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South Korea's Naver acquires Poshmark for $1.2bn

Earlier this year, South Korean search giant Naver completed the acquisition of secondhand apparel marketplace Poshmark for $1.2bn in an all-cash deal. Shareholders of the California-based company received $17.90 per share, which represents a premium of approximately 15% of the stock closing share price on October 3, 2022, when the deal was announced. Poshmark shares jumped 14% the day after.

Poshmark is now the largest fashion consumer-to-consumer platform in North America, with 80 million registered users primarily from Millennials and Gen Z. The market for online “re-commerce” is expected to grow by 20% annually to $130 billion in 2025.

But despite that, large potential customer base and market growth, Poshmark has performed unpredictably in recent years, reporting a loss of $23.5mn and $44.4mn in 2022 and 2021 respectively after raking in a $25.2 million profit in 2020. Regardless, Naver’s CEO Choi Soo-yeon is confident of the deal timing, stating: "the online market changes so quickly, not doing anything now can mean losing long-term value”.

Poshmark will operate as an independent subsidiary under Naver's ownership, where the company intends to combine Poshmark's thriving social shopping platform with its own “technological prowess”, including advanced AI, and current user communities. The ultimate long-term objective is to expand the business into other developed markets in Asia and beyond, where Naver has substantial holdings, partly by integrating some of Naver's live shopping services with the Poshmark platform.

As ad sales, international investment growth, and live commerce usage all expand, according to Naver and Poshmark, combining forces will result in "major revenue and cost synergies," including a near-term acceleration of annual revenue growth exceeding 20% and save the company $30m in annual costs.

In conclusion, if Naver’s strategy is implemented progressively, the deal has the potential to create a global player in online fashion, and enhance a key opportunity to build the next stage of growth for both companies.

Written by Ignacio Paz

Sources: The Wall Street Journal, Financial Times, Retail Dive, CNBC, Inside Retail Asia, Tech Crunch

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