How Poshmark Built a Profitable Wholesale Portal on Top of Its Mobile Social Shopping App

How Poshmark Built a Profitable Wholesale Portal on Top of Its Mobile Social Shopping App

Poshmark the mobile social shopping network is in many regards an outlier in the online retail space.

Techcrunch reported back in April of this year that Poshmark is cash flow positive:

Poshmark, the fashion resale social network, is on track for $100 million in revenue this year, TechCrunch has learned. We hear the company reached $50 million in revenue last year, which means they are on pace to double in 2017.

The company also recently became cash flow positive, with profitability on an Ebitda basis. This is a commonly used, but adjusted measurement of profitability that excludes certain items like taxes and one-time expenditures.

​TechCrunch on the Poshmark model:

Poshmark has a business model that’s different from the rest of the clothing resale startups. It’s not only a social network, but the company also does not buy any inventory, meaning its costs are lower.

Instead, Poshmark makes money by taking a 20% cut from the sales. They are forecasting $500 million in gross merchandise volume, meaning the total dollar value of transactions on the platform for the year.

Poshmark now has 2.5 million sellers. These are users that are selling their (or brands‘) items on the app.

​Over its lifespan, the company has raised over $65 million in venture capital.

Glossy recently did an interview with Poshmark co-founder Tracy Sun, that is well worth a listen.

Here are some remarks:​

She said that the two — mobile and social — go hand-in-hand, because the majority of our time spent on our phones is based on the emotional connection that comes with checking in with people, whether that’s on Instagram or via text message. That doesn’t happen on a typical mobile shopping app, but users check back in on Poshmark between seven and 10 times per day.

​What makes Poshmark special is that the company has added a wholesale model on top that feeds off of the p2p marketplace:

Brands can work directly with Poshmark sellers to supply them with new, unused inventory, but some brands shy away from the idea of “user-generated selling,” as Sun called it. It’s putting a lot of control into the hands of individual sellers. Sun said Poshmark is taking an “if you build it, brands will come” approach.

Glossy has published separately a fantastic closer look at this transformation at Poshmark.

The wholesale portal grew out of an observation that Poshmark users essentially already did something similar themselves. Poshmark just, wisely, followed the desirability path:

sellers began doing just that: They were making trips to stores like Nordstrom Rack and T.J.Maxx, specifically in search of items to sell on their store.
Rather than letting all of that inventory be outsourced, Poshmark launched a Wholesale Portal, an invite-only platform that connects retailers with verified sellers. (To buy from the Wholesale Portal, sellers must have completed at least 10 transactions and have a 4.5-plus rating.)

Bringing that onto the platform and adding a trust element so that brands feel more comfortable partnering, was a brilliant move.

But it goes further. Poshmark has also rolled out a dropshipment program, making its sellers essentially into affiliate partners for partnering brands. Glossy:

In addition to wholesale partnerships, Poshmark has rolled out a dropship program, where sellers act like affiliates for brands, while brands fulfill their orders.

Poshmark is also looking into private labels:

She also said Poshmark was looking to add new opportunities, like a program that would help sellers launch private-label lines.

Poshmark earns a 20 percent commission on items sold on the platform.

We haven‘t seen a company in this vein make it to an IPO. But if anyone can build a successful, lasting company it looks very much like the Poshmark team is your best bet yet.

More on this topic:

One comment

  1. […] How Poshmark Built a Profitable Wholesale Portal on Top of Its Mobile Social Shopping App […]


%d bloggers like this: