By Hans Tung and Robin Li
Written in collaboration with Zara Zhang
Earlier this month, our portfolio company Poshmark, the largest social marketplace for fashion, announced $87.5 million in Series D funding led by Temasek. GGV Capital, which participated in this round, also led Poshmark’s Series C1 financing last year. Hans is a board member of the company.
In addition to the new round of financing, Poshmark introduced a new feature, Poshmark Stylist Match, that allows users to match with a Seller Stylist on the app, thanks to Poshmark’s algorithms. Users can ask to be styled for specific occasions such as “Date night” or “Brunch with friends”. The feature helps women and men who want help with their look but don’t have the time to sift through Poshmark’s 25 million items. It also has a voice-enabled feature: users are now able to ask Amazon’s Alexa to connect them with a stylist.
Given these exciting developments, we wanted to take this chance to reflect on why we invested in Poshmark in early 2016.
Many may think of Poshmark as one of the numerous used-goods marketplaces for women that have appeared in the app store. It’s much more than that. Our view at the time of our investment in 2016 was that the potential for Poshmark exists in the expansion across four key segments:
- Gender: expanding user base from women to men. Today, one in five new Poshmark users is a man.
- New goods: expanding product offering beyond used goods to new goods. Today, more than 250,000 of its sellers are now boutique stores.
- Verticals: expanding categories beyond fashion to home goods, kids, and others.
- Geographies: expanding user base beyond the US over time.
Most importantly, our investment in Poshmark was a bet on “social commerce,” a phenomenon that we thought has the potential to shake up the multi-trillion-dollar global e-commerce market.
Facebook turned weak ties into friends that you can engage with easily. Twitter created new ties by allowing strangers to follow one another. Pinterest added a visual element to what Twitter did, allowing users to discover beautiful things in life. To us, the next natural progression would be to enable users to buy the beautiful thing right then and there – integrating commerce into the social experience.
Most of these companies continued to generate revenue from advertising, which remains the dominant way to make money for most US social media companies. On the other hand, we noticed that companies in East Asia were a lot more creative about monetization.
In China, we saw companies like Mogujie, Meilishuo (GGV portfolio company; later merged with Mogujie), and Xiaohongshu/Red (GGV portfolio company of which Hans is a board member) leverage online social interactions and influencers to drive e-commerce sales.
On the Mogujie app, you can watch live streamers try on various pieces of clothing and announce limited time offers for these items, which can be purchased with one click.
On Xiaohongshu (which means “Little Red Book”), you can follow fashion bloggers, view their photos where items are tagged by brand, and purchase the featured item all within the app.
Why is social commerce so powerful? Humans are social animals; our decisions to buy are often influenced by others around us. Encouraging conversations between buyers and sellers leads to the discovery of new items. Providing users with looks that they aspire to can be a powerful way to drive purchasing behaviors.
When we met Poshmark in 2015, we saw the opportunity for them to achieve what Pinterest did not do and what certain Chinese companies did do: seamlessly integrate social with e-commerce.
Poshmark is not just a marketplace – it is also a vibrant community brimming with positive energy and trust. Poshers help one another share and discover new items. Influencers showcase entire closets and capitalize on their strong relationships with followers to drive sales. On the Poshmark app, users can participate in themed virtual parties, such as “Best in Jeans” and “Sunday Funday.”
Offline, Poshers often spontaneously host gatherings called “Posh n Sips,” where they come together over food and drinks to discuss their Poshmark experience.
Poshmark also hosts its annual “PoshFest,” a two-day conference – complete with panels, parties, and a fashion show – for fashion lovers to learn how to grow a business and meet their PFFs (Posh Friends Forever).
As CEO Manish Chandra says, “You can’t succeed on Poshmark unless you support other people. There’s a lot of exclusion in shopping. Poshmark is about everyone.” He added that Poshmark has created a new kind of “neighborhood store” – a place where people know one another by name, where sellers stock items that they know frequent customers will want to buy. Cultivating an inclusive community takes a team that listens. Manish himself talks to 100 members of the Poshmark community every week.
Poshmark’s strong community reminded us of Xiaomi, China’s leading consumer electronics brand which sells more phones in China than Apple (Hans is an early investor and former board member of Xiaomi). Xiaomi has an army of enthusiasts nicknamed “Mi Fans” who have become the brand’s most vocal marketers. These followers volunteer their time and energy to help grow Xiaomi’s community.
Moreover, Poshmark has empowered many of its 3 million peer-to-peer “Seller Stylists” to become entrepreneurs – in the same way that Alibaba’s (where GGV was an early investor) Taobao has enabled millions of small- and medium-sized businesses to find an audience. For example, a woman in Texas created her own fashion brand on Poshmark and has seen her annual revenue grow to $1 million. We know that Taobao has helped create countless millionaires out of its professional merchants over the years and was also able to provide financial solutions to power their business growth. We have recently seen parallel growth in Square Capital serving qualified merchants. This is an area Poshmark could draw inspiration from.
Congratulations Poshmark on the new financing round and feature launch. The best is yet to come.
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Hans Tung is a Managing Partner at GGV Capital. A five-time Forbes Midas Lister, he has been a US/China investor for more than a decade. He was among the first Silicon Valley VCs to move to China full time, betting on the rise of the Chinese consumer internet market with companies like Xiaomi where he was an early investor and board member. His portfolio includes 3 of the top 5 shopping apps in the App Store – Wish, Poshmark and OfferUp – with Ibotta growing fast at #12. Other companies in his geographically diverse portfolio include: Airbnb, Bowery Farming, Bustle, Dirty Lemon, Function of Beauty, Giphy, LimeBike, Lively, musical.ly, Peloton, Slack, Smartmi, Xiaohongshu (aka Red), Yamibuy, and more. Read his blog at hans.vc.
Robin Li is a vice president in GGV Capital’s Silicon Valley office. She focuses on investments in e-commerce and consumer internet. She is a member of the board of directors for Lively and is actively involved with Boxed, Bustle, Function of Beauty, musical.ly, Ibotta, OfferUp, Poshmark, Xiaohongshu, Yamibuy, and more.