In 2019, Poshmark users interacted socially an average of 56 million times a day (including 38 million social “shares”), totaling 20.5 billion social interactions in 2019. It believes that’s key to its success, it made clear in its recent filing to go public, where it said the scale of its buyers and sellers creates network effects that drive growth for the social shopping marketplace.
The company experienced a 34% increase in social interactions per Active User as compared to 2018. “As users join our community, they interact with one another and build personal networks through likes, comments, shares, follows, offers, and purchases.”
Sellers sold $1.3 billion worth of goods on the platform between October 1, 2018 and September 30, 2019, compared to $1 billion in the same period the previous year – a 30% growth rate.
Unlike retailers, Poshmark doesn’t own or manage inventory – all products are listed, managed, sold, and shipped by sellers, it noted. “This asset-light model creates scalability and favorable working capital dynamics,” it told potential investors.
Like other ecommerce marketplaces, Poshmark charges a fee from each successful transaction: “20% of the final price for sales $15 and over, or a flat rate of $2.95 for sales under $15. There are no other fees that the seller pays to sell on our marketplace,” it said, and reported the following metrics from its latest quarter:
Quarter ended September 30, 2020:
- GMV of $375.4 million
- Revenue of $68.8 million
- Net income of $10.8 million
- Adjusted EBITDA of $15 million
Poshmark understands that often on marketplaces, buyers are sellers and sellers are buyers:
“Of all buyers who activated between 2012 and 2018, 34% of these buyers also activated as sellers by year end 2019, and of all sellers who activated between 2012 and 2018, 39% of these sellers activated as buyers by year end 2019.
“In addition, in 2019, 48% of sellers used a portion of their earnings on our marketplace to make a purchase on our marketplace in the same year.”
Poshmark said it’s positioned well to take advantage of three key trends that are driving the future of retail: the shift to online, the shift to social, and the shift to secondhand. “Many of these trends are led by younger generations who continue to grow their spending power as they age,” it noted.
When companies go public, they feel pressured to show high revenue growth rates to satisfy investors, and some believe that can have a negative impact on sellers – such as the introduction of new fees.
Poshmark outlined its growth strategy, listing some key elements:
- Grow our community of Active Users.
- Add new product categories. (“We organize all of the products on our marketplace into distinct, shoppable categories. We anticipate adding new categories to expand our product offering and continue to serve demand from our diverse community.”)
- Drive innovation to increase engagement and enhance the marketplace.
- Expand internationally.
- Offer high impact enterprise seller services. (“We intend to enhance our enterprise selling services and continue to attract professional sellers, brands, and retailers to participate on our social marketplace.”)
Poshmark filed for its IPO last month – news site Pymnts reported at the time that the company was profitable, writing, “The company turned its first profit in the quarter that ended June 30. After losing $14.5 million in 2018 and $48.7 million in 2019, Poshmark made $21.1 million in the June 30 quarter and $10.7 million in the Sept. 30 quarter.” (Poshmark noted in its prospectus under risk factors, “We may not be able to sustain our profitability, and our revenue growth rate may decline.”)
You can pore over the filings on the SEC.gov website; it’s always particularly interesting to look at risk factors in a prospectus. One such risk Poshmark noted was the necessity of maintaining effective relationships with third parties, “such as the USPS, Amazon Web Services, or AWS, and Braintree Payment Solutions, a subsidiary of PayPal.” It also described the impact of Covid-19 and of the requirement for it to collect sales tax from buyers. Feel free to share your takeaways in the comments section below.