poshmark-business-model

How Does Poshmark Make Money? Poshmark Business Model In A Nutshell

Poshmark is a social commerce mobile platform that combines social media capabilities with its e-commerce platform to enable transactions. It makes money with a simple model, where for each sale, Poshmark takes a 20% fee on the final price, for sales of $15 and over, and a flat rate of $2.95 for sales below that. As a mobile-first platform, its gamification elements and the tools offered to sellers are critical to its growth.

Origin Story

Manish Chandra, Founder, and CEO of Poshmark explained how his childhood growing up in India, with the summers spent with his grandfather in a pharmaceutical shop in Chandni Chowk, a traditional market in Old Delhi, he learned what makes up a marketplace.

By observing people interacting, transacting, and negotiating, he learned what makes up a vibrant market.

In the decades following, e-commerce would become the primary mode of consumption, and Manish Chandra wondered if he could still make the whole online shopping experience social.

As he highlighted as the iPhone 4 launched, around the 2010s he realized how technology could be used to connect people, and enable them to share, while shopping.

From an engineering standpoint, Manish Chandra developed his own blueprint centered around a social, and sustainable experience, where technology would enhance both the value proposition for users and sellers on the platform.

After building his team, comprised of Tracy Sun, Gautam Golwala, and Chetan Pungaliya, in 2011, they launched Poshmark.

Market Opportunity

Poshmark’s opportunity sits across three markets and trends, which are all under the umbrella of retail.

As an online platform, driven by social commerce, selling primarily secondhand stuff, those three elements make up the market characteristics of Poshmark.

Value model

Poshmark value model moves along the lines of a shopping experience, improved by technology.

As a digital platform, Poshmark creates value for two types of individuals: users/customers and sellers.

On the one hand, Poshmark offers a discovery and purchase process primarily driven by a social experience.

As Poshmark highlights in its prospectus, perhaps in 2019, 87% of items purchased on the platform were preceded by a like, comment, or offer on its marketplace.

This discovery process is also user-generated, where users/buyers can curate their newsfeed with similar tastes and styles.

Poshmark’s marketplace provides a listing with millions of secondhand items.

Mission and vision and core values

Poshmark’s mission is “to put people at the heart of commerce, empowering everyone to thrive.”

Poshmark’s core values are:

  • Focus on People.
  • Lead with Love.
  • Grow Together.
  • Embrace Your Weirdness.

Value propositions and key stakeholders

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Poshmark’s primary goal is to make “buying and selling simple, social, and fun.”

In the offline shopping experience, product discovery is inherently social.

Shoppers seek the same in the digital world and increasingly turn to one another for recommendations and validation online.

Social technology platforms take a central role in facilitating personal, meaningful interactions at scale through photos and discovery-based content.

Also, consumers increasingly favor resale shopping, fueled by the desire for sustainable consumption and increased orientation towards value.

From the seller’s perspective, people continue to find ways to pursue their passions with a digital “side-hustle” or digital entrepreneurs.

The growing demand for social shopping online creates a meaningful opportunity for sellers to expand their potential customer base from local to global, with the data-driven ability to reach, acquire, and retain buyers.

Value Prop for Buyers

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Some of the claimed values for buyers comprise:

  • Social and fun mobile experiences and social actions are built into the platform. Interactions as likes, Posh Parties, and conversations, Poshmark tries to recreate a sort of real-world shopping experience.
  • Simple, personalized with a large variety of sellers.
  • Second-Hand item. Buyers on the platform can also find a vast assortment of secondhand items at a cheap price. For instance, in 2019 the average order value was $33.
Value Prop for Sellers

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Sellers are critical for Poshmark, as the variety of items offered will make the platform more interesting to buyers and it will enable repeat buyers to get back to it over and over.

So Poshmark emphasizes its mission to “make selling a superpower.”

Poshmark takes a 20% fee on the final price, for sales of $15 and over, and a flat rate of F $2.95 for sales below that.

Some of the claimed value propositions for sellers comprise:

  • Easy and simple tools to build a digital business via Poshmark through listing, fulfillment, and customer support capabilities. Sellers can easily list their inventory in real-time and engage with buyers. Poshmark makes it a mission to enable anyone to sell, whether it is individuals that want to sell their used clothes, professional sellers, local boutiques, or other merchants.
  • Draw on a large mobile user base. Poshmark highlights how in 2019 its community engaged in 20.5 billion social interactions on its marketplace. So it combines social media capability and e-commerce. In addition, sellers can build their following on the platform and capitalize on it.

Technological model

LOGO
Poshmark claimed proprietary technology leverages on a mobile marketplace, with built-in social media capabilities to enable as many interactions as possible. Indeed, many interactions on the platform become purchases with a higher degree of probability. Whether they are individuals trying to sell their used clothes or professionals and merchants, sellers can easily set up their mobile store and tap into millions of potential buyers. In addition, sellers can leverage Poshmark’s logistic services to handle their inventories (Image Source: Poshmark S-1)

Poshmark combines e-commerce, social media, inventory management, and sellers’ tools as means of growth.

Some of the key elements that make up the technological model claimed by Poshmark comprise:

  • Multi-Platform and API-first Design. Users can access the platform both via mobile (iOS and Android) and a responsive web app. The whole platform runs in the cloud with a set of APIs which are platform agnostic.
  • Social Platform managed via a social graph. Poshmark is a social media platform within an e-commerce platform. As such, it manages social graphs that store the myriad of connections across the millions of users on the platform.
  • eCommerce Engine that sellers can optimize listings and sales.
  • Real-time Platform. Features like Posh Parties allow tens of thousands of users to interact daily.
  • Big Data and Machine Learning used to process the tens of millions of interactions across buyers and sellers and used to personalize the experience across the platform.

Poshmark Storefront

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Example of buyers and sellers users’ experience via Poshmark. As a social commerce mobile platform, sellers can share their listings with the community of buyers who can interact with it through likes and comments. Sellers can promote their listings through promotions and negotiations. And listings can have additional exposure through Posh Parties (Image Source: Poshmark Prospectus).
  • Listing. Sellers can easily create their own listings, that can get broadcasted to seller’s followers. Those same listings can be integrated with other social media like Facebook, Instagram, and Pinterest for further amplification.
  • Pricing. Sellers can set their own pricing strategy, by either setting dynamic pricing through the Make An Offer feature (it enables negotiations and offers from potential buyers), or targeted discounts via the Price Drop feature (buyers can offer discounts to users who have liked an item). For instance, in 2019, Make an Offer drove 70% of orders placed on Poshmark.
  • Wholesale. Sellers can purchase inventory in bulk via Posh Wholesale.

Poshmark Social Commerce Features

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The four core social selling features on Poshmark: Posh Stories, Bundles, Drops Soon, and Reposh (Image Source: Poshmark Prospectus)

Social Marketing Services where sellers can promote their listings comprise:

  • Posh Stories, where sellers can showcase their listings via short videos and photos that disappear in 48 hours (a similar format to stories which we find on other social media platforms).
  • Bundles. Here Sellers can offer storewide seller discounts.
  • Drops Soon. A feature that enables sellers to pre-market items and notifies buyers when they are out.
  • Reposh. A one-click feature to resell items.

Poshmark Logistics And Payments

Logistics and Payment comprise shipping, payment, and authentication services.

  • Shipping. Posh Post offers sellers a fast shipping solution where buyers pay a flat fee to ship any USPS item.
  • Payment. Buyers are offered various payment methods, including credit cards and Posh Credits.
  • Authentication. Features like Posh Protect are used to guarantee buyers the quality of the received item, and other features like Posh Authenticate enable secure transactions.

Distribution Model

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Poshmark is a peer-to-peer mobile social commerce platform that has two core players, buyers, and sellers. The experience on the platform is enhanced by buyers that can engage with other buyers. And at the same time engage with sellers, their listings, and offers – Image Source: Poshmark Prospectus.

Posh mark does not own or manage inventory, it, therefore, runs an asset-light model where Poshmark earns revenues based on a fee from each successful transaction.

Poshmark’s flywheel starts as users join the platform and start interacting, building communities just like on a social media platform.

That “attention” draws sellers that first offer their listings and then invest in widening them up, thus making the platform more interesting for users in the first place.

The interesting dynamic on Poshmark is that buyers can easily become sellers, as also individuals can sell their used clothes, with a strong secondhand marketplace.

And sellers can turn into buyers.

Growth Strategy

Poshmark growth strategy is skewed toward a few key objectives:

  • Growth of active users, as those users engage on the platform that becomes more valuable for the users joining (perhaps users leaving likes on listings also signal the quality of specific products/boards on the platform).
  • Growth in product variety.
  • Growth in engagement to drive transactions on the platform. Through data, Poshmark knows that the more engagement on the platform the more the sales and transactions taking place there. Therefore, the objective is to enhance engagement and discovery.
  • Expand Internationally. 
  • Expand the enterprise seller services.

Digital marketing strategy

Poshmark uses both organic and paid channels to grow its user base, and via virtual and in-person events.

Poshmark leverages social media channels, via organic, and paid campaign and influencer marketing. In addition, it has also been experimenting with TV and radio advertising.

Virtual community events are key marketing channels. Events like Posh Party Live, Posh N Sip, and PoshFest (an annual two-day conference) play a key role.

Financial & Revenue model

The Poshmark revenue model is quite straightforward, it takes a 20% fee on the final price, for sales of $15 and over, and a flat rate of $2.95 for sales below that.

poshmark-revenues

Poshmark revenues are based on the value of items sold on the platform as it makes money when sellers have sold their listings.

Key takeaways

  • Poshmark is a social commerce platform that enables buyers and sellers to engage and interact easily. In that way, the transactions’ flow is ensured and Poshmark, which takes a cut on each transaction on the platform, makes its revenues.
  • Poshmark combines elements of e-commerce, social media, and machine learning/big data to enable engagement on the mobile-first e-commerce platform.
  • Its distribution model is given by the variety of items available on the platform. And at the same time, the fact that sellers can easily set up their e-commerce and build their community makes the platform appealing to sellers.

Read Also: Amazon Business Model.

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