A Profitero study showed Target’s online prices were 25% more expensive than Wal-Mart’s, which were just slightly more expensive than prices on Amazon.
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Children’s and women’s apparel retailer ThredUp.com also sends postage-paid bags for sellers to fill and return. ThredUp primarily sells goods from mass-market brands like The Gap and J. Crew, and consequently has to inspect, catalog and manage a lot of inventory. About 20,000 items arrive each day and about half are accepted for resale after passing a 12-point inspection, says Anthony Marino, chief marketing officer. (Items not accepted for resale are donated or returned to the consumers who sent them for a $12.99 fee.)
On Thredup.com, the e-retailer explains to consumers considering selling their clothing its requirements regarding the brands, styles, sizes and condition products must meet for ThredUp to buy them. “We want the customer to find inventory that’s relevant to them,” Marino says. “It’s also a process of communicating to our [consumer] suppliers, here are the things we’re looking for.”
Offering sellers better financial terms than they might get from local resale shops also opens the door to acquiring desirable inventory. That’s the tack taken by high-end online watch consignment site Crown & Caliber, which launched in January 2012, to scale up its inventory.
With resale prices that can sometimes be more than $100,000, the company’s primary competitors for reselling these high-end watches are auction houses and bricks-and-mortar dealers, says Hamilton Powell, the retailer’s founder and CEO. But Crown & Caliber offers a larger commission to sellers. Crown & Caliber keeps 19.5% of the purchase price as its consignment fee, which is considerably lower than the 50% commission many bricks-and-mortar consignment shops rely on, he says. “We want to develop a reputation quickly,” he says. “We think we can do so with a much lower rate.”
By accepting merchandise on consignment, merchants like Crown & Caliber don’t have their capital tied up in inventory. Yet some online resellers see advantages to purchasing product outright from sellers.
Yoogi’s Closet offers sellers a choice between consignment, with the retailer taking a 30% commission fee, or direct purchase, with the site paying the seller at least 60% of the expected selling price of the item up front. Less than 10% of sellers opt for consignment, Han says. “They want cash now,” he says.
The 60% payout is at the high end of what bricks-and-mortar resale shops might offer sellers. A typical commission fee for resale stores is 50% to 60%, although it is less for high-end items, according to Adele Meyer, executive director of NARTS: The Association of Resale Professionals, an association that represents resale professionals. Han says by offering better terms for merchandise than many bricks-and-mortar consignment stores, Yoogi’s Closet improves the flow of inventory, which keeps buyers and sellers coming back. “Sellers are intelligent,” Han says. “They can figure out the average selling price by going to eBay. The last thing we want to do is offer an unfair payout.” He notes that the company is on track to gross more than $10 million this year.
By offering experiences similar to first-run high-end retail sites, upscale resale sites are pitching to consumers the fact that they offer first-rate items at a fraction of the price. And that’s a value proposition many consumers are buying.
Ann Meyer is a freelance writer based in Wilmette, Ill.
Poshmark gives fashions a second life
Poshmark Inc. CEO Manish Chandra knows fashion-conscious women are passionate about their smartphones.
That’s why Chandra chose to go mobile from the start with Poshmark, a smartphone app that allows women to turn their closets into virtual resale boutiques on the company’s platform. Individual sellers use their iPhones or Android smartphones to photograph the apparel, jewelry and accessories they want to sell. Then they upload the photos, write brief product descriptions and post prices to their resale accounts—called “closets”—on Poshmark.
The platform launched as an iPhone app in 2011, then added a web site in late 2012 and introduced the app for Android smartphones last November. About 90% of the company’s sales are from the apps.
“We make it very easy to manage [shopping] while you are on the go,” Chandra says. When a buyer purchases an item, Poshmark notifies the seller and sends a mailing label for the seller to print out and put on the package. Once the buyer accepts the item, Poshmark sends a check to the seller.
Poshmark, which keeps 20% of the selling price on completed transactions and gives 80% to sellers, features more than 300,000 resale closets. For the first eight months of 2013, more than 1 million items were sold on Poshmark, Chandra says. But he says the company is only scratching the surface of what he estimates is a $35 billion resale apparel market.
About 70% of Poshmark’s customers also sell merchandise on the platform. Chandra calls the sellers “closet entrepreneurs,” with some generating $70,000 or more annually. “Many of these women started with their closet and found they were really good at it,” he says. Now they are sourcing merchandise to sell on the platform.
Chandra, who previously founded social shopping site Kaboodle Inc., launched Poshmark after looking at the clothes in his wife’s closet and finding many items still in bags and that hadn’t ever been worn. He saw a business opportunity. By allowing women to serve as merchandisers, Poshmark provides an incentive for sellers to do their own marketing, largely using social media. The platform also hosts “posh parties,” which often focus on a specific designer or category of clothing, where buyers and sellers connect virtually at a set time.
The company has raised $15.5 million in venture capital from Mayfield Fund, Menlo Venture and SoftTech VC and individual investors, including stylist Rachel Zoe. The funds have allowed Poshmark to improve its systems and launch its Android app. The company’s streamlined system, including a Share button that makes it simple to posts merchandise photos to Instagram, Pinterest or Facebook, has helped to create a community of loyal users.
“It’s selling, but it’s also self expression,” Chandra says. “I don’t think [other] people have focused on women and their closets and mobile the way we have.” — Ann Meyer