Investors were keen to buy into Poshmark's vision for the future of retail — one that is social, online and secondhand. The company's stock price more than doubled within a few minutes of its Nasdaq debut this morning, rising from $42 to $103.
Poshmark is anything but an overnight success. The California-based company, founded in 2011, has steadily attracted a community of 31.7 million active users to its marketplace for secondhand apparel, accessories, footwear, home and beauty products. In 2019, these users spent an average of 27 minutes per day on the platform, placing it in the same realm as some of the most popular social media services. This is likely why Poshmark points out in its S-1 that it isn't just an ecommerce platform, but a "social marketplace." Users can like, comment, share and follow other buyers and sellers on the platform.
For the first time since its founding, Poshmark turned a profit in its quarter that ended in June, and was again profitable the following quarter. It makes money by charging sellers a fee: 20% for items over $15, and $2.95 for everything else. And though Poshmark markets itself as a trusted source for luxury items (it provides free authentication for items over $500), the average order value in 2019 was just $33.
Co-founder and SVP of New Markets Tracy Sun spoke with Protocol soon after Poshmark's market debut. Sun discussed the importance of social commerce, why users are spending so much time on Poshmark, and how the company is investing for long-term growth.
The interview has been edited for clarity and brevity.
As you went through the IPO process, what were some common questions from investors?
The main questions we get from investors are about our social commerce marketplace and the magic behind it. Here's the thing: A lot of social networks are tacking on commerce, and a lot of commerce companies are tacking on social. Poshmark is different in that we built our business with social and commerce integrated from the very beginning. This means we are at the forefront of social commerce and this puts us in a leadership position.
Many people are aware that social commerce is a global phenomenon. So they really want to understand, "How does it work? Where is the momentum coming from? And why have we been able to get to where we are today?"
What's driving customers to spend those 27 minutes each day on Poshmark? Are customers treating it as a social experience, even if they have no immediate intention of buying?
Shopping, historically, has always been social. Hundreds of years ago, people wanted to talk to one another about the items they were buying. They wanted to know the people they were buying from. That's just inherent in us in shopping.
With the rise of ecommerce, all of that engagement and vibrancy that human beings have when they connect with one another got stripped out of shopping. What we see online is the photo of the product and price. What Poshmark does is put all of that vibrancy of social community connections back into shopping.
To your question of what people are doing on the platform: They are talking to one another; they are getting to know who they're buying from and selling to; they're getting inspiration; they're getting recommendations; they're asking questions about color, fit, sizing and everything else we're accustomed to asking in a social environment. And honestly, this is the way people are shopping today. Gen Z and the younger generations refuse to have one-way communication, they want to be involved, talk to their peers and socialize. So we've built this social marketplace in order to help enable that, and, as a result, help our buyers and sellers thrive.
There's a fairly large gap between your average selling price of $33 and the authentication threshold of $500. How does Poshmark build consumer trust for customers making purchases below $500?
Buyer and seller trust is extremely important to us. As you mentioned, we offer authentication services on certain items. There are also a lot of investments we're making — on the human, technology and program side — to protect our community.
We have machine learning in the background that helps strengthen the integrity of our marketplace. We have a community program where we enable anyone on our site to flag any listings that violate our politics, and our politics are very clearly stated on our site. We also have a team of people who are constantly monitoring listings.
Poshmark experienced a dip at the onset of the pandemic in March, but then performed really well in the subsequent months. How do you plan on retaining that momentum as the pandemic hopefully subsides?
There are three trends driving momentum in commerce: the shift online, the shift to social, and the shift to resale or secondhand. Over the past year, those trends that were already there have accelerated. Once we go online, we're not going back. When we go social, we're not going back. These trends are here to stay.
We see ourselves at the intersection of these trends and the leader at this intersection. We are focused on continuing to build long-term growth. So we started with women's products and added men's and kids'. Last year we added home goods, and most recently we launched beauty. We'll continue to add more categories so that our buyers and sellers can transact with more items, [and] international [expansion]. Then the last one is building enterprise-grade tools and services to support those sellers that are looking to move a high volume of inventory.