Another IPO has joined the ongoing IPO boom that has continued in 2021 and this time it is the social re-commerce marketplace, Poshmark. The online platform released its share price of $42 per share, above the forecasted target range of $35 to $39. The price of $42 per share gives the company an initial valuation of $3 billion. Poshmark plans to sell 6.6 million shares of Class A common stock which is expected to list on the Nasdaq on January 14 under the ticker symbol, “POSH”.
Poshmark & Re-commerce
Re-commerce is all about re-selling products online and that is what Poshmark does. It provides a platform that connects buyers and sellers just like eBay. Be it a $17 reusable Starbucks cup or a $3000 Louis Vuitton handbag, sellers can list and sell almost anything.
It was founded in 2011 by Manish Chandra and since then has gained over 70 million registered users in the US and Canada alone with over 200 million items listed for sale. Poshmark reveals in its IPO prospectus that they sell an item every second in the US.
The online firm’s revenues doubled in 2019 from $1 billion to $2 billion. However, Poshmark didn’t see a positive bottom-line number until recently when the e-commerce industry’s demand boosted thanks to the pandemic.
The Pandemic & Online Sales
The covid-19 pandemic brought bad news for most industries but it proved to be a blessing for the online marketplace. While unemployment was on the rise and disposable income decreased, platforms like Poshmark and The RealReal provided people with an opportunity to sell products for generating additional income.
From the buying side, as people stayed more at home, they engaged in online window shopping to kill boredom. Moreover, the closure of physical stores and awareness of the environmental impact caused shoppers to opt for secondhand items. All of these factors led to Poshmark reporting a profit for the first time in its 10-year history in the quarter ended June 30.
The online thrift store, ThredUP also filed for an IPO confidentially in October while the luxury fashion retailer Mytheresa Group is set to go public this week at a valuation of around $1.6 billion. The luxury consignment marketplace The RealReal went public in 2019 and has a current market value of $2.3 billion. It also experienced a surging demand during lockdowns, reporting a 14% increase in active buyers while hosting more than 600,000 customers through its website.
Poshmark Offers Wider Price Ranges
Comparing with Poshmark, The RealReal focuses on high-end goods while Poshmark offers a wide price range to buyers. For the luxury items it sells, Poshmark also uses an authentication process like The RealReal. This authentication is limited to items valued at $500 or more.
Poshmark Holds No Inventory
On the other hand, The RealReal and ThredUP offer online consignment services and procure stocks from sellers while charging a percentage of the sale when the product is sold. Poshmark doesn’t hold any inventory allowing it to keep costs down. It simply allows sellers to list, sell, and ship their products directly to the buyers. The growing marketplace earns by collecting a flat 20% fee for sales of $15 and above and charges $2.95 for sales under $15.
According to GlobalData commissioned by ThredUP, the total resale market was $28 billion in 2019 and is expected to grow to $64 billion by 2024. The growing trend of re-commerce could mark a new beginning for online retailers like Poshmark.