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Peer-to-peer fashion resale service Poshmark is launching an ad sales platform that lets sellers promote their listed items, as it pivots following last year’s January 2023 acquisition by South Korea’s Naver.
In the past year, Poshmark has quietly started adding the option for sellers to promote their closets, which are then individually recommended to relevant buyers based on specific search terms. The tool becomes widely available to all sellers in the US today.
It’s the latest in a series of technology updates Poshmark has rolled out since being bought by Naver — often referred to as the “Google of South Korea” — it specialises in search, machine learning-informed recommendations and e-commerce.
Under Naver ownership, Poshmark has focused on profitability and a return to its original premise: peer-to-peer selling. Founded in 2011, Poshmark went public in January 2021 when competition in the secondhand market was at its peak, after a pandemic-era boom. At the time of its IPO, Poshmark was profitable, with a valuation of $7.5 billion. But in the years immediately after — as the world recovered from the pandemic and resale platforms struggled with profitability — Poshmark’s share price fell 82 per cent, and it was losing money. It was acquired by Naver in January 2023 with an enterprise value of $1.2 billion.
A key benefit of becoming part of Naver was the ability to focus on returning to sustainable growth through mid and longer-term projects that take advantage of Naver’s technology, says Poshmark founder and CEO Manish Chandra, including live streaming, the ad sales offering, personalisation — and more in the pipeline. “If we think of ever becoming public again, we have all the different growth engines. These are projects that will take multiple years to complete and get out.”
A year after the acquisition, it returned to profitability, partly due to the addition of ad revenue, according to Naver’s 4 May earnings call. Advertising revenue is expected to be a significant growth driver this year, said Naver CEO Choi Soo-yeon on the call.
Poshmark is going back to basics, focusing more squarely on fashion resale; it previously expanded into home goods and a wholesale offering that sold small bundles of new apparel to sellers, positioning them as small independent boutiques. This enabled the brand to make money on both these sales, and then to make more revenue when those pieces were sold through the platform. While this offering still exists, Chandra says that it is now a very small part of the business, and that resale remains a hot topic in the wider fashion industry.
“Brands are still trying to figure out their role in resale. Given our audience, we are focusing back on our roots of uniting the closets of the world together. There is still so much work to do there.”
The advertising opportunity
Called Promoted Closet, the new ad platform has been in testing since early 2023, with participating sellers seeing a 43 per cent increase in sales, according to the company. Sellers who want to use the capability set a weekly amount that they want to pay, then Poshmark automatically promotes individual product listings from their entire offering when they are relevant; the seller who buys the promotions only pays when a shopper clicks on the promoted listing. (Often phrased as “cost per click”, this is similar to ads on Google, Etsy and Amazon.) Advertisers also gather data on impressions, clicks, sales on promoted listings, return on ad spend, cost per click and click-through rate.
It’s a way to diversify Poshmark’s revenue, says Chandra. (Poshmark makes money by taking a percentage of any sales that take place on its platform.) “[In terms of] diversification of revenue streams, it is a very powerful one,” Chandra says. “But anytime you think of revenue, we have to align it with a single metric, which is the success of our sellers. The only way this revenue stream succeeds is if our sellers succeed.”
The changes at Poshmark reflect a number of shifts in the wider industry, including consolidation, the post-pandemic slump and the need for diversified revenue. Retail media networks, which refer to the practice of retailers selling ads to the brands it carries, have become an opportunity to increase revenue for retailers including Macy’s and Saks.
“One of the big challenges for brands and creators is how to reach consumers, and that has made retail media networks far more appealing,” says Neil Saunders, managing director and retail analyst at Globaldata. “From a retailer and platform perspective, retail media networks are seen as a way to enhance sales and profit. They can be a nice addition to traditional sales.”
Ninety-five per cent of brands said they will be spending the same or more this year on retail media networks (RMNs), according to a recent LTK study with Northwestern University, and it’s understandable other platforms would try to replicate this model, given the success in other industries, says Rodney Mason, head of marketing and brand partnerships at LTK. Retailers and brands are “leaning in” to using creators more than celebrities in RMNs because of their authenticity, Mason adds.
The difference — and risk — for Poshmark is that it’s not selling ads to brands; it’s selling them to individual sellers who may be casually cleaning out their closet, and not necessarily planning to invest in ads to promote goods they could also donate.
At the same time, some everyday resellers have become increasingly serious about flipping thrifts online, thanks to the rise in platforms like Depop, which is now owned by Poshmark competitor Etsy. There has been a recent rise in Gen Z entrepreneurialism, with a 206 per cent increase in 16 to 20-year-olds registering as ‘sole traders’ between 2017 and 2021, according to research from The Accountancy Partnership. A 2023 report from Thredup found that Gen Z and millennial consumers will account for nearly two-thirds of incremental secondhand spend in the growing secondhand market.
Chandra sees this as especially useful for those who have grown their Poshmark presence into a business. “When you think about a lot of our sellers, they’re not professional sellers. They’re people who started with their closet, they’ve scaled up and now they’re managing large closets. For them, this approach is much simpler.”
Poshmark says that early tests showed an impact on the people who have become full or part-time sellers on the platform. One full-time seller (who goes by @llaird56), focuses on handbags and accessories and has witnessed daily sales and increased earnings since participating. Another (who goes by @classysapphire) has seen more orders, offers, likes and closet exposure since using Promoted Closet.
What’s next for Poshmark
Chandra says that AI is a big theme in how Poshmark is “reinventing” the company, and it wouldn’t have been possible to build some of the new capabilities, or pay for external third-party providers, while functioning independently. This, in part, is because AI is so expensive, and because Poshmark’s business is so complex, with hundreds of millions of available stock-keeping units available at any given time.
In July, it introduced a visual search tool called Posh Lens, which uses computer vision to source available items that match those pictured in submitted photos. It also has a number of existing seller marketing tools (which are free), including the option for sellers to bulk share listings, styling and bundling features, and private chats — but sellers want more ways to automate marketing, even if they have to pay, Chandra says. Promoted Closet is unique because people don’t have to market individual SKUs as they would on other platforms, he adds.
Poshmark is also heavily investing in live-stream video commerce. It launched Posh Shows in April last year, reaching 100 million users and $8 billion in gross merchandise value at the time, and now reaching 130 million users and $10 billion in GMV. It added Posh Shows, which allows multiple sellers to go live together through a ‘Share Shows’ option, piggybacking on each others’ reach. Sellers now host “tens of thousands” of Posh Shows each month, with shoppers watching more than one billion minutes.
The plan is also for Promoted Closet, and Poshmark more widely, to increasingly offer hyper-personalised shopping recommendations. Already, Promoted Closet is designed to learn the best pieces to promote and how to make better matches with shoppers, all while finding relevance from a fashion perspective. It doesn’t currently interpret a shopper’s own taste (the way that Spotify and Instagram algorithms do), but that — and the ability to more quickly adapt to micro-trends — is in the pipeline.
Chandra is energised by the renewed focus on AI, and thinks that eventually, it will impact every aspect of the business, from automatic product listings to styling and even singular garments that are able to change their colours.
“It’s been more than a decade since we’ve seen this stuff. I wake up and I look forward to seeing what’s happening… even internally talking to the team, just the level of ideation is at a very high quality. I think the last time we saw that was 10 years back when the iPhone was just coming of age, and Android. It’s been a long time since we saw something like this.”
Clarification: Article has been updated to reflect that Posh Shows reached 100 million users and $8 billion in gross merchandise value when it launched in April 2023, but those numbers have since increased to reaching 130 million users and $10 billion in GMV. 16 May, 2024
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