In recent years many online platforms have risen to the public’s eye. These platforms often exist of virtual communities created for several different purposes. Facebook brings friends and family together and focuses on the social part, AliExpress brings manufacturers and customers together and focuses on the transaction part. According to Armstrong and Hagel (1996) there are 4 different categories of virtual communities. Firstly interest communities are identified as communities that exist of people who share similar interests. Secondly relationship communities exist of people that come together to form personal relationships. Thirdly there are fantasy communities which are often focused on online games in which people come together for ‘shared experiences’. Lastly and the most important point of this article are the transaction communities. These communities are focused on the transaction of needs (products or services).
All these platforms create relations between parties. I will namely focus on the transaction communities that have taken over the traditional markets. This trend has brought new business models that exploit the online environment and the network effects around it. An interesting development is the Customer-to-Customer (C2C) business model (Lu et. al, 2010); Think of eBay and Marktplaats. These platforms allow peer-to-peer trading of goods and services. An individual can sell something of their own to another on a platform that facilitates this transaction. Example: you can sell music albums you have previously bought but do not want anymore to someone who is interested and get some of the money you paid initially back. The reach of people that are interested is bigger on an online platform than your own network of people you know offline.
An interesting idea of this C2C concept is the platform built by Poshmark: an app that facilitates the resale of fashion items. You can buy and sell fashion. Poshmark allows people to list clothing that they do not use or want anymore in their own virtual closet that other people can buy. It connects people based on style, brands and parties. An unusual aspect of the platform is that Poshmark organizes Posh parties, which are virtual buying and selling parties based on different themes, brands, item categories etc. For example parties based on themes like Designer Handbags, Louis Vuitton or Cocktail dresses. There is a possibility to list items together with your friends. In addition to this a strong point of this platform are the top designers and top brands that are featured in the app, setting itself apart from traditional C2C platforms that often have fake brands and low quality items listed. To combat the sale of fake items Poshmark introduced several policies and Posh Protect in order to protect customers. Every purchase is protected and will be refunded if it does not arrive or is not as described (Poshmark, 2016).
The most important distinctive aspect of this platform is that it sets itself apart from other transaction communities (e.g. eBay) by offering social media-like features. A following system like Instagram is implemented into the application allowing users to follow people they like based on their style. Every user, seller and buyer, can follow each other and share items they like.
Now how does Poshmark benefit from this? Firstly Poshmark offers premium services to generate revenue. Posh Concierge is a service where Poshmark verifies the authentication of luxury and premium items, which makes the platform trustworthy to buyers of high-end items. It costs $39 per item, however if your order is above $500 it’s free. In addition to this Poshmark takes a cut of sale prices. For all sales under $15 Poshmark takes a fixed fee of $2,95. For all sales above $15 Poshmark takes 20% and the rest is for the seller (Poshmark, 2016).
This unique take on the business models of C2C platforms taps into the trending aspect of social media by incorporating features of instagram, making it susceptible to social network effects. As the market of C2C platforms for goods get saturated companies need to target niche markets in new ways. Poshmark is on the right track by targeting a market of premium items.
- Armstrong, A., and Hagel, J. The real value of on-line communities. Harvard Business Review, 74, 3, 1996, 134–141.
- Lu, Y., Zhao, L., & Wang, B. (2010). From virtual community members to C2C e-commerce buyers: Trust in virtual communities and its effect on consumers’ purchase intention. Electronic Commerce Research and Applications, 9(4), 346-360
- Poshmark (2016), Poshmark Concierge, https://poshmark.com/posh_concierge [accessed on 09-03-2016]
- Poshmark (2016), FAQs, https://poshmark.com/faq [accessed on 09-03-2016]