Startups Vie for “Craigslist Killer” Title As Mobile Claims Focus

Startups have spent years trying to dethrone Craigslist as the ruler of selling used goods—and if not to dethrone, at least to capture some of its users for their apps.

Now a new generation of competitors has risen up, all with the goal of converting some of the website’s 50 billion or so monthly pageviews to mobile applications. Some newer entrants are trying to attract users with the conceit that a mobile experience is more convenient and attractive. Others rely on the concept of selling niche goods or to more specific populations.

The startups are targeting an audience that researchers believe will only grow with time. Mobile commerce currently accounts for 39 percent of e-commerce transactions, according to research firm Forrester. That number should increase to about 54 percent by 2018, when e-commerce sales will reach an estimated $414 billion, the firm said last year.

5miles exemplifies some recent trends: it’s a mobile-first company that has a website as a secondary product. The company’s application was developed in China, and its 30-person team of engineers and technical staff remain there. It has a similar feel to Craigslist—which does not have an app of its own, though people have created multiple apps that link to Craigslist listings. 5miles’ users can sell anything, within reason, from a chest of drawers to a classic car.

Four months ago, 5miles made Dallas the first market for the app, and it’s also where the company established its U.S. headquarters, says general manager Rick Cantu. The company differentiates itself from Craigslist and larger, better funded digital marketplaces like eBay by focusing on the user experience, Cantu says.

It allows buyers and sellers to directly message one another through the app, and buyers can also make offers on any product they want to buy that are lower than the ask price. Technical capabilities like that, responsive customer service that customers of larger businesses won’t get, and making the app look and feel attractive are what will help 5miles attract business, Cantu says.

“We aim to be a Craigslist killer,” he says.

That will take some doing, of course. 5miles currently offers all of its listings for free, and it will always retain some sort of free listing service, like Craigslist, Cantu says. However, the company will also eventually make money by potentially selling premium listings and advertising, Cantu says. He says the company recently received a Series B round of funding from Chinese venture capital firms—he declined to disclose the amount—so that it can expand into more markets, such as Los Angeles and Miami, after having already opened in Houston, San Antonio, and Austin.

5miles isn’t the only one trying to grab a hold of market share. Listia, a six-year-old trading marketplace app based in Mountain View, CA, allows people to auction off their used goods for an internal currency to other users, which can then be used to buy more stuff. The company received $9 million in a round led by General Catalyst Partners in 2013.

Cantu isn’t concerned about competitors. “When there’s an opportunity in the marketplace, you’re going to have multiple entrants going after that opportunity,” he says. “At this point, we believe the market is large enough for multiple competitors in the marketplace.”

Some of those young and growing competitors include Spain-based Wallapop (which now has U.S. operations) and OfferUp, a Seattle-based competitor that Re/Code reported is trying to raise $60 million or more in venture capital.

There have been previous “Craigslist killers” who have failed—five venture-funded ones that Bill Harding, the CEO and founder of Bonanza, says he can recall. Bonanza is an online storefront business that is focused on people with unique items for sale, from an individual with a handmade cabinet to an entrepreneur selling homemade soap (more on the company below).

That type of niche focus in terms of the items that can be sold, or the people who can sell, has led to moderate success for some startups. Poshmark is a Menlo Park, CA-based, fashion-focused app that targets women almost like a consignment store. The company is arguably one of the more successful mobile marketplaces, having just landed $25 million in Series C financing last week from Mayfield, Menlo Ventures, Inventus Capital, Union Grove Venture Partners, Shea Ventures, and SoftTech VC. That brings its total raised to $47.2 million so far, and the company plans to use the new money to expand its services beyond women’s fashion.

On Poshmark, a seller can list anything from a $20 shirt to a $5,000 handbag with a photo and description. The company, which takes a 20 percent commission on sales above $15 and gives the seller the rest, makes the service easy and personable, with standardized shipping and payments procedures, as well as a customer service system, CEO and founder Manish Chandra says.

Poshmark’s early success—more than 700,000 sellers have helped the company reach a run rate of $200 million in annual sales—is in part thanks to the more personalized relationship buyers and sellers have … Next Page »

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David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at dholley@xconomy.com Follow @xconholley

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