What is Poshmark?

Poshmark is a platform that allows users to buy and sell clothing and accessories from each other’s “closets”. Although items are shoppable on desktop, a user can only sell goods through the mobile app. Users can post items to sell “in less than 60 seconds”, and Poshmark makes 20% commission on all items sold. Although Poshmark provides the shipping label for sellers, the buyer is responsible for paying the standard shipping price of $4.99.

With over 700K users, Poshmark has raised $47.2 million in outside funding and has over 10 million items for sale at any point in time. Items for sale are displayed in an instagram like feed that can easily be liked, commented, or shared.

Magic Sauce: The Community

Users love interacting with each other and will even shop for a “posh friend” they have met through the app. This makes users more likely to share not only their own items, but other user’s items with their followers. Users are constantly looking for more followers and other user to follow you. This cycle continues then continues over and over. Once a user has reached a certain threshold they can become a suggested user and will appear on the many users timelines as someone they should follow.

A Like acts as a watch feature for items a user may want to buy. All liked items are stored in the app and users are notified when the price of a liked item has dropped.

Bundling allows sellers to provide a discount to buyers who buy multiple items from their closet. It incentivizes more sales at a faster rate. One common bundle is buy 3 items and receive 15% off total purchase.

Shopping Parties are blocks of time where items of a certain theme are available for purchase. Users enter the party to shop or share their items for sale. The limited time encourages users to act

Community Meetups is Poshmark’s way of taking the online offline by bringing together poshers in the same physical community to share tips and talk about their experience. This continues the user buyin to the Poshmark brand.

Platform Risks

Although all transactions should occur on the app, there are many users who leave comments on items and request that they be sold through Mercari or direct with Paypal. Mercari is a hugely successful mobile shopping app in Japan that launched in the US in July. They do not charge any fees or take a portion of the sales and the seller is responsible for shipping. Because Mercari does not take any fees, sellers could potentially get 20% more for their items.

Any time your business is a platform, there is a risk that users can bypass the platform. Some users simply list clothes on Poshmark to reach a broad base of potential customers and then conduct all of their transactions through Paypal, cutting Poshmark out completely. When buyers do this, they leave behind all of their protection. However, the Poshmark community feels trustworthy due to all the communication and interaction that happens between users.

There is also the buying and selling of counterfeit goods. Poshmark offers a $35 authentication service for goods over $500. The buyer purchases an item through the app and the seller ships the item to Poshmark. Once the item has been verified as authentic, it is then sent to the buyer. Given this high threshold, there are complaints of many counterfeit goods being sold.

The Future

There is so much competition in this space that it is too early to tell who will be the market leader. However, Poshmark has built a strong community and can continue to build services and features to add to the stickiness of their platform, which will position it for success in the future.

Sources
https://poshmark.com/what_is_poshmark
http://fashionista.com/2015/04/poshmark-funding-round
http://techcrunch.com/2015/04/21/fashion-marketplace-poshmark-raises-25-million-more-heads-to-apple-watch
http://blog.poshmark.com/community-meet-ups/”

By: Anndrea Moore


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9:25AM: Wake up to my phone’s notification that class starts in 5 minutes. Mildly panic.

9:26AM: Wash face and make myself look somewhat presentable (at least from the torso up).

9:30AM: Open laptop. Class starts. Still wear pajamas on the bottom.

It’s a university. 4-year accredited. 121 students in this year’s first-year class. Everyone lives in the same dorm. All classes have less than 20 people. No lecture, only classroom discussions. But here’s the real kick: all the classes are done online.

Welcome to Minerva Schools at KGI, with a bold mission to take down Harvard. Minerva was born in San Francisco, when a successful entrepreneur and former CEO of Snapfish Ben Nelson wanted to build a new kind of university that directly challenges what he views as a broken higher education system. Everything about the university is meticulously thought out. In the two years between Minerva’s founding and its admission of the first wave of students (that they lovingly call the “Founding Class”), Minerva questioned and restructured every aspect of an undergraduate education, from content (curriculum) to structure (lecture format) and admissions (SAT scores)*. But what may be most interesting is that all of their innovation is based on an online platform.

One might hear the word online platform and think, “MOOC (Massive Open Online Course).” Not quite. MOOCs are open to the public, largely imitating the form of a lecture and for the most part, one-way education where students are on the receiving end with the exception of “participating” through comments. Minerva is not open to the public (it has a stringent admissions process), and the classes are not one-sided (students are expected to fully participate in their classes).

Or an “online university” like the University of Phoenix. No again. Minerva simply has an online “platform” where students learn, but it has a dorm where every student lives in, co-curricular programs done outside the classroom (and outside of students’ laptop monitor) that incorporates the learnings from the classroom with offline visits and activities.

Then the real question is, why? They already seem to have a great curriculum and a great teaching model – why do they need an online platform? Wouldn’t discussions be more effective in an offline setting? Is this simply to lower the cost of education?

Let’s first take a deeper look at the platform. Minerva’s patented online program named the “Active Learning Forum” works like this. Students log in when class starts; professors also log in (from their respective homes that don’t have to be in San Francisco). All students’ faces are placed on the top of the screen, and whoever is speaking at the moment has the full stage (aka the middle of the screen; see image below). Professors guide the discussion, often cold-calling on people who haven’t spoken as many times in the class and asking students to back their opinions based on the poll they just took on the platform (see image below).

1) poll

To the “non-believers,” it may seem that while Minerva’s methodology looks very engaging (even resembling the HBS classrooms and the case-method), the online platform is more of a nuisance than a merit. To this concern, Minerva is adamant that their platform is not only practical but also necessary. For one, the tools help professors achieve high quality discussions. Professors can see who has spoken and who hasn’t on the screen, which marks those who haven’t spoken much as red and others as green (see image below). The system warns the professor when he speaks for more than 5 minutes – gently reminding him or her that the class is for discussion, not lecture. The polls show students’ responses in real time, facilitating discussions. Small group sessions can be broken out within the system, and 2-3 people are matched with a googledoc they can collaborate on the platform (no need for switching seats and shuffling about in the classroom). Another point is that the tool records everything, which allows the professor to give detailed feedback on students’ participation, fostering students’ development. Last but not least, the online platform allows students to have an international experience throughout college. Because all classes are done online, students go abroad every semester after their first year. For example, their sophomore fall, they go to Berlin where everyone lives together but still takes classes online. They get to still enjoy the high level of education that they have signed up for (which, some may argue that study abroad programs don’t provide) while experiencing a different culture.

2) green red

The students seem to think that the system works. They talk about how extraordinary the education has been, something that they have never experienced before. They actually say that, because the professor can see everyone’s faces facing the screen at all times, the online platform makes them be even more focused in class.

Reflecting this sentiment, Minerva accepted 220 students out of almost 11,000 applicants in their mere second year. It received almost $100 million in funding. Minerva certainly seems to be on a good trajectory in many measures. But there is something still foreign and discomforting about the concept of an online platform as an effective tool for heightening student engagement in class. Is it really the online platform that is effective and core to the success of Minerva? Perhaps the structure of the class with a tight discussions format keeps them on the feet enough to counter the effects of getting bored of staring at a monitor. Is a lower tuition partly due to having no lecture halls, gyms, or sports teams necessarily good? Who loses in this more “efficient” system? Who wins? Is their platform really a necessity or a practicality?

The source of this discomfort and pushback may be the fact that we ourselves are a product of those traditional education institutions. What is Minerva’s model implying about the level of education at existing institutions like Harvard or HBS? This hints at a real challenge for Minerva as a disruptor – convincing the population who have believed and lived in the legitimacy and prestige of the existing institution system.

If anything, Minerva found a niche that the first wave of “online platforms” lacked – human interaction that flows in both directions. It presents to us an option that only utilizes a technological platform in order to connect people rather than using it to replace people. In a world that is increasingly valuing algorithms as an answer to everything (e.g., dating), it can be a refreshing example that implies what needs to be there for the success of a tech-based platform – human aspect.

* Minerva abolished the lecture format and does not require/consider SAT scores for admissions

By: Seong Min Lee

 


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ONE

TWO

(Intel ad from the mid 90’s and an image of the recently announced Samsung Gear VR)

For those following trends in Silicon Valley, one might experience a sense of déjà vu recalling the mid-1990’s when Virtual Reality first captured the zeitgeist for its promise as an immersive portal into the nascent world of cyberspace. Twenty years later, the amorphous medium has transformed from a “not too distant future” captured in the low-resolution computer graphics and millenarianism of 90’s Sci-Fi films into a commercial reality. The the 2.4 billion dollar acquisition of the Kickstarter funded Oculus VR by Facebook and the recently announced $542 Million dollar Series B financing round for the VR/Augmented Reality start-up, Magic Leap (led by Google with Qualcomm, Legendary Entertainment, KKR, Vulcan Capital, Kleiner Perkins, Andreessen Horowitz and Obvious Ventures) suggests that large tech companies are committed to developing virtual reality platforms. The big question is how will companies like Oculus / Facebook and competitors like Google mobilize development of their virtual reality platforms?

The Oculus Platform

In his explanation of the acquisition of Oculus VR to investors and the public, Mark Zuckerberg characterized the virtual reality startup as pioneering a “new communication platform” that was part of “a long term bet on the future of computing”. In the same way that mobile phones have created a new form of ubiquitous computing, virtual reality may similarly add qualitatively higher levels of immersion in computing, enabling a new ecosystem of applications to develop. Whereas mobile applications make novel use technologies like embedded cameras, GPS and accelerometers, virtual reality apps can use technologies like positional head tracking and three-dimensional high-resolution, wide field view screens to create new online products and businesses.

THREE

Rather than building a business around selling hardware, Oculus VR and Facebook have focused on developing their “Oculus Platform” – a store for new virtual reality applications. Oculus VR / Facebook has partnered with Samsung to build virtual reality devices on top of existing mobile devices – which are rapidly increasing in screen resolution and processing power – and have expressly said that they will be pricing their virtual reality headsets at or below cost in order to grow the VR ecosystem. In other words, Oculus will subsidize virtual reality hardware in order to build a large developer and user base needed for a software ecosystem and app marketplace to develop.

To assist in the development of the virtual reality ecosystem Oculus is investing in developers subsidizing headsets as well as providing the tools to create new VR Apps. These include developer support forums, developer “best practice” manuals with clear guidance on the technical standards, and finally free software for updating apps as virtual reality hardware changes. Additionally, in its September “Connect” conference, Oculus announced an expanded strategic partnership with the game development platform Unity, providing free Oculus add ons for Unity Developers to further build a developer ecosystem. Although Oculus is assisting and subsidizing the development of third party apps, the company is also creating sponsored Oculus Apps that will raise the quality level of early consumer virtual reality experiences.

FOUR

In addition to building its developer base, Oculus VR / Facebook has decided to wait and let the virtual reality ecosystem to develop before releasing mass commercial products. The company has already released three different Developer Kit headsets (DK1, 2 & 3) with a consumer version yet to be officially announced. Oculus’ stated intention is to first develop a marketplace of high-quality virtual reality experiences before releasing mass consumer products, as they are concerned that the platform can be undermined by a lack of compelling content.

As the virtual reality app marketplace is growing, Oculus is also providing its own ratings of apps on its platform. Additionally, while the company is allowing the development of third party accessories, they are also building sponsored Oculus accessories. These moves allow Oculus to control the quality of the platform, creating a high quality experience for consumers that they describe as “good for everyone.” This discretion to control the platform can be a powerful tool for Oculus, allowing the company to define the parameters of its app marketplace leading to higher quality and potentially inreased market power.

In contrast to Facebook / Oculus, Google’s strategy for developing a virtual reality platform is less clear, and perhaps at an earlier stage of development. Although the company did launch Google Cardboard, a cheap cardboard adapter and mobile app turning all mobile phones into virtual reality devices, they have yet to be as public about their intentions in virtual reality. However, the company’s investment in exotic stealth technologies like Magic Leap’s digital lightfield displays, may signal broader ambitions in the virtual reality market. Currently, Google appears to be offering compatibility with Facebook, Oculus and Samsung products alongside its suite of products, suggesting that there is currently collaboration in virtual reality.

As virtual reality ecosystems develop, there are questions about whether this initial collaboration across will be replaced by competition once the market becomes lucrative enough. For example, although the Oculus Platform is compatible with multiple mobile phone based operating systems, it is not yet clear whether the Apple store will allow the Oculus Platform app to run on iOS phones. Additionally, it is unclear exactly how Facebook / Oculus will monetize their virtual reality platforms once they attract a large enough user base to make it economically viable for developers to continue committing large resources towards developing virtual reality applications. Finally, it is unclear whether formal standards will emerge for developing virtual reality applications or whether there will be competition between different standards.

We may be seeing the rise of new computing and entertainment platforms that will create remarkable new collaborative possibilities as well as competitive challenges for the largest media and technology companies – stay tuned!

Links:

On Mark Zuckerberg’s statements regarding the acquisition of Oculus VR:

https://www.facebook.com/zuck/posts/10101319050523971

http://www.technologyreview.com/news/525881/what-zuckerberg-sees-in-oculus-rift/

http://arstechnica.com/gaming/2014/08/why-oculus-sees-virtual-reality-as-the-final-compute-platform/

Articles on the Oculus Platform and Developer Support

http://techcrunch.com/2014/09/20/oculus-platform/

http://www.roadtovr.com/oculus-rift-best-practices-guide-virtual-reality-recommended-age/

http://unity3d.com/company/public-relations/news/unity-technologies-and-oculus-expand-strategic-partnership

Links about Magic Leap:

http://www.technologyreview.com/news/532001/how-magic-leaps-augmented-reality-works/#

http://recode.net/2014/10/20/look-who-else-is-joining-google-to-back-magic-leap-the-secret-augmented-reality-startup

Recommended Virtual Reality 90’s Movies: eXistenZ and Strange Days


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LINE may not be well-known in the US, but it has been exploding in Asia, Middle East and Europe since its launch in 2011. LINE is a messenger app with 300 million users worldwide and its growth is accelerating. The last 100 million users were added in mere 4 months. Some argue that LINE may replace Facebook or Twitter as the most popular social platform. LINE is expected to go public next year with an estimated valuation of over $10bn.

What is LINE?

LINE is somewhat similar to other messaging applications, including WhatsApp, KakaoTalk, or Facebook messenger. LINE allows users to send text, share photos/videos, and make phone calls/video calls to another LINE account(s) for absolutely free.

What’s different is that LINE also has a huge library of “stamps” – a small picture of a character that describes emotion, thoughts, actions, and objects. Stamps act as a way to mimic real human interaction by communicating very subtle points. Some of these stamps are sold for a price (usually $1 for a set of 30 stamps) and LINE shares revenue with its media partners. This has been the major source of revenue ($132M for 2013 Q2) since its launch.

Another difference is that LINE is quickly moving towards platform strategy. The initial version of LINE was only able to handle messaging, but now that LINE is installed in virtually everybody’s smartphone, LINE started to expand its offerings. LINE Mall offers online shopping, LINE Game is consistently topping ITunes rankings, LINE Camera competes against Instagram, and LINE Card is a dominant e-card service in Japan. All these services that be accessed thru LINE application and more and more people are using them.

Birth of LINE and its mobilization strategy

The birth of LINE is somewhat interesting. NAVER Japan, a subsidiary of Korean internet company, was in the midst of developing a photo sharing application when a big earthquake hit Japan in March 11th, 2011. As mobile network was disrupted, people formed lines in front of public phone booth (public phone act as emergency line in Japan and never gets interrupted).  Realizing there is a strong need for efficient and easy communication; the development team switched their focus and started developing messaging application. LINE was launched 3 months after the earthquake.

LINE faced a classic chicken-and-egg problem and tackled to solve the problem in two ways; technical and marketing. LINE has an auto-sync function that allows user’s existing phone book to automatically sync to LINE contact list. Even if I was the only one using LINE, I could still text my friends using LINE (my text would appear as a regular text on their screen). As I don’t have to bother importing phone book to my LINE account, once I started using LINE I had no reason to switch back. Because LINE texting was absolutely free, people quickly switched.

On the marketing front, LINE initially focused on high school girls because they are the ones who often start new trends in Japan. LINE created cute “stamps” that high school girls would love and solicit user feedback very frequently. Once high school girls adopted LINE, it spread to college girls, junior high school girls, boys, 20s, and the rest of the population.  LINE dominated Japanese market in less than a year.

 LINE’s future and competition

 LINE deliberately focused on expansion of its user base and not on monetization strategy. LINE is believed to be already making profit with its stamp and game sales, but the real monetization is expected to come after its IPO. LINE may start selling advertising space like Facebook or open its platform and charge a fee to whoever wants to access its user base.

LINE’s biggest competitors are WeChat (over 1 billion users, mostly in China) and WhatsApp (mostly in the US and Europe). As there is a strong network effect, messaging app is likely to follow the same path of SNS and one or two players will take the dominant positions. Demographic and social trends are in favor of LINE because LINE has a dominant share in Asian markets, where smartphone penetration is expected to skyrocket in the next few years. Whoever comes out as winner will enjoy the similar power as Facebook today.

References:

http://linecorp.com/en/

http://thenextweb.com/apps/2013/08/08/line-corp-brings-in-132m-of-revenue-in-q2-2013-as-its-messaging-app-contributes-76/

http://www.digitaltrends.com/mobile/messaging-appline-and-its-us-efforts/

http://www.cubrid.org/blog/dev-platform/the-story-behind-line-app-development/


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Whenever I see a fragmented network of low-tech brokers or intermediaries extracting large profits from a value chain, I suspect there’s enormous potential for a large-scale market dislocation to the web.

We’ve seen several case studies that share some elements of this archetype in ecommerce/retail, digital music, and housing/relocations.  In all these cases, migrating significant slice of the value chain online has connected fragmented buyers and sellers of goods and services together more effectively and at a lower cost.

As I thought of which large industries in the economy will next see a web/mobile inflection point, transportation logistics came to mind.  This is an incredibly low-tech, inefficient space that suffers from a massive market participant coordination challenge.

What are the table stakes in logistics?

Logistics is an enormous sector – more than 10% of US GDP – and comprises many diverse verticals and sets of activities related to the physical movement of goods.  Domestic trucking transportation, in particular, generated $629 billion in revenue last year, and employed roughly one out of every 13 people working in the private sector in the United States in trucking-related jobs, serving manufacturing, retail, public utility, construction, transportation, mining and agricultural sectors (source: American Trucking Association).

Shippers and carriers typically negotiate contracted rates for transporting loads over a specified period of time, either directly with one another or through an intermediary.  This is commonly referred to as the “Contract Market”, and comprises a majority of truck shipments.  The remainder are facilitated through the “Spot Market”, in which loads are offered by shippers and prices are negotiated “on the spot” (at the time of shipment).  Typically, this activity is coordinating through intermediaries such as brokers that specialize in spot market transactions, or through more sophisticated third party logistics providers that can offer a broader outsourced transportation department alternative, spanning from order planning through delivery confirmation and freight payment.  Large shippers will typically maintain a proprietary system that will plan, tender, and monitor load shipments with their own network of large carriers, although they also may rely on large intermediaries like C.H. Robinson to manage shipments on their behalf.  Small shippers with unpredictable load volumes, and small carriers that have a hard time filling capacity, rely heavily on spot markets and intermediaries.

What’s the web/mobile case for change?                                

Despite the increasing sophistication of large intermediaries that have better connected shipping supply and demand, domestic trucking is still a very inefficient market today.  A McKinsey study reported that approximately 1 out of every 5 truck trailers on the road is empty in the US because carriers cannot find loads for the return segments of their delivery routes (a “backhaul”).  According to a study by AT Kearney in 2010, reducing these “deadhead” backhaul miles for commercial and private truckload moves could eliminate 64 billion miles of traffic, and yield almost $60 billion in incremental revenues for the industry.  Much of the inefficiency in coordinating supply and demand for moving loads is a function of market fragmentation: out of the 750,000 registered carriers, roughly 90% of these carriers own less than 6 trucks.  The shipper industry is equally fragmented.  As a result, the coordination challenge of connecting the right load with the right equipment at the right place and right time has remained difficult to solve effectively at scale.

Intermediaries that connect this fragmented supply and demand extract much of the value in the trucking value chain, charging roughly 15% of the cost of shipping (and as much as 30% for critical time-sensitive loads in key lanes, particularly smaller loads), more than covering the high costs of their labor-intensive operations.  Truck fleet operators often see 3-4% after tax net-income margins in aggregate, while non-asset based brokers enjoy 17-18% after tax net-income margins in aggregate.  However, brokers often have trouble aggregating appropriate lane density at a national level, and are typically limited to only serving limited regional markets; of the approximately 20,000 certified freight brokers in the U.S., only 40 earn more than $20M in net revenue (source: 3PLogistics.com)

The full potential of technology has yet to be applied to domestic trucking.  This is probably most apparent in trucking brokers, who rely almost solely on phone calls to get status updates on freight location, and cannot provide accurate real-time load visibility for their shipping clients.  In addition, because sourcing loads is labor-intensive and conducted offline, pricing through intermediaries is very opaque, unlike in comparable industries with real-time pricing such as airline or the stock market.

Who’s making waves?

Emerging in the early 2000s, load boards are “post and browse” directories, similar to Craigslist.  They are an extremely low cost intermediary, costing approximately $150 per month for a subscription (source: DAT.com). Transcore, the leading load board provider, has grown into a several hundred million dollar business.  However, loads boards are also time-intensive to use, requiring many phone calls to reach carriers and execute a load move.  Indeed, according to an Armstrong & Associates report, an estimated 80-90% of the transactions closed through load boards are actually facilitated by small mom-pop brokers who have their own systems to comb through load board data.

Transportation management systems (TMS) are more sophisticated and can help optimize shipments through consolidation of loads, shifting of modes of transportation, and real-time track and trace, and can create connect routes across loads to create continuous moves.  However, TMS are also primarily proprietary, the domain of large shippers like WalMart.  The remainder of the market is comprised of 3rd party TMS – primarily on-site installed software.  This segment of the market is highly fragmented, and suffers from compatibility issues across TMS, and as a result, multi-homing costs between competing systems.

High-tech brokers are also beginning to employ their own online systems to serve this market.  Coyote Logistics has developed its own online freight matching algorithm, although it continues to source empty trailers with a large pool of phone operator/brokers.

Perhaps most interesting are web-based freight exchanges such as Freightquote and Open Mile, that, unlike brokers, are fully automated and not labor-intensive (and can thus scale easier), but unlike load boards, can more efficiently facilitate transactions with broker-type service features such as electronic load offering, accepting, tracking, and payment.  Many possible transaction permutations can be facilitated.  These exchanges can support reverse auctions, in which carriers bid on posted loads during a bid period similar to eBay.  In another permutation, shippers could post a load and a set a requested price that a carrier can accept to automatically “win” that load, similar to Priceline.   Finally, shippers can also review published sample quotes and compare across carriers for rates, transit times, and reviews, and then submit a booking request for a load, similar to Expedia.  I like the eBay model and charging carriers a service fee, because it would a) allow shippers to see savings from carrier competition, and b) monetize small carriers at a point when their alternative would be running an empty trailer on a backhaul.

Facilitating trust among market participants is critical in shipping, given the high value of loads and time sensitive nature of delivery.  Authentication and review of carriers must be high priority, as well as cargo insurance and payment fraud protections.

I suspect executing the right set of platform ingredients will unlock tremendous value creation in the tired business of moving goods from point A to point B.


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