Open Letter: Poshmark Fee Structure Implementation Business Analysis

An open letter to the Poshmark C Suite from a Poshmark User:

First let me introduce myself. I am a Seller and a Buyer. I am a business owner (outside of Poshmark) for which I am a licensed service professional with a graduate degree.

For what it is worth, I get paid to professionally consult with businesses primarily on employment issues, but also on everything from valuation, to marketing to profitability. While my opinion here is personal over professional, I provide my background to give this color.

Second, I acknowledge and give proper weight and consideration to the fact that people hate change. I am one of them, but I can usually distinguish between a situation where change just takes getting used to, and one where there is something nefarious at hand (i.e. shrinkflation).

The recent changes to the fee structure yesterday seem ill-advised at best, but overall devastating to your core sellers.

With those admittedly simplistic foundational considerations in mind, I hope you will consider this post-mortem project analysis. Although it appears your project was primarily unsuccessful, I was able to offer a suggested path forward to possibly mitigate some of the widespread client dissatisfaction.

IMPLEMENTATION

Although some purportedly received an e-mail exactly one day in advance of the change, I did not nor did anyone I personally know. That’s deceptive and abhorrently insufficient notice.

The middle-of the night, no-notice rollout of buyer fees instantly gave me a negative connotation of Poshmark's business techniques and made my overall impression of the company is much less favorable than it always has been.

In the spirit of a true “Posh Ambassador”, I have always affirmed the platform’s quality, given out my QR code, assisted new Poshers and recommended it to my friends and family. 

Unfortunately, I am now far less likely to recommend Poshmark to others, if at all, because the platform has taken a direction that I struggle to participate in or support. That's based solely on the sneaky rollout, not the actual fees which I will address below.

I do not like businesses that try to hide fees or, more importantly, take advantage of customers that are regular users and don't pay much attention because they have come to TRUST a known and reliable platform.

Yes, I consider this to be taking advantage of someone who thought they were making a purchase in one amount based on historical experience, only to learn they weren’t paying attention and had significantly more deducted from their balance or charged to their card.

I’m also disgusted with the practice of charging fees on sales tax or tax on fees. I have yet to be able to make the equation work on an actual transaction, which is alarming. I had a shopper decide not to buy for the same reason. Together we worked through the numbers (her state had no sales tax) and we couldn’t get to Poshmark’s math.

We agreed it felt like theft, and even though I offered to discount to cover the fees, she was unwilling to buy anything until she could determine exactly what was allegedly “tax” and how the numbers were being arrived at. She claimed she reached out to the supposed customer support that she purportedly paid for, and still didn’t get a straight answer.

This has tarnished not only my impression of the platform, but also made me question its transparency and trustworthiness. It also makes me wonder what kind of predicate market research was done before forcing this on Buyers and Sellers, but my analysis would indicate poor, inaccurate or unsatisfactory.

In my practice, I would be demanding to know the basis for determination that this was a viable substantive change or that this was proper handling of the change’s introduction. People just want something straightforward and clear.

Next there is also the manner in which this was presented. As Sellers, we were treated as unintelligent, unobservant, foolish idiots.

On a $20 sale with the current $5.95 shipping promotion, using a 6.5% sales tax, the fees for Buyer were $3.67 and the Seller's fees were "estimated" at 3.79. Poshmark has now taken $7.45 (37%) in place of where it previously got $4, all while telling the Sellers how great it is they saved 34 cents.

Meanwhile, I have dropped my price by at least $1 to offset the Buyer's fees, totally obliterating that $0.34 I saved, and then some. This is just an obnoxious business practice on the platform's part. I can't begin to contemplate doing this calculation with a shipping upcharge.

By using carefully selected data, of course specific examples can make this new fee structure seem favorable to Sellers.

That is to some extent psychological manipulation, and strategy often used in business transactions and valuation negotiation. It is all a matter of how the data is presented, and often making the adversary feel like they are getting a good deal is half the battle to getting your desired outcome. 

To me, personally, it appears disrespectful at best and further erodes my TRUST in this platform.

SUBSTANTIVE CHANGES

To that end, take a moment and read some of the comments on your socials, private groups, and Reddit. Many Sellers have indicated they want transparency and simplicity to retain buyers on the platform. 

Consider that Sellers would rather pay a higher fee than have temporarily discounted shipping, or confusing fees thrust upon their buyers. Consider that we, as Sellers, have built a brand and in many cases, a loyal customer base. That is based on OUR hard work. Those buyers shouldn't be forced to pay fees for using your platform to buy versus purchasing online retail.

In most cases shipping is free, at least over a certain threshold, and customer service certainly is whether you call it “buyer protection” or not.

Poshmark is also now charging the customer for MY WORK. I provide 99% of the customer service they receive – patiently walking them through bundle weights, custom listings, repeat customer deals, how the shipping upgrades work and so much more.

My Buyers don’t need protection because I package with extraordinary care and use extensive details in my listings. If there is damage in shipping, then it is a claim against the Priority Mail insurance, and Poshmark has to handle that, because neither buyer nor seller have a way to handle on our own.

Furthermore, having read countless examples of blatant abuse of the system when it comes to “Buyer Protection”, it disturbs me that there is now a buyer protection fee charged to everyone without discretion, a trait which Poshmark’s “case” system seems to be lacking for the past several months, if not years. It is the classic example of the whole group losing privileges because of a small percentage of “bad apples”.

Why not devote your resources to weeding out the bad apples, rather than penalizing the users of the platform as a whole. I always felt that the customer service was what the 20% was for, and several years ago it was top notch. 

Customer service, however, has become sadly lacking and rote in its responses, which primarily seem to be generated by AI. The alleged 24 hour customer service seems to be bots that can’t competently identify clear conflicts in Buyer or Seller allegations. In most cases it’s laughable how completely non-responsive the replies have become.

I want to be clear that my 1 and only “case” as a Buyer (2019), and the handful of my cases as a Seller have been satisfactorily (albeit not necessarily equitably) resolved, but I can say without hesitation that I am the exception rather than the rule.

When you take the time to read actual experiences with customer service, the outcomes are not only wasteful, but unacceptable. To make up for these practice’s, Poshmark is now charging every one of my hundreds, if not thousands, of good customers for nothing. That is egregious.

The customer loyalty your best Sellers have fostered and maintained over years is unlikely to overcome a Buyer’s willingness to pay arbitrary and obfuscated fees. As Sellers, all of our hard work and effort has been destroyed.

Finally, let’s discuss the new fee structure itself. I left eBay, my original selling platform, when it began charging fees on sales tax and it became impossible to know specifically what the margin would be on a given offer.

While it may come as a surprise to the executive decision-makers at Poshmark, some of us monitor margin, amongst other analytics, and often in my case the break even point.

Notwithstanding the complex spreadsheet that is now required to calculate earnings on a sale-by-sale basis (which still is an estimate based on state sales tax), it becomes impossible to do quick math and make an offer, which I have done 100s of times on a conference call or sitting at a redlight in the middle of my workday.

Now, I can’t even figure out the formula, let alone do it in my head on the fly. Additionally, the 5.99% is insulting. At least call it what it is at 6%, which makes no difference to those of us with a modicum of common sense. This isn’t the gas station where there is a marketing advantage to have the first number as a 5 rather than a 6.

This needlessly complex fee structure also makes it impossible to do an honest comparison to retail. As a Seller, I most certainly take that into account when pricing (although it is one of many factors). From the Buyer’s side, if Poshmark is going to advertise an alleged “up to” 70% of retail, then first and foremost a buyer should easily be able to see an apples-to-apples comparison to retail. 

Additionally, is this site being promoted as a platform where the buyer can get a cheap deal? If so, Buyers will be disappointed when they realize the fees make something equivalent to retail on most, if not all, items of a certain price range.

BUNDLES & SHIPPING

The shipping has always been a cumbersome issue, but now many basic items will be equivalent to or more expensive than retail. The idea of a “closet” and a “social platform” has been eclipsed.

What exactly is your target market? The specialty area of out-of-stock, out-of inventory, niche items that are hard to be had? I’m feeling “cabbage patch doll at Christmas in the early 80s” market. This is where buyer fees become trivial and no one is doing a direct comparison to retail. That is but a nominal fraction of Poshmark’s annual and core sales.

In many cases, I have taken the time to explain the cost of a single bundle at 10 lbs versus the cost of two 5 lb bundles. With fees, I now have no way to predict what the actual cost to the buyer will be or how much multiple bundles would save the buyer.

I feel that my days of separating a huge sale with multiple listings into 4 bundles are over, because I simply do not have the bandwidth to explain that much (including how much of it is merely guessing because of these new and less-than-transparent fees). My time has to be incorporated into the value of a listing and profit, and quite frankly, many Buyers don’t understand as is.

How do I make an offer that absorbs the fees when they are all over the place? It seems far better to go to a competing platform where bundle shipping is far more favorable to Buyers and Sellers, because there is so much unknown on Poshmark.

At least in a scenario where there are zero seller fees, it actually means zero seller fees, period. I can accurately predict my net profit and make a take it or leave it offer. Apparently the days of large bundles on Poshmark are essentially over for me.

PROMOTED CLOSETS & CONSIGNMENT

Stop. Just Stop. I understand the concept of a promoted closet from my eBay days, but at least that platform had a reasonably accurate search feature. My overall assessment was that the promoted listing feature was in no way worth it, but at least back when I used it, they were on a straight 10% platform fee and it was still pretty easy to figure it out.

That said, if you are going to offer it, fine, but get your banner off my closet. Every time I open it up and go to share my closet, there it is, and I DON’T WANT TO USE IT. If only so much effort had been put into notifying Sellers you were going to change the fees so we had a chance to react.

As if all these other things mucking up the platform aren’t enough, now we’re adding consignment? Slow your roll. Why not change/add one thing at a time and see how the platform responds instead of overwhelming everyone with so many changes and unknowns at once. How are we, as Sellers, supposed to figure out how each one of these things are affecting us?

On top of that, who in their right mind has time to properly list someone else’s stuff for only 50%, especially now with the additional fees. This is Poshmark, not ThredUp. Besides that, ThredUp is a disaster in my experience. I ended up getting a dress with an actual hole in it and some other misrepresented ‘EUC’ items that were nowhere near the advertised condition, so after obtaining a refund, I promptly closed my account.

Adding a third party into the mix sounds like a costly administrative nightmare that further drives up prices beyond what is viable for a secondhand or resale market.

TARGET MARKET AND USER RETENTION

That brings me to a question which is paramount to any business analysis: What is your mission? Who is your target? Aren’t Poshmark closets supposed to be a way to sell things from your closet that still have value, but likely not as much as when purchased from a retailer?

Perhaps that non-returnable bag that you never used and still has the tags that someone else would be excited to own because it is a brand name at a lower price? Or a high-end dress that no longer fits. The target buyer is someone who can’t afford a new bag, or gown, or brand name pair of shoes, but can get them at a reduced price because someone wore them once.

I feel mistaken based on this change in the fee structure. I’m lost as to whom this platform caters.

To say I think you have lost your way is an understatement. As a user of this platform for 5+ years, I do not know what image you are aiming for. I have LOST not only trust, but significant respect for the platform.

I used to think it was the classiest of all my reselling platforms with ethical practices and an appeal to the masses. I found it to be so much safer and cleaner than some of the others. The “up to 70% off” retail was a little cringy, but I understood could live with it, because that is certainly part of the foundation of buying from a reseller, or more specifically someone else’s “closet” in a  predictable and reliable forum.

I recently bought a low-weight item on eBay versus its cross-listing on Mercari, because of buyer fees. I reached out to the seller who acknowledged that even though I paid about $3 less, she made more (I have no idea if it was $3 or three cents). The bottom line was, I never contemplated looking at Poshmark where it presumably would have been the most expensive (nor was it cross-listed there) and that was BEFORE Buyers’ fees.

I hope that Poshmark can reevaluate its place in the market, the simplicity of its fees (or now lack thereof) and dial back this mistake for Q4 (the most profitable quarter in the retail space) with minimal attrition.

Unfortunately, the mere decision to implement this fee process along with the timing makes me question who or what Poshmark is trying to be, and whether I want to be a part of it.

CONCLUSION

I hope the executive committee will take this seriously, and at the very least:

1.      Make the process simple enough to understand and easily calculate the overall numbers for both parties.

2.      Implement a fee structure without taxing fees leaving a seller with an unknown profit when accepting an offer.

3.      Adopt something that allows an actual comparison to retail (where shipping is often free and there are no fees on top of fees on top of fees).

Thank you in advance for your attention to this matter. I see that you are running yet another banner giving everyone notice that you are reconsidering, so at least you have given your “notice” issue some thought. Unfortunately, the company has a long way to go to restore trust.

Sincerely,

A Poshmark User

P.S. I began working on this the day of the change; however, there were two delays including a hurricane, and the pause I took to import my entire closet to my secondary selling platform.

I have never used an import feature before, and have only moved selected listings by hand.  Perhaps that is worth taking into consideration, as I am by far not the only one.

Editor's Note: the opinions expressed above are those of the letter writer, edited by Value Added Resource for formatting and clarity only.

Have your own thoughts to share about the new Poshmark fees? Leave a comment below or submit a letter to the editor for consideration!