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ThredUp and Poshmark’s Top Sellers Speak Volumes About Consumer Appetites

ThredUp and Poshmark are both continuing to scale up, indicating ample runway for growth in the burgeoning resale space.

In the second quarter, ThredUp saw revenue increase 26.7 percent to $60 million, up from the $47.3 million generated in the year-ago quarter. Earlier in the quarter, the secondhand apparel seller released its 2021 Resale Report, which indicated that by 2025, fashion resale is expected to grow 11 times faster than the broader retail sector.

As the growth continues, more brands are buying into ThredUp’s strategy, with brands like Vera Bradley, Farfetch and Fabletics all recently hopping aboard the marketplace’s resale-as-a-service option.

And the continued demand for “going out” clothing and “return to work” attire has continued throughout the summer, with kids’ sales up 50 percent in July month-over-month, while sales for women’s items like dressier working pants saw a 32 percent increase during the same period.

In addition, sales for both midi dresses and formal dresses grew by 16 percent, and sales for heels experienced 21 percent month-over-month growth.

Although the demand for apparel is back, ThredUp CEO James Reinhart remains cautious.

“We also anticipate challenges from the Delta variant [continuing to] linger and competition for consumer wallet share to be fierce,” Reinhart said in an earnings call.

Similarly, Poshmark posted net revenues of $81.8 million, or a 22 percent year-over-year increase from the second quarter of 2020. Gross merchandise value (GMV) sold across the peer-to-peer platform was $449.6 million, an increase of 25 percent year-over-year from $359.7 million. On a two-year basis, GMV has grown 67 percent. Quarterly GMV has increased year-over-year for the past 14 quarters.

Unlike the previous quarter, Poshmark founder, CEO and chairman Manish Chandra was lighter on explicit growth numbers, noting a “surge” in sandals, midi dresses and blouses.

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Chandra has faith in his company’s ability to manage any Delta variant-related disruption, largely on the grounds that the secondhand business model is designed for selling inventory from anywhere.

“You can sell from home, you can shop from home, you can ship from home. So all of those things allow us to be fairly robust in case people have to stay back at home or mingle and sort of order back and forth as the world is,” Chandra said. “And even the variances across the country in terms of the attitudes, that will be there. So that’s really the strength we see in the core marketplace that has allowed us to manage through all of the different changes over the last 18 months or so that we’ve seen with Covid and Covid-related attitude or changes.”

Both companies have made significant international plays in recent months, with ThredUp acquiring European resale marketplace Remix to break into its first foreign market and Poshmark prepping expansion into its newest market, India.

While the $28.5 million Remix acquisition enables ThredUp to extend its RaaS platform beyond the U.S., the India expansion gives Poshmark a chance to tap into its biggest potential audience and capitalize on a nascent e-commerce environment that is heavy on marketplaces.

Gross margins remain high, but net losses mount

Beneficial to both companies’ business models are the increasing gross margin totals, which are efficient since Poshmark carries no inventory at all and ThredUp only carries $4.4 million. Gross profit at ThredUp totaled $44.1 million representing growth of 33.7 percent year-over-year. Gross margin expanded to 73.6 percent from 69.7 percent in the comparable quarter last year.

Adjusted gross margin at Poshmark jumped 0.4 percentage points to 84.4 percent of revenues.

As the companies continue their growth trajectory, their bottom line is paying the price for now. ThredUp saw net losses widen to $14.4 million, or 15 cents per share, for the second quarter 2021, compared to last year’s $6.7 million (61 cents per share). Adjusted EBITDA loss was $9 million, or 15.1% of revenue, for the second quarter 2021, compared to the adjusted EBITDA loss of $3.3 million, or 6.9 percent of revenue, for the second quarter 2020.

Poshmark is in comparably better shape, reporting a smaller net loss of $2.9 million, or 4 cents a share, compared with net income of $21.3 million, or 61 cents a share, in the year-ago quarter. Adjusted EBITDA for the second quarter of 2021 was $6.1 million, a decrease from the $23.7 million gain in the second quarter of 2020. Adjusted EBITDA margin was 7.4 percent of revenue in the second quarter of 2021.

More buyers increase ThredUp’s processing times

Active buyers who purchased at least one item in the past year have continued to add up for both companies. ThredUp saw its active buyers grew 8 percent to 1.34 million, with total orders growing 22 percent to 1.22 million, indicating that those who try the experience typically end up buying more often. At Poshmark, active buyers reached 7 million, a 16 percent year-over-year increase from 6 million from the second quarter of 2020.

As more consumers shop through ThredUp and the resale company partners with more sellers, Reinhart admitted that the company did not make as much progress as expected in reducing bag processing times.

“Even though we have accelerated overall processing capacity by more than 40 percent since this time last year, regular bag processing times have increased [from eight weeks] to 12 weeks on average across our distribution network,” Reinhart said on the call.

Reinhart hopes to cut that total down to two to three weeks by the end of the year, but realistically doesn’t see that happening. “That’s our goal as we move into 2022,” he said.

To date, ThredUp has processed more than 125 million unique secondhand items and displaced an estimated 1.1 billion pounds of carbon emissions.

Style Tags drive engagement, capture emerging trends

Poshmark’s Chandra said that 28 percent of sellers used the company’s recently introduced Style Tags in June, contributing to an increase in daily listing views and buyer engagement with these listings.

Style Tags are a search and discovery tool that helps sellers to merchandise and market their listings by style and trends, giving consumers alternative ways to shop beyond their usual brand preferences.

Real-time updates from the Poshmark community of sellers.
Real-time updates from the Poshmark community of sellers. Poshmark

“If, for example, a buyer is shopping for Y2K looks, they can now simply follow Y2K as a trend, which also greatly expands their ability to find and track relevant listing start with that,” Chandra said. “Similar to how buyers can follow brands such as Gucci or Lululemon, they can now follow these emerging trends such as ’90s or Bohemia. And though early, we believe that shopping by style and trends is the way consumers want to shop and Poshmark Style Tags will help drive conversion over time.”

Both companies shared guidance for the third quarter, with ThredUp expecting revenue in the range of $60 million to $62 million, alongside gross margins between 71.5 percent and 72.5 percent. Adjusted EBITDA margin loss is anticipating in the range of 19 percent to 17 percent.

Poshmark set its expected revenue range at $81 million to $83 million, and an adjusted EBITDA range of $1 million to $2 million.

ThredUp also shared its expectations for the full 2021 year, with revenue seen reaching $236 million and $241 million. Like the third-quarter estimate, gross margin is expected to be between 71.5 percent and 72.5 percent. Adjusted EBITDA margin loss is in the range of 16 percent to 14.5 percent.

Poshmark’s total cash, cash equivalents, and marketable securities were $579.5 million as of June 30, 2021. For ThredUp, these assets amounted to $230.4 million as of the same date.