The 2021 initial public offering (IPO) season is off to a fast start for the payments and commerce business, including an expected filing next week from reCommerce platform Poshmark. The closely-watched filing should list sometime before the end of the month, according to reports, and it has put a spotlight on the reCommerce category.
The social media-focused platform company’s business model is simple: it’s a retail destination for consumers looking to sell their second-hand apparel and other goods or pick up desirable designer items for fraction of the price. Poshmark doesn’t stock its own inventory and has positioned itself as a marketplace that connects buyers and sellers. Unique to Poshmark are social media aspects like the ability to share “likes” on favored items.
“We are a social marketplace that combines the human connection of a physical shopping experience with the scale, reach, ease and selection benefits of eCommerce,” the company wrote in its S-1 filing. “In doing so, we bring the power of community to buying and selling online. We created Poshmark in 2011 to make buying and selling simple, social and fun. Pairing technology with the inherent human desire to socialize, our marketplace creates passion and personal connections among users.”
Poshmark, according to its S-1, enters the market a profitable firm, with growing revenue, an increasing consumer base and rising revenue. The company turned its first profit in the quarter that ended June 30, 2020. 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. And as those figures increase, so are Poshmark’s consumer engagement numbers — 6.2 million active users spent an average of 27 minutes a day on the site in 2019. Those users skew young: the firm disclosed that 80 percent of its active users as of Dec. 31 were millennial or Gen Z consumers.
What Comes Next
As stated, the IPO puts the spotlight on the reCommerce space, which has other high-profile companies such as The RealReal and ThredUP. The pandemic has notably set off something of a reCommerce boom. According to a thredUP report released in late 2020, the resale market grew 25 times faster in 2020 than the overall retail market did in 2019. Some experts have worried the pandemic would prompt consumers to pull back on purchasing their goods secondhand, for fear of running into the coronavirus as an unwanted free gift — but the data is telling another tale, according to CEO James Reinhart.
According to thredUP’s annual report, the resale marketplace is currently worth roughly $28 billion and is projected to reach $64 billion by 2025. The RealReal, which went public in June 2019 before the pandemic began, reported surging active users and sales when it last reported earnings, as well as new partnerships with players like Gucci to expand its reach more broadly and widely to consumers.
The field also has different spins on the consignment business model. For example, thredUP takes possession of the goods for sale, while Poshmark and The RealReal do not. The RealReal advertises and markets itself as a luxury consignment marketplace; Poshmark’s range of goods and sellers is wider. Wardrobe, which is smaller and still private, allows owners of high-end and distinctive clothing to rent out their items via local dry cleaners. Renters pick up and return clothing at a local participating dry cleaner, which also cleans and stores the items, thereby eliminating Wardrobe’s need for warehouses and shipping fleets. The service is aimed at customers who want to rent items for special occasions or temporarily indulge in high-end fashion and trends.
All of them have spent the last year riding a digital commerce bump brought on by consumers rewiring their commerce lives — and a reCommerce bump that has seen consumers looking for more sustainable channels by which to access high fashion.
The sustainable trend powering reCommerce has been on the rise for the last several years and will likely carry the category past the pandemic. Consumers, after all, have been habituated to new ways of shopping and transacting with merchants, mechanisms they are increasingly reporting to PYMNTS and others they don’t intend to change even after they’ve been vaccinated and are able to move more freely in the world.
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