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Fashionistas who need to unload clothes? There's an app for that

Second-hand clothing apps are luring women from other online marketplaces by promising built-in community and profits.

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Avid Poshmark seller Kathleen Ensign is one of the many loyal users that is at the core of mobile shopping apps like Poshmark. Screenshot by Donna Tam/CNET

In order to supplement her compulsive shopping, and keep her closet space in check, Kathleen Ensign used to sell her used clothes by lugging black garbage bags to a consignment store once a month.

Ensign said she's never thought she'd ever use a smartphone to shop for clothes, let alone sell them. She was even wary of trying to sell clothes online through eBay, a popular platform for second-hand, vintage items.

"That was too scary," the 28-year-old fashion blogger from San Francisco said. "That sounded really hard. eBay scared me. I wasn't too tech savvy."

But now Ensign is all in when it comes to mobile commerce, often selling her clothes from the comfort of her bed. She uses Poshmark, one of several second-hand shopping apps that are turning consumers into merchants by offering an easy way to list clothing, accessories and jewelry for sale.

"Poshmark is so much fun, and it's easy," Ensign said. She made more than $2,000 last month off her used cloths, which she sometimes shows off in her blog through her daily styling.

Poshmark represents a new breed of mobile commerce apps -- alongside competitors like ThredUp, Threadflip and Tradesy -- that allow anyone with a smartphone to become a retailer. Many shoppers are drawn to the selection of deeply discounted designer goods, and there's a fair number of merchants selling new clothing through the apps. The apps also represent a more intimate alternative to established online retailers such as eBay or Amazon.

Poshmark has grown by building on the loyalty it's created among its users. The app lets users showcase their style, making it easier for power users to gain followers and, ideally, increase sales for them and other sellers (users can post other sellers' items to their feeds). The company also implemented a new algorithm last month that is supposed to pull more relevant items into a shopper's feed based on past purchases and favorite brands.

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Poshmark

CEO Manish Chandra said it's about helping Poshmark's community of sellers make more sales.

"The faster you can help people find things, the more you sell," Chandra said in an interview. "The more you sell, the more you buy and the more you curate. Sellers sell more, shoppers get what they want more and then women who love to show off their style get a platform."

Manish wouldn't say how much money his company makes, or how many people actually use the app. Poshmark said it has "millions" of users and over 400,000 closets with listings.

Whatever revenue these apps generate, they have certainly captured Silicon Valley's interest in recent years. Poshmark has raised $15.5 million in funding so far. Threadflip has raised $21.1 million, and ThreadUp, $23 million.

There's certainly money to be made in second-hand goods. First Research estimates the US resale industry generates approximately $13 billion in sales annually.

To be sure, eBay is still the No. 1 choice for second-hand goods. It's been around the longest and has built itself a stable community of sellers and buyers. The company reported $4.4 billion in sales for the second quarter of this year.

Poshmark and the other such mobile apps, meanwhile, make up very little of the second-hand consignment market, said Forrester analyst Sucharita Mulpuru. Consignment websites and eBay still make up the lion share of the market, she said.

If these apps are gaining momentum quickly, it's because they are benefiting from the growth of mobile shopping in general, according to Mulpuru. Most retailers have reported seeing 50 percent or more of their sales coming from mobile.

Working the community

Poshmark seller Evelyne Teman was an eBay seller for 13 years before she left it for Poshmark. It's now her full-time gig. The LA-based merchant said she's earned three times as much through Poshmark, estimating that she has done "way over a quarter million dollars" in sales through the app since she joined two years ago. Teman said she left eBay because Poshmark let her create a better relationship with her customers. Some shop from her on a weekly basis.

"The community is huge and very important for me in my life," Teman said. "It's not like eBay, which is, I'm sorry to say, boring and you don't interact with other people."

eBay, which has made several efforts to increase attention to the fashion listings on its site including a dedicated app for sellers, declined to comment for this story.

Not everyone, however, can be as successful as Tenam.

"It's a great story to tell, 'you can sell anything in your closet,'" Mulpuru said. "But that doesn't happen very often. The universe of people who could sell this merchandise is limited. The universe of people who is even going to buy it is also small."

She suspects the typical shoppers on these apps are also sellers and friends of sellers, which she thinks is hard to scale. It's also hard to authenticate a lot of the designer goods on these apps. Users just have to trust that the sellers aren't lying.

Built-in rating systems are one way to police the community, but what the companies emphasize is the loyalty among its users.

Competitor Threadflip says more than 80 percent of its merchants will sell something and then use those profits to purchase other items. On average, these sellers return to the app at least once every two weeks to buy something new, according to the company.

To build out its community, Poshmark holds virtual and real parties to keep their sellers connected, going as far as to hold a two-day conference called Poshfest in Las Vegas last year.

Ensign, who also uses Poshmark to shop for vintage goods, said she's a loyal Poshmark user because she can't find the same community anywhere else.

"When I think about second-hand shopping -- going to those smelly stores, going through used stuff, it's not as luxurious, it's just not a fun experience," she said. "Poshmark has created an app that's all about creating a very safe, very fun, healthy environment. There's no bullshit. It's very forward and everyone is very supportive."

While it's hard to tell if these networks of fiercely loyal users will translate into big profits for second-hand shopping apps, dedicated sellers -- and shoppers -- are the fanatic fashion-centric users that larger marketplaces want but don't have.