Amid the continued slowdown in online shopping, it was likely only a matter of time before the ongoing consolidation in e-commerce swallowed a resale player. Even so, Poshmark’s decision to sell to Naver, a South Korean tech giant, for $1.2 billion likely left some in the industry scratching their heads.

The deal values Poshmark at less than half the $3 billion valuation the company bagged when it went public in January 2021. Tech stocks across the board have slumped this year, but rather than try to ride out the downturn and fetch a higher price later, Poshmark opted for an exit.

The company is suffering from the same challenges facing many secondhand fashion sellers. Despite the growth opportunity in the market, the publicly traded firms have seen their stocks tank as sales growth slows and losses mount, keeping profits elusive for resale. ThredUp’s stock has dropped more than 80 percent this year, and The RealReal’s stock now trades at just under $2.

Ongoing inflation, rising interest rates and the threat of a recession make a turnaround in the near future unlikely. By selling, Poshmark was “able to get some cover,” said Sucharita Kodali, a retail analyst at research firm Forrester. “If they waited, they may have had to merge or sell for an even lower price.”

Poshmark stands to benefit in other important ways, too. Just as the acquisition gives Naver a foothold in the US resale market, it provides Poshmark — a social-shopping app that lets users buy and sell pre-owned fashion to one another — the opportunity to expand its presence in Asia, where buying goods in social media-like environments is second nature for consumers.

It also gets access to technology that promises to help it solve one of its most pressing issues: converting more of its 80 million registered users into active buyers.

The social media-like atmosphere of Poshmark’s app, where users can follow their favourite sellers’ closets and like and comment on posts, is a great environment to foster engagement and time spent on the platform. Yet certain commerce features that Poshmark hasn’t nailed, such as advanced search functionalities, have prevented many users from buying the pre-owned goods they ogle.

In the second quarter of this year, just 10 percent of overall users had made a purchase within a 12-month period.

Not converting enough users into buyers has been especially cumbersome for Poshmark at a time when costs to acquire new users skyrocket and recently implemented privacy changes by Apple make it harder for retailers to target ads at potential shoppers. Poshmark’s marketing expenses have grown and pushed the company, which was profitable when it went public, deeper into the red.

Manish Chandra, Poshmark’s chief executive, said on an earnings call in August that improving search was one of the principal tools the company would use to convert more of its users, along with offering promotions.

Now, Naver says it will bring its AI-powered software capabilities to Poshmark, including smart image recognition that lets users figure out where on the platform to find an item without knowing the name, and the ability for users to filter searches based on the colours, designs and materials they prefer. These tools are expected to inspire more purchases on Poshmark.

“We entered into this agreement because we believe that in partnership with Naver, we can execute our vision and ambition faster,” Chandra said in an emailed statement. “Naver’s expertise, technology and market position have the potential to accelerate our key strategic growth areas, which include live selling and global expansion.”

While better technology may not be enough to help Poshmark overcome all its challenges, for Naver, sometimes referred to as the South Korean equivalent of Google, the price tag on Poshmark makes the acquisition relatively low risk. (Though after news of the deal broke, Poshmark’s shares were up 13 percent while Naver’s traded down nearly 9 percent, suggesting who investors thought would benefit most from the deal.)

The deal marks Poshmark as the latest in a spate of recent resale acquisitions. Last July, Etsy bought Depop, which lets users buy and sell used goods to one another, for $1.6 billion. In March, Paris-based Vestiaire Collective scooped up Tradesy, another peer-to-peer marketplace, for an undisclosed sum to fill out its inventory and shore up its US expansion.

The string of purchases and the struggles of resale businesses to turn a profit might lead onlookers to wonder whether resale companies can ever survive alone. But some experts say that’s not the issue.

“It’s too early to say that the business model cannot stand up on its own. It’s still a pretty young industry,” said Tom Nikic, a senior apparel and footwear analyst at Wedbush Securities.

Poshmark turning to Naver to beef up its tech and operational capabilities was “more a function of them being a younger company with a shorter operating history and shorter time to have made all the investments,” Nikic added.

It probably won’t be the last resale business to get acquired in any case. The most likely targets offer some form of tech prowess. For example, The RealReal’s automated software for authenticating high-end goods makes it an attractive buy for a larger retailer, Anna Andreeva, a senior analyst at Needham, said in a note.

Still, the varying business models of resale firms could limit acquisitions. Peer-to-peer platforms like Poshmark, Depop and Tradesy don’t incur the costs to process and store inventory. The RealReal and ThredUp, by contrast, face the same struggle to acquire customers and have to contend with the expenses of operating warehouses, contributing to their profit challenges. It could make resale firms that handle inventory less attractive, except maybe at a steep discount, and there’s no obvious technological solution for that.