Poshmark had no problem finding buyers for its stock on Thursday: The online marketplace for secondhand goods saw its shares more than double in their stock debut, as investors showed faith the company will build on its position as a leader in the booming resale market.
Shares closed at $101.50 on the Nasdaq, almost 2.5 times the IPO price set late Wednesday, making Poshmark the latest venture-backed company to soar in its stock market debut.
While Poshmark is still a relatively small company, the market’s bullishness is predicated on the belief that it commands a leading position in the resale market and has a credible plan to build on its success so far.
Poshmark calls itself a social marketplace to stand out from resale rivals like ThredUp, which takes possession of what it sells, the RealReal, which focuses solely on luxury, and eBay by looking to foster socializing and browsing for fun to keep its edge. CEO Manish Chandra says active users spend on average 27 minutes a day on the site. (The RealReal went public in 2019, and ThredUp is planning an IPO too.)
“That is about building the human connection between our buyers and sellers,” Chandra tells Fortune. One of the company’s distinctive tools is to create frequent socializing events (now all virtual because of the pandemic) to connect buyers and sellers.
Chandra says Poshmark’s growth has been fueled by a trifecta of factors: the acceleration of e-commerce, which has hit hyper-speed during the pandemic, the interest in the resale market, and social selling. That has served Poshmark well so far: It has 31.7 million active users all over the U.S. who buy on average six items a year.
“There is room to grow just our user base,” the CEO says. And that, he adds, gives Poshmark the reach it needs to increase sales by getting them interested in new product categories.
In the first nine months of the fiscal year, Poshmark’s revenue rose 28%, and it posted a small profit.
A study last year, conducted by independent research firm GlobalData and commissioned by ThredUp, found that the U.S. resale market would hit $36 billion by 2024, compared with $7 billion last year. The idea has caught on to such a degree that some well-established companies, including Levi Strauss, are jumping in with their own resale programs.
And Chandra sees a big opportunity in the future in working directly with retailers and brands to sell their wares to its users as an extra avenue for a special collection or to serve as a clearance outlet like T.J. Maxx, which has almost no e-commerce.
“They already have a ready-made community, and you give them new kinds of merchandising tools,” Chandra says of prospective brands. He’s betting a new Poshmark tool called Dropping Soon, which allows sellers to market their listings ahead of when they’ll be on sale in order to build buzz, will be a key element in luring brands and retailers to sell on Poshmark.
Poshmark recently launched features to bolster spending by its customers and to increase how frequently they shop. Those include its Just Picked feature, which uses artificial intelligence to scan listings (there were 201 million items listed as of the end of its last quarter) and personalize suggestions for customers on what they should buy.
To avoid Poshmark’s becoming a bazaar, the site has given sellers digital tools to create cover pictures and videos describing the items for sale to add to the fun. And that’s an unending task, Chandra suggests.
“We have to, of course, build more tools for them to scale that,” he says.
More must-read retail coverage from Fortune:
- 14 of the biggest bankruptcies of 2020—and who might be next in 2021
- The pandemic cramped Rent the Runway’s style—but here’s how the company is fashioning a comeback in 2021
- From pet adoptions to DIY home improvement to sweatpants: 10 COVID-fueled consumer trends that will endure
- Marie Kondo is back with a new collaboration to keep you organized while staying at home
- A record 12,200 U.S. stores closed in 2020 as e-commerce, pandemic changed retail forever
