How to Scale a Marketplace Startup - Manish Chandra + Shilpi Sharma

so how many of you actually bought anything in last one week on an e-commerce portal kind of you right so today it's gonna be fun I'm I'm not sure how many of you actually know about Poshmark just raise hands women Wow great that's amazing so I was gonna give us feel about what Poshmark is I'm gonna shorten it because a lot of people know it but there's some facts which I wanted to share with everybody it was almost 100% of the men users so far but now Venetia has launched women the men and they're planning to do kids as well so it will change pretty soon one in 50 women in America have opened a shop on Poshmark there is a sale made every five seconds on it and there are 2 million people selling their wardrobe their style their fashion on Poshmark almost 3 million items are uploading and are actually are shared every day on Poshmark so it's it it's a huge transaction it's a pretty big marketplace today I'm just gonna talk about Manish how he has created this and also what is what is his plan in future because he they recently got 25 million dollar last year and before that also so there's a huge growth that's going on in the market and we will also talk about if anybody in in the audience is thinking of starting a marketplace then what should they pick what it wanted what are the trends they should look for and what are the things they should focus on Thank You Minnie for being with us today thank you for having me chippy pleasure all this so I would like to start just shared with our audience you know a little bit about your background where did you grow up what did you do before Poshmark I'm sure so I grew up in India I came to us when I was 19 so a while back as you can probably imagine and my background is I grew up as a software programmer I have an undergrad and a master's degree in computer science and first off dozen or so years of my career were spent in hardcore saw we're kind of technologies and companies a couple of startups couple of large companies I was part of two different IPOs and then last 12 years or so I've been in consumer software primarily actually in women in fashions communities I started a company before this called kaboodle which was acquired by Hurst magazines and interactive back in 2007 and the Poshmark journey began in 2011 so I was been talking about different metrics related to Poshmark there was one very interesting thing I found that there is every user kind of spent 20 to 25 minutes a day on Poshmark and they come to the app seven to nine times so that's like creating a very deeper engagement with consumers so how walk us through how did you do that so I mean when you create a consumer product you really bet on a certain interaction model in a certain pieces and sometimes it works out sometimes it doesn't in case of Poshmark we launched the app it was initially an iPhone app today we have iPhone Android web iPad and from really from the very beginning we saw that the average active user were spending about 20 to 25 minutes a day they were opening the app seven to nine times a day and that's that even today we're obviously five years later it's at a whole different scale that stat is still true and it's fundamentally built because Poshmark is not just a ecommerce marketplace it's an e-commerce marketing marketplace it's a platform to jumpstart your selling process on the Internet but it's also a social network and that really that last piece really distinguishes Poshmark from every other marketplace in the world we truly have been able to combine social and commerce together into this integrated approach which works very symbiotic ly with each other so just give us one or two features which really have sure-sure so one of the core features in Poshmark which is very endemic to fashion is how do you connect people to products and there is you know the simple approach which is either you create sort of a directory model or a search model in fashion it really doesn't work because a lot of fashion shopping especially for women is not centered around an item it's centered around quite often an occasion or an emotion and the actual item that is purchased can be substituted so for all the women in the room I'm not gonna try to get inside your head here but you all know what I'm talking about which is that you could start your quest looking for a yellow dress and end up with a red top and a blue pair of pants and nobody can really figure out what's happening it's except that you were shopping for a girls night out and really didn't matter what you wore at the end that journey took you into this thing because that made sense and so that process really requires a different way of designing discovery and connections and fundamentally the the core sort of curation model in Poshmark is one of social discovery so the core action besides listing an item that you do is a share action will you broadcast the item to your followers you share it to what we call social parties well the shearing action drives everything it drives how your inventory is exposed it drives mutual curation so you can't just curate your own items because if you do that you'll never grow your followers so you have to curate other people's items so that whole engine drives the entire liquidity model in the platform and that volume actually now just this year in the last six months has doubled again so we are actually over 6 million curations a day you know and that is one of the core engagement points that drives the entire engagement when you're in mobile you can open your app every five minutes and most ecommerce engines if you go to it every five minutes of you open it we have nothing changes in Poshmark you can open it every by the minute and the entire experience will be constantly changing more like a social network that's what causes this repetitive cycle of engagement addiction social discovery and sort of back and forth see well I was talking to many she said every time you make a change in an app some consumers are most of the consumers react to it and they say it's not good for us and you have launched so many features in last 3-4 years like starting with you know recently you came up with different kind of payments earlier there was you know you started up a shipping feature which was very specific to to Poshmark then now recently you've launched marketplaces which is earlier Poshmark was out all about me as a user coming and buying and selling but now you have brought marketplaces on Poshmark as well so walk us through what was the reaction from the community and when you were launching these features you know how do you justify that okay it's okay I'm gonna get the resistance but I'm still gonna do it so quite often you know we have a core mission in embark and as long as we are true to the mission it gives us our true what I call the North Star so our mission from day one has been our stellar community we call them seller stylists because they're not just selling they're actually curating and styling on the platform and our mission is to serve them whether you're a seller style is just selling a couple of items from your closet or your seller stylist running a million dollar business on Poshmark our job is to serve you and so in that process one of the things we saw which was always part of our vision but it got accelerated a couple of years back as we saw our seller stylists who had run out of items from closet opening up fashion boutiques and sort of going up that journey now for some if you live in LA you live in Dallas you have access to great local inventory you can pick it up but our sellers stylists are in every ZIP code in America so literally you can go to the smallest town in America and find at least 20 to 50 seller stylists and we wanted to enable every one of them to take the journey if they choose to if they choose to sort of walk down and open up a boutique or altom utley become a fashion brand and that was sort of what guided us in terms of opening it when we were initially validating it talking to some of our seller stylists they thought that we were moving away from our core mission of enabling any person to open up their closet for business that was not the case what we were doing was providing them with a way to continue that journey forward and so that's what we did and today we have a hundred and fifty thousand boutiques open on posh Marc's 150000 cellar stylist taken that step and started to sort of become a full-blown boutique we've launched about a hundred and fifty fashion brands some major some indie but what's interesting is that the top ten brands that sell through the wholesale engine out into the seller stylists community seven out of the top ten brands are created by our seller stylist so they actually now becoming a full ball fashion band so the whole cycle is coming around so at the end it is all in their service and giving them empowerment and what we are launching this year is the ability for many more seller stylists to start to create their virtual private brands and really become a mini Zara or our mini forever 21 or H&M themselves great question about funding like I mentioned you you raise 25 million in 2016 and 2015 as well why a lot of marketplaces are failing especially the ones which started with at the same time and Poshmark started so how did you gain the trust from your investors that you are in this for a long long run I think there's three principles we followed first was really just focusing on our community and continued scale that community and that metric has been going north for us the second thing was we knew to build a business you cannot go and become deceptive with our seller stylist so a lot of people have tried approaches where the marketplace is tax-free in the first couple of years and then you impose a step tax and that usually creates a downward spiral for the marketplace we have a decent tax a decent sort of take rate in the marketplace from day one that take rate was done with a lot of thought early on so when we started the company five years back our take rate was 20% and built into our platform is standard shipping and shipping was always one to two day priority so when seller style is actually ship it goes very fast and that's again a characteristic of fashion a lot of times people take an inordinate amount of time to make up their mind on what to buy once they buy them on away with that Saturday right and so our platform really honors that a lot of our inventory is immediately shipped and delivered within a few days so our shipping fee was nine bucks today our platform take rate is still 20% and our shipping fear 649 what that did was it created healthy unit economics from day one and allowed us to basically scale the business very fast and then the third piece is there's sort of deep technology underpinnings of Poshmark we have tons of patent around sort of data data driving entire e-commerce financial payment systems etc there was a lot of depth on the technical side from day one that was there so the combination was those three things have always been the reason why investors have backed Poshmark and compared to many other places make sense so the question related to funding again is when you get the funding investors expect you to grow at a certain pace like 10x 20x whatever they're comfortable with so now when you say one and fifty women are on Poshmark are you gonna grow that want to to them in in 50 or you're gonna go outside us certain geographies where are you gonna get growth from and how so currently we are only in United States we are only focused on both selling and buying in United States and the business is going very fast just in the US so in the time that we'll have a conversation about a hundred and fifty new shops would have opened on Poshmark so we certainly want to get to two three four five women and two three four five men the men's side of the business is going fast these sneakers are bought on Poshmark so you know we have a huge sneakers business for fur men we've got a huge fashion business growing very fast it's literally inventory constrained and so we're sort of pouring in more inventory and then we want to enable our seller stylists to shift locally there's a lot of demand that they have for their products across the world and then the next phase is we want to enable seller stylists network across the world where people can create local seller stylist networks in their country but then also ship globally and so you really want we want to bring the fashion global world together in this interconnected Network we've started to do that in in the country and we are going to do that across the world so when when you scale a business like this where its ecommerce where people are coming and putting their stuff what is the responsibility as an e-commerce company like for example Poshmark when it comes to what kind of goods are being placed because like recently we had so many issues in Amazon Canada having products which you know people hate in India because they were using their Indian flag as a slipper sort of footboard so you know what is your role how will you ensure that you don't hurt sentiments when you're going global so I mean it's it's always a challenge it's a challenge between freedom of what you can post on the side and sort of constraints and we have different level of I to moderation systems but at the end the responsibility the item lies with the seller and the purchaser but we have tremendous level of moderation that's there we have counterfeit prevention which doesn't mean we are able to prevent all the counterfeits but we have lots of different systems we have a lot of take down copyright as well as legal and then there's subjective things which happen which are there but all of those things are layers and layers you have to build and at the end for a platform like ours you have to rely on both technology and community as well as sort of our own work force to to manage these pieces and it's a it's a never-ending iterative battle it's not something that you can ever say you're done we have flows for example when you post an item there's rule-based AI based systems which detects certain patterns and will warn you and if you're not able to certify it it goes into a certification queue then we have the ability to take down for high-value items they actually come and get physically verified because before they're shipped to the customer so there's many different flows and processes you have to build and you have to keep strengthening it over time as we go global I'm sure there'll be next level of issues based on the local laws of land that we'll have to work with it's it's a tough problem so if someone has a cool idea let's say in this audience to build ecommerce marketplace and they're also thinking of social commerce and maybe it's a part it's a very unique perspective Poshmark let's say ethnic dresses or event party related dresses if they have to start it today you started like five six years ago right if they have to start it today what are some tips you want to give them and some do's and don'ts which you want to share with them so I would say for a marketplace you gotta first focus on supply because without supply it's really hard to create demand and then focus on demand if and you have to look at your unit economics because no business is free and you have to scale in different Gio's though there's sort of different levels of marketing so in certain geographies you can invest in marketing upfront and then your marketing expense flattens out and sort of goes down so you can model your business very differently in in the u.s. the marketing expense never sort of stalls completely so you have to kind of build for a much more scalable marketing engine that that works together so all of that dictates the take rates and the fee structures you charge I would personally say that if you're building something good you should start with a decent take rate as opposed to think that you can do something free because if you're building something of value then people are should be willing to pay for it I've seen cases where I've been involved with Ottoman if they did despites or the advice never charged at a crate and ultimately had to shut down their business because they were always tentative about take rates from that point onward so that's the second thing I would say and then the third thing is what is sort of your core model of engagement so it's any consumer product it's not just about the transactions just not about the money it's about the engagement at Poshmark for example one of our core values is love and we say Poshmark is a platform focused on love if you focus on love it brings money if you focus on money it brings nothing and love is really the score metaphor of how do people engage on the platform and it drives not just the company but also the platform so what do you think in terms of the trends what's the role of AI and e-commerce marketplace especially driven from social so we are applying AI selectively to certain areas and we'll do more of it I think one area is customer service and sort of like really look fraud and other areas that AI can be super helpful in the second area is the ability to scale a seller so for example our top sellers are do a lot of one-on-one styling with their customers and that at a certain scale stops scaling right because you can only do one hundred and fifty two hundred and so we are using a combination of AI and tooling that we'll be launching in the next few months which will allow them to 10x their thing is even as an individual and that will allow them to take a business that may be generating five hundred thousand dollars and take it to five million dollars without necessarily hiding a big workforce so that's sort of a second-order thing now of course the physical packaging of it you'll need different people but on the customer service side you can really modify it so are you gonna build something like this your own or you would acquire we're actually the process of building something about our own so I think we have a minute and a fourteen seconds so last question about just your thought process in terms of the technology trends that you are watching and apart from me I which I already talked what is something you feel is going to change social commerce I think some sort of augmented and virtual reality is going to happen whether it's a holographic image or augmented image which really starts changes the communication paradigm which will ultimately bleed into Commerce in some form and it's it's not going to be the way we are visualizing it today I think it's going to be something different but I do expect that to happen which may fundamentally change not just commerce but may actually change the actual product we buy at a deeper level as well do you think the consumer behavior they'll be exchanging because of technology that will fundamentally change social commerce - or oh absolutely I mean if you think about what's happening in physical retail and the meltdown that's happening in a physical retail that doesn't mean physical retail will go away but physical retail is going away from an inventory fulfillment engine to becoming an immersive experience you see a lot of malls taking half the mall and turning it into movie theaters into restaurants into in a big sort of dining experiences and that whole thing is something that we are observing from a Poshmark perspective and seeing you know how we can enable our seller stylist to participate in new things because part of the whole thing is this immersive deep experience that is not possible completely in the virtual work perfect so I have my questions done if anybody has questions in the audience I'll take [Music] [Music] [Music] it so it's a continuous conundrum in in both marketplaces I think when you start the marketplace you have to focus on supply first then demand and sort of work through the engines and then over time you to really realize what sort of the key and in Great marketplaces typically supply becomes a constraining element and demand sort of continues to grow around it but in order to convert supply to demand you may have to put processes packaging arounds for example in Poshmark we had to get standardized shipping payment methods you know trust verification etc had to be built in to make sure that demand flows smoothly we were unique in the sense that even today we have a single channel of acquisition of our customers who activate as both buyers and sellers that's unique to the nature of fashion but you can look at other marketplaces which have different dynamics that you have to work through and then as you're going through it you have to figure out how do you prove out the model how do you get the basics and then how do you scale it so we proved out the basics in 2011 which we did really hand to hand we we would recruit these customers and our app was partially functional and at that time people didn't even have iPhone so we actually bought a hundred iPod videos which were sort of these little devices some of you may remember them we were like many iPhones and we gave them out to seller stylist to kind of activate their closets we didn't have Fame in system so we would meet once a week at the district wine bar in San Francisco and literally do these things which looked like drug deals where people who bring their fashion clothing cash would change hand and my current VP of community would be there and she'd be facilitating these transactions so you sort of you know hack it and you can make it and then finally we sort of started to kind of have a real product and then as it started to scale up everything broke down then you had to rebuild everything in 2012 to take it forward and then from 2012 to 2013 we suddenly found some really massive channels of growth like Facebook so we grew 10x and that became its own challenges so each point in marketplace particularly with the network effect the expansion can be so fast that you have to reinvent and rethink these sort of supply demand curves that are happening thank you I think we've done with the questions sorry guys you can connect with me later thank you so much [Applause]

Channel: Startup Grind

Views: 7,597

Rating: 4.8620691 out of 5

Keywords: startup grind, entrepreneur, entrepreneurship, motivation, inspiration, how to, how to be an entrepreneur, how to start a business, startup company, startup tips, startup ideas, startup business tips, silicon valley startups, startup stories, startup advice, technology, silicon valley, san francisco, venture capital, fundraising, innovation, startup news, technology news, two sided market, marketplace, market place, Manish Chandra, Poshmark, Shilpi Sharma, Kvantum, growth, marketing

Id: 4fXGGUo913c

Length: 23min 16sec (1396 seconds)

Published: Thu Apr 27 2017