Will Poshmark pull away from the pack in the secondhand clothing wars?

By Erin Griffith , written on October 17, 2013

From The News Desk

Secondhand clothing is a crowded place for startups. For a while there, I was writing about a new company launching every other week. Since the "Buyitnow"-ification of eBay, nothing has really become the new digital equivalent of a garage sale or clothing swap. But trust me, it's not for a lack of trying. Threadflip, ThreadUp, Refashioner, Vaunte, Material Wrld, Tradesy, Forewillow, and ClosetDash are a few.

One company may be pulling ahead of the pack, by virtue of being the most funded, most staffed up, and first to mobile. Poshmark, based in Menlo Park, has raised $15.5 million in venture capital. The company announced it is on track to have $350 million worth of merchandize on its site this year. It has sold more than a million items this year. Poshmark has 250,000 active sellers on its site.

Today, Poshmark announces a spate of celebrity investors: Rachel Zoe and Ashton Kutcher's A-Grade Investments have joined the company's previously announced round of funding. In addition to Kutcher and Zoe, well-known investors Guy Oseary, Ron Burkle, Naval Ravikant and Shervin Pishevar have joined as angel investors.

"Slap-a-celeb" on it is dangerous proposition. In the case of, say, Viddy, which raised a hot round of funding from the likes of Shakira and Jay-Z at a crazy $370 million valuation, celebrities represent dumb money. (Viddy has since struggled.)

Then again, Ashton Kutcher has proven himself to be a savvy investor. His firm, co-founded with Oseary and Burkle, has backed SmartThings, Foursquare, Fab, Uber, and Airbnb.

Rachel Zoe has invested in fashion companies like DailyLook and Pose. She's also lent her name to ShoeDazzle as the site gets itself back on track. (The company sold to JustFab in August.)

The addition of celebrities may help Poshmark push itself further into the mainstream. For now, everyone doing the secondhand clothing thing is fighting for a small piece of an already small pie.

Secondhand shopping online is a challenging proposition. It's hard to keep quality of the goods high, and it's hard to get users to post polished, attractive photos of their goods. It's hard to convince new populations of women to buy used clothing that they can't see beforehand. (With so many shopping options on the Web, do shoppers really have the patience to wade through someone else's closet?) And as with any marketplace, it's hard to get all the dynamics -- shipping, pricing, accurate listings, etc -- down perfectly.

Poshmark has clearly gotten the inventory part down pat -- with a "run rate" of $350 million worth of listings, the site has plenty of secondhand stuff to sell. But that inventory isn't worth anything unless the site can find enough people to buy those items. The company takes a 20 percent cut of sales, so it only makes money when an item sells. (Threadflip employs a similar model. Etsy and eBay take a listing fee regardless of whether an item sells.)

To Poshmark's credit, the site's homepage has more activity than I've seen on any of its competitors' sites. Power users like Bowsandsequins, with more than 100,000 followers, regularly get 20 to 80 likes on each items they post. If all 250,000 of Poshmark's active sellers are this successful, the site will have a solid business. The company has invested resources into professionalizing its sellers, including a PostFest conference, which teachers sellers to establish their businesses and market their goods.

Poshmark is a leader in this category. But it's still not clear whether the category is something worth leading.

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