Poshmark — eBay meets social media of fashion — makes its IPO debut

Poshmark, the “eBay meets social media” of fashion, is expected to debut on the stock market on Jan. 14.

Poshmark was popularized by:

1. Thrifty Millennials and Gen-Zs, which made up 80% of users
2. Growing awareness of the negative environmental impacts of clothing

The social reselling experience

Founded in 2011, Poshmark grew into one of the largest online marketplaces to buy/sell fashion. In a social media-esque fashion, users can create profiles to showcase and sell their products and follow other users.

Poshmark and its competitors have spent the past decade breaking down the stigma of secondhand clothing — seeding a massive opportunity.

Market opportunity: Resale market is expected to grow from $28b to $64b by 2024 — growing 25x faster than the broad retail sector in 2019.

• Environmental concerns with clothing disposal are driving the usage of resale marketplaces.
• Millennials and Gen-Z’s are adopting second-hand purchases 2.5x faster than the average consumer.

Over the past 2 years, niche online marketplaces grew in popularity from the growing resale market and shift to online commerce:

• Farfetch ($FTCH) and RealReal ($REAL), two luxury reselling platforms, have gone public in the past few years.
• ThredUp, a competitor to Poshmark, confidentially filed for its IPO in 2020.

Poshmark by the numbers

Despite the secondhand nature of reselling, COVID had accelerated the growth of Poshmark.

• Strong growth — 28% sales growth in the first 9 months of 2020 compared to the previous year.
• Profitable — $21m in net income for the first 9 months of 2020 compared to losing $48m in 2019.
• Large user base — 31.7m active users who spend an average 27min/day using its app.

Poshmark has expanded into other categories (ie. home decor, beauty) but don’t expect this to be significant in the short term. Apparel is still the largest segment on the resale market — making up 50% of total global resales.

For investors… How to go viral?

The social aspect of Poshmark could be the key to its success. As a social marketplace, Poshmark benefits from:

• Network effect — the value of each additional user increases the value of its platform (i.e. old users benefit from more sellers/buyers)
• Virality — adding social features (likes, shares) encourages sharing which leads to higher app usage.

At the time of IPO, Poshmark is expected to be worth nearly $3b — a reasonable valuation compared to other resellers on the market.

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