Prospectus Summary
PROSPECTUS SUMMARY This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our Class A common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, the terms “Poshmark,” “the company,” “we,” “us,” and “our” in this prospectus refer to Poshmark, Inc. and its consolidated subsidiaries.POSHMARK, INC.
Mission
Our mission is to put people at the heart of commerce, empowering everyone to thrive.
Overview
We are a social marketplace that combines the human connection of a physical shopping experience with the scale, reach, ease, and selection benefits of eCommerce. In doing so, we bring the power of community to buying and selling online. We created Poshmark in 2011 to make buying and selling simple, social, and fun. Pairing technology with the inherent human desire to socialize, our marketplace creates passion and personal connections among users. In 2019, our Active Users spent an average of 27 minutes a day on our marketplace browsing, shopping, buying, selling, and connecting with each other via 20.5 billion social interactions. We dynamically curate our marketplace into lifestyle categories that our users love, including apparel, accessories, footwear, home, and beauty. Powered by our proprietary technology, our social marketplace is purpose-built to enable simple transactions, seamless logistics, and an engaging experience at scale. As of September 30, 2020, there were over 201 million secondhand and new items for sale across 9,431 brands on our marketplace. As of September 30, 2020, we had 31.7 million Active Users, 6.2 million Active Buyers, and 4.5 million Active Sellers.
We empower people to sell a few items or to become successful entrepreneurs by providing them with end-to-end seller tools. We refer to this as “making selling a superpower.” Our comprehensive infrastructure makes it easy for sellers, from casual consumers to professional sellers, brands, and retailers, to build their businesses with seamless listing, merchandising, promotion, pricing, and shipping. Sellers use content, inventory selection, and social interactions to monetize their listings. Our transparent fee structure aligns our success with the success of our sellers. Our fee is 20% of the final price for sales $15 and over, or a flat rate of $2.95 for sales under $15. We attract, engage, and retain sellers by creating a vibrant community where sellers can use their personal passion for economic empowerment.
Our social features make the discovery and purchase process simple and enticing for buyers, fostering high engagement and retention. In 2019, 87% of items purchased were preceded by a like, comment, or offer on our marketplace. We enable buyers to discover, connect, and curate their network and news feed with that of other users who share similar styles and personal preferences, creating a fun shopping experience. Our marketplace is vast, with sellers listing millions of secondhand and new items across multiple categories. We use data-driven personalization to customize each user’s feed to feature the most relevant listings and make it easy to quickly search for and find products of interest. Furthermore, sellers list a variety of items across all price points, with the added benefit of being able to negotiate offers directly with buyers seeking to optimize their budget, allowing sellers to manage their listings to achieve their individual objectives. Because our marketplace features a massive selection of secondhand items, buyers are also able to support their personal style while minimizing their environmental impact.
The scale of our community of users, buyers, and sellers creates network effects that drive growth in our social marketplace. We make it easy for buyers and sellers to build and deepen relationships through a variety of social mechanisms designed to foster social interactions, create community, and drive engagement. As users join our community, they interact with one another and build personal networks through likes, comments, shares, follows, offers, and purchases. Each day in 2019, there were, on average, over 56 million social interactions on our marketplace, including 38 million shares. In 2019, we also saw a 34% increase in social interactions per Active User as compared to 2018. This engagement attracts new sellers who, in turn, increase the breadth and depth on our marketplace, and ultimately attract more buyers. Buyers often convert to becoming sellers after experiencing the ease and value of selling on our marketplace. At any time, a user may be a buyer, a seller, or both. This high velocity flywheel of community engagement drives strong monetization potential and an attractive business model with efficient user acquisition dynamics. Of all buyers who activated between 2012 and 2018, 34% of these buyers also activated as sellers by year end 2019, and of all sellers who activated between 2012 and 2018, 39% of these sellers activated as buyers by year end 2019. In addition, in 2019, 48% of sellers used a portion of their earnings on our marketplace to make a purchase on our marketplace in the same year.
Proprietary technology and data underpin our community, social marketplace, logistics, and payments. Our eCommerce technology allows seamless, secure transaction capabilities in a highly distributed network across millions of buyers and sellers, without having to touch or own physical inventory. We rely on data science to personalize every user’s feed while offering powerful, easy to use tools to drive seller success. The result is a unique ecosystem built for social commerce, which leverages social tools to humanize the online shopping experience and harnesses community engagement, while providing an integrated end-to-end system across the transaction cycle, from shopping to shipping.
The engagement of our community has fueled strong growth in our business, supported by attractive unit economics and efficient user acquisition. We do not own or manage inventory as all products are listed, managed, sold, and shipped by our sellers, utilizing our transaction tools that makes the selling process seamless and easy. This asset-light model creates scalability and favorable working capital dynamics. As of September 30, 2020, our community has generated $4.0 billion in GMV since 2011, with $1.3 billion in the four quarters ended September 30, 2020 and $1.0 billion in the four quarters ended September 30, 2019, representing a 30% growth rate. We win when our sellers win; we earn our revenue based on a simple fee from each successful transaction that is conducted on our marketplace. In the four quarters ended September 30, 2020, we had revenue of $247.5 million and we generated net income of $6.2 million, and Adjusted EBITDA of $17.5 million. In the quarter ended September 30, 2020, we had GMV of $375.4 million, revenue of $68.8 million, net income of $10.8 million, and Adjusted EBITDA of $15.0 million.
The Future of Online Shopping is Social
While eCommerce offers substantial improvements to buyers over in-person shopping, namely the easy access to unparalleled scale and diversity of brands, styles, and price points, the personalization element remains a challenge. The sheer scale of online inventory can often overwhelm potential customers. Despite some advances in personalization, the online buyer experience is still largely one-way and transactional.
In the offline shopping experience, product discovery is inherently social. Shoppers are seeking the same in the digital world and increasingly turn to one another for recommendations and validation online. Social technology platforms take a central role facilitating personal, meaningful interactions at scale through photos and discovery-based content. In addition, consumers increasingly favor resale shopping, fueled by the desire for sustainable consumption and increased orientation towards value.
From the seller perspective, people continue to find ways to pursue their passions with a digital “side-hustle” or as digital entrepreneurs. The growing demand for social shopping online creates a meaningful opportunity for sellers to expand their potential customer base from local to global, with the data-driven ability to reach, acquire, and retain buyers.
The Poshmark Solution
Poshmark makes buying and selling simple, social, and fun.
Benefits to Buyers
Social and fun. Our shopping experience flourishes because of authentic human connection. We enable our buyers to grow their personal networks on our marketplace, driving positive social feedback, long-term engagement, and repeat purchases. Our community builds relationships through a variety of social actions and encourages sellers to style and promote each other’s items. Through Likes, Posh Parties, conversations, styling “Bundles,” and negotiations, we have brought the benefits of the real-world shopping experience online.
Simple and personalized. Our marketplace makes shopping and buying easy and accessible. Users access our marketplace on numerous devices, with a simple payment and shipping process and a consistent buying experience across the platform. Buyers can benefit from personalized experiences with sellers who understand their individual style, sizing, and fit. Our sellers offer a vast assortment of items, over 201 million as of September 30, 2020, and we offer the data-driven ability to sift through all of it and personalize the experience for each user. Sellers often send personal, handwritten notes to buyers along with their item, while buyers often write digital “love notes,” commenting on the purchase or seller experience.
Value shopping with breadth and depth. Our marketplace allows buyers to optimize the best value for them. Sellers offer a vast assortment of secondhand and new items at value price points enabling shoppers to easily find and purchase any style, including everyday items as well as hard-to-find items. The average order value on our marketplace in 2019 was $33.
Win-win for environment and enduring style. Shopping on our marketplace allows members of our community to support their commitment to environmental sustainability across multiple products and brands that fit their personal style. We believe this trend will grow, particularly as the next generation of consumers age and have growing disposable income.
Benefits to Sellers
Easy and simple to rotate a closet or build and grow a business. End-to-end tools make selling a superpower through robust listing, fulfillment, and customer support capabilities. Underpinned by our proprietary technology, our millions of sellers can easily list their inventory in real time and connect with buyers. We offer an integrated stack for running a full-scale online shop from a mobile phone, supported by end-to-end marketplace tools for order fulfillment. The simplicity of this selling experience makes it possible for anyone to engage with buyers and sell on our marketplace, whether it is individuals cleaning out their closets, professional sellers building their own brands, local boutiques expanding online, merchants engaging other merchants, or brands and retailers building their online social store presence. Since 2011, our sellers have delivered more than $4.0 billion in GMV as of September 30, 2020.
Ability to build a personal brand and loyal customers. Sellers use their personal passion to feature content, select and style inventory, and engage in social interactions to monetize their listings and drive the growth of their businesses. In 2019 our community engaged in 20.5 billion social interactions on our marketplace. As of September 30, 2020, sellers on average had 359 followers, and the most-followed seller had more than 2.7 million. Sellers can create a personal brand and ongoing relationships with buyers on our marketplace, and this social feedback helps keep sellers engaged. This is a powerful feature of our marketplace and has enabled entrepreneurial sellers to launch their businesses and build their own brands quickly and cost effectively, while empowering brands and retailers to deepen their interaction and engagement with our loyal customer base.
Built-in demand based on community scale and engagement. As our business has grown, we have invested in new technology and capabilities to allow our sellers to reach and engage with more users and buyers. We market and enable sellers to market their items through social tools so that sellers do not need to spend money on marketing to drive traffic to their listings. In 2019, 87% of items purchased were preceded by a like, comment, or offer on our marketplace, and our community of over 30 million Active Users spent an average of 27 minutes per day on our marketplace.
Transparent business model and pricing. Our business model is simple. We make money when our sellers make money on our marketplace. We charge a transparent fee based on the final sale price of an item: 20% of the final price for sales $15 and over, or a flat rate of $2.95 for sales under $15. There are no other fees that the seller pays to sell on our marketplace.
Our Market Opportunity
Three key trends are driving the future of retail: the shift to online, the shift to social, and the shift to secondhand. Many of these trends are led by younger generations who continue to grow their spending power as they age.
The retail industry is undergoing significant transformation as consumer preferences shift away from traditional, physical retail in favor of the selection and convenience of eCommerce. The online U.S. apparel and footwear market is estimated at $90 billion in 2019 and is expected to grow at a 10% compound annual growth rate, or CAGR, to $131 billion by 2023, according to Statista. This growth represents increasing online penetration of the total U.S. apparel and footwear market from 20% in 2019 to 26% in 2023.
Consumers are also shifting to more engaging and personalized experiences, fueled by the rapid growth of social platforms. According to Pew Research, in 2011, 50% of U.S. adults used social media, and in 2019 the share had risen to 72% of all adults, including 90% of those aged 18–29, and 82% of those aged 30–49. The proliferation of social platforms has created a new opportunity for commerce. According to our Social Commerce Report that we commissioned from Zogby Analytics in 2019 and 2020, 57% of our users use friends, family, and word-of-mouth to discover new brands, and 42% of our users use influencers. According to that report, 55% of Gen Z consumers rely on influencers on social platforms to discover new brands.
Secondhand and resale also continue to grow as consumers, particularly younger generations, adopt efforts to reduce overall consumption and support a more sustainable economy. According to that report, an estimated 16% of the Gen Z consumer closet is secondhand, compared to 10% of the Baby Boomer closet. Shoppers are turning to platforms to extend the lifecycle of clothing, creating a more sustainable future. According to that report, 72% of our U.S. users often consider an item’s resale value before purchasing, and that when unable to return an item online, 93% of our U.S. users would sell it online. The online U.S. resale market for apparel and footwear is estimated to have been $7 billion in 2019 and is expected to grow to an estimated $26 billion in 2023, according to a report we commissioned by GlobalData in 2020. Shopping secondhand also provides shoppers with the opportunity to access a wide variety of brands and price points in a sustainable way. Consumers are increasingly seeking to diversify their fashion choices, from luxury brands, to mainstream retailers, to emerging online brands, a trend we expect to continue.
Our social marketplace has grown rapidly due to these trends, and is well-positioned to address the future of shopping online in the U.S. apparel and footwear market. Over the long-term, we have the opportunity to address additional categories of retail and serve a broader global population. The online global apparel and footwear market is estimated at $422 billion in 2019 and is expected to grow at an 11% CAGR to $636 billion by 2023, according to Statista.
Our Competitive Strengths
We believe that we have a number of competitive advantages that will enable us to maintain and expand our position as a leading social marketplace, including:
Our Growth Strategy
Community is the engine of our business, and our main priority is ensuring that this community continues to grow and transact. Our community provides both the supply and the demand on our social marketplace, which is critical to our success. We are therefore focused on expanding the community and fostering the best environment possible for a seamless and enjoyable shopping experience. We focus on the following elements of our strategy to drive our growth:
Summary Risk Factors
Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks highlighted in the section titled “Risk Factors” immediately following this prospectus summary before making an investment decision. We may be unable for many reasons, including those that are beyond our control, to implement our business strategy successfully. Some of these risks are:
If we are unable to adequately address these and other risks we face, our business, results of operations, financial condition, and prospects may be adversely affected.
Channels for Disclosure of Information
Following the completion of this offering, we intend to announce material information to the public through filings with the Securities and Exchange Commission, or the SEC, the investor relations page on our website (poshmark.com), press releases, public conference calls, and public webcasts.
Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website. Information contained on or accessible through our website is not incorporated by reference into this prospectus, and inclusion of our website address in this prospectus is an inactive textual reference only. You should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase shares of our Class A common stock.
Corporate Information
We were incorporated in 2011 as GoshPosh, Inc., a Delaware corporation, and changed our name to Poshmark, Inc. in 2011. Our principal executive offices are located at 203 Redwood Shores Parkway, 8th Floor, Redwood City, California 94065, and our telephone number is (650) 262-4771. Our website address is www.poshmark.com. Information contained on or that can be accessed through our website does not constitute part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.
“Poshmark” is our registered trademark in the United States, Australia, the European Union, Japan, Korea, and the United Kingdom. Other trademarks and trade names referred to in this prospectus are the property of their respective owners. Solely for convenience, trademarks and tradenames referred to in this prospectus may appear without the ® or TM symbols.
Emerging Growth Company
The Jumpstart Our Business Startups Act, or the JOBS Act, was enacted in April 2012 with the intention of encouraging capital formation in the United States and reducing the regulatory burden on newly public companies that qualify as “emerging growth companies.” We are an emerging growth company within the meaning of the JOBS Act. As an emerging growth company, we may take advantage of certain exemptions from various public reporting requirements, including the requirement that our internal control over financial reporting be audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, certain requirements related to the disclosure of executive compensation in this prospectus and in our periodic reports and proxy statements, and the requirement that we hold a nonbinding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions until we are no longer an emerging growth company.
In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. As a result, our financial statements may not be comparable to those for companies that comply with new or revised accounting pronouncements as of public company effective dates.
We will remain an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of the completion of this offering.
For certain risks related to our status as an emerging growth company, see the section titled “Risk Factors—Risks Relating to Our Business and Operations—We are an ‘emerging growth company’ and the reduced disclosure requirements applicable to emerging growth companies may make our Class A common stock less attractive to investors.”