and the money is refunded to the buyer.

 

Value Capture

Poshmark captures value in the form of commissions. For items that sell for less than $15, a flat fee of $2.95 is delivered to the platform and the seller receives the rest. For items that sell for more than $15, Poshmark receives 20% of the purchase price. [5]

Network Effects

There are both same-side and indirect network effects at play.

Both sellers and buyers can “follow” certain sellers. The benefit of following to buyers is that they are kept abreast of when the seller posts and shares items. Sellers benefit by being able to grow and engage audiences, thus increasing their odds of selling merchandise. Sellers will follow other merchants to encourage reciprocity and audience building.

Similarly, sellers can “share” both their merchandise and others with followers and Poshmark-initiated “parties.” Buyers can share items with other buyers and their friends, in addition to “liking” items. Sharing is a critical component of driving engagement and purchase behavior since this action promotes greater merchandise exposure to sharer’s network of followers. “Liking” enables sellers to understand an item’s demand; it also helps buyers keep an eye on the items they are interested in.

Lastly, sellers and buyers have the ability to communicate via commenting and a ratings system, which promote a virtuous cycle. All of these actions promote stronger network effects, and of course, the platform becomes stronger as more sellers and buyers join and engage with the platform.

     

 

Sources:

[1] https://www.crunchbase.com/organization/poshmark#/entity

[2] Ibid.

[3] https://www.forbes.com/sites/ryanmac/2015/09/10/thredup-seller-of-secondhand-clothes-bags-81-million-from-goldman-sachs/#6a3f5066297e

[4] https://poshmark.com/faq

[5] Ibid.