Poshmark Business Model | How Does Poshmark Make Money?

Poshmark is a mobile app that enables social commerce transactions by integrating social media features and its e-commerce platform. 

Poshmark earns money through a straightforward business strategy in which it charges 20% of the final price for sales of $15 or more and a fixed cost of $2.95 for sales below that. 

The platform’s gamification tools and seller tools are crucial to its success as a mobile-first network.

Poshmark is a fashion eCommerce website that attracts online shoppers. The method is similar to that of browsing offline and then purchasing online. 

The result is that buyers and sellers in this region can use this well-known service to like and share products. You can connect with merchants whose wares pique your interest as a buyer.

Poshmark business model is extremely simple to implement and can benefit both consumers and sellers. 

You will never be surprised to learn that the platform has attracted over 1.5 million vendors and millions of buyers who are so active that the site adds over 3 million dollars of inventory daily.

What is Poshmark?

Poshmark is an online marketplace where merchants may sell things linked to fashion to interested purchasers. 

The company differentiates itself from other operators (for example, eBay) by including social components into the site, such as likes and followers.

Poshmark earns money through commissions on peer-to-peer sales, its premium boutique service, and a portion of wholesale products.

Poshmark has elevated the shop-and-buy experience for fashion to a whole new level, particularly on a social level.

Poshmark Business Model

This eCommerce platform is primarily focused on connecting customers and sellers wishing to purchase or sell fashion accessories, fashion items, and other luxury goods.

Poshmark also enables consumers to sell unworn or unwanted clothing and features a secure payment method.

Poshmark, based in Redwood City, California, was incorporated in 2011 and is extremely successful. 

There are over 60 million visitors each month to the platform. The Poshmark platform was launched in January 2021.

Company NamePoshmark, Inc.
Company TypePublic
FoundersManish Chandra, Tracy Sun, Gautam Golwala, & Chetan Pungaliya
ProductSocial Marketplace Platform
Founded Date2011
HeadquarterRedwood City, California, USA
WebsiteVisit Website
Poshmark Wiki

How Does Poshmark Work?

Poshmark is a social commerce platform that is available on iOS, Android, and their website. There are clothing options for men, women, and children and items for the home.

The marketplace is managed by users who upload and sell items. Poshmark does not own the items sold through its service, so it does not own the items they sell.

Poshmark, therefore, can be perceived as a marketplace where merchants can connect with potential buyers online.

Poshmark is thus solely responsible for transaction facilitation, which includes providing secure payment methods and shipping alternatives.

Additionally, Poshmark provides authentication services for any items sold for more than $500. (called Poshmark Authenticate).

What distinguishes Poshmark from other shopping sites is its focus on social media and user interaction.

For example, merchants are not restricted to selling items but maintain a social profile comprised of shares and followers.

Additionally, Poshmark hosts live events dubbed Posh Party. These events occur either on the platform or in various physical places throughout the United States and Canada.

Posh Parties are themed around various topics, such as Chanel or specific product categories, such as shoes. Users can engage and get to know one another within the party or simply sell a commodity of their choice.

Finally, individuals can construct virtual closets that can be followed by others. This serves as a source of inspiration and is then displayed on the user’s feed.

However, unlike social media platforms such as Instagram or Pinterest, all shared things are for sale.

Poshmark Business Model

What do you believe is responsible for the success of the company? Poshmark’s business model is different from many others – it does not maintain inventory. 

Poshmark has a lower overhead than its competitors since it does not have to purchase clothing. 

Stylists have been at the heart of the business for a long time, similar to how micro-influencers succeed on social media by recommending products to their followers.

Poshmark’s innovative business model provides these influencers with a captive audience, therefore assisting individuals in developing their style. Poshmark’s market presence increases as a result of its strong grasp.

The Poshmark business model relies more on social media engagement to develop a network to sell items. Poshmark offers a mobile app, enabling the company to stay connected with mobile users.

How Does Poshmark Make Money?

Poshmark earns money from commissions on sales, boutique service, and the wholesale items it sells.

While listing on Poshmark is free, Poshmark will deduct a charge from the listed price once an item is sold. The charge is a fixed amount of $2.95 for purchases under $15. 

When you purchase $15 or more, you will have to pay 20% of the listing price. Poshmark provides sellers with free pre-paid shipping labels, free credit card processing, free customer service, and free Posh Protect buyer protection for their customers. 

Poshmark Business Model

All orders are subject to a fixed fee of $6.49 for expedited delivery, which the customer pays.

A seller’s Poshmark account is credited with the proceeds of the sale of an item. They may choose to transfer their funds to their bank account, request a check, or keep the money in their Poshmark account for future purchases.

Let’s look closer at each of these revenue streams.

P2P Sales

The Poshmark business model is commission-based. Poshmark does not own any inventory and merely facilitates the transaction. It charges a percentage of each transaction for this service.

Poshmark makes its merchant experience seamless and transparent in comparison with its competitors.

The firm charges a fixed fee of $2.95 on any sales under $15. A 20% fee is levied on all sales above $15.

The Poshmark marketplace allows private merchants to offer new or gently used fashion products to interested consumers.

Poshmark verifies luxury goods that exceed the $500 level (and therefore qualify as luxury goods). 

You will be responsible for the payment and logistic processes, among other things. The company charges fees for operating its platform and verifying items.

Wholesale

Poshmark launched a new business called Poshmark Wholesale in late 2015. Sellers can use the gateway to purchase larger amounts of merchandise to sell in their shop.

Sellers may benefit from price reductions and increase their earnings on their listings as a result. 

A merchant must have a rating of 4.5 or above and the Boutique Certification to access the wholesale site.

Sellers purchase goods through the gateway from recognized wholesalers such as April Spirit or Function & Fringe.

Poshmark, like peer-to-peer transactions, takes a share of each wholesale transaction. Regrettably, these figures are not publicly available.

Boutique

Poshmark boutique sellers are more professional sellers, similar to a small physical store.

The Poshmark boutique label signifies that the items sold are authentic, brand new, and high quality.

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The standards required of boutique vendors include accurate product photos and descriptions as well as proofs of purchase.

A retailer must be certified to become a boutique vendor. The seller must pay a fixed fee of $20 to receive it.

What is the Funding and Valuation of Poshmark?

Poshmark has raised approximately $153 million in six fundraising rounds, according to Crunchbase. Its most recent Series E investment round was spearheaded by Singaporean holding firm Temasek in November 2017. 

Poshmark was valued at about $600 million during the round, but the valuation wasn’t revealed publicly.

Poshmark Business Model

Inventus Capital Partners, Menlo Ventures, GGV Capital, Mayfield Fund, and Ashton Kutcher are significant investors.

Poshmark was able to raise an additional $277.2 million at its January 2021 initial public offering. Poshmark went public in 2012 at a valuation of $3 billion.

What is the Revenue of Poshmark?

Poshmark reported $262.1 million in revenue for the fiscal year 2020, a 28 percent increase over the previous year.

Success Story Of Poshmark

Poshmark was created in 2011 in Redwood City, California, by Manish Chandra, Chetan Pungaliya, and Tracy Sun.

Indian-born and -raised Chandra is the interim CEO of the company. He moved every two to three years during the first 15 years of his childhood, owing to his father’s position as a judge. 

It is common in India for judges to transfer between jurisdictions to prevent corruption and bribery.

He subsequently earned a bachelor’s degree in computer science from the prestigious Indian Institute of Technology Kanpur, followed by a master’s degree from the University of Texas in Austin. 

He began his professional career in 1989 when Intel hired him as a database engineer. 

After a year at Intel, he worked for various database businesses and obtained his MBA in 1995 from UC Berkeley.

Chandra ran met Pungaliya at his daughter’s school, with whom he had previously worked at one of the listed companies.

Chandra discussed his vision for a bookmarking site to enable visitors to gather connections to home décor products they want to purchase. 

That site evolved into Kaboodle, which the couple sold to Hearst Media in 2007 for an estimated $30 million.

Chandra was eager to launch another firm in the social commerce area as both social media and mobile phones gained widespread acceptance. 

And four years after his successful leave, that impulse materialized in the form of Poshmark.

He met Sun months ago through a mutual acquaintance. Sun began her work as a clinical researcher in the field of neurology after graduating from Columbia University. She then earned an MBA from Dartmouth and worked in a variety of marketing-related roles.

This experience inspired her to establish her firm in 2007, a platform for designing and sharing fashion ideas. 

The business quickly gained popularity, but the technology couldn’t keep up, and the site frequently crashed. 

Furthermore, the current economic crisis made raising the required funds to remain viable even more challenging.

Sun relocated to San Francisco in 2009 following her failure, where she met Chandra. They batted around many concepts before settling on Poshmark, a cross between upscale and marketplace.

They became a mobile-only company in 2011. The organization barely attracted over 1,000 members in its first year but recently seemed to be on the rise. 

One significant finding was that users spend an average of 25 to 30 minutes each day on the app. 

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This metric was quite similar to those used by other social media platforms such as Facebook or Instagram.

The founders’ remarkable engagement figures were mirrored by user growth over the next few years. Every day, users uploaded items worth a million dollars by the end of 2013.

The app’s exponential growth over the subsequent years was due to two factors: To begin, Poshmark invested extensively in its user base by developing a tight relationship. 

For example, they arranged (and continue to plan) regular events called Poshfests for its vendors.

Second, merchants reaped enormous financial benefits from the site. Several of their merchants reportedly earn well over six figures every year. 

This encourages them to create more interesting content and goods, therefore increasing user engagement and growth. This is a critical element of a contemporary marketplace model.

The meteoric rise of Poshmark has not come without setbacks. Servers couldn’t keep up with the increase in users in 2013, and the firm came dangerously close to bankruptcy.

Poshmark’s database was breached a few years later, in 2019. Hackers obtained the user’s name, birth date, email address, and passwords.

Poshmark recently assisted thousands of its merchants in generating more revenue during the Covid epidemic.

Some merchants even become influencers themselves, leveraging the company’s social capabilities, which enable them to cross-promote their content across platforms such as Instagram and Tik Tok. Their growing popularity enables them to form brand agreements.

Poshmark revealed in September 2020 that it has confidentially filed for an initial public offering, which it completed a few months later in January 2021. 

Poshmark’s shares surged more than 140 percent on the day of its first public offering, like several other recent IPOs.

Poshmark has recently expanded into new categories such as pets and announced collaborations with Snapchat, which launched the Poshmark Mini in-app store.

Poshmark’s marketplace now draws more than 60 million monthly users, supplied by 5 million vendors. The firm employs around 2,000 employees in five global locations.

Key Takeaways From Poshmark Business Model

Poshmark is a platform that facilitates easy communication and engagement between consumers and sellers. Poshmark makes money from each transaction and ensures a smooth flow of transactions.

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Poshmark’s mobile-first e-commerce platform combines e-commerce, social networking, and machine learning/big data to enable interaction.

The platform’s breadth determines its distribution methodology. The ease with which merchants can establish their e-commerce and community also contributes to the platform’s popularity.

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