Behind the Term Sheet: How Ghost is Revolutionizing Inventory Management with Access to Excess
Today, brands face an ‘inventory apocalypse’, where excess inventory is burgeoning.
Why? A few drivers: supply chain disruptions, unpredictable demand, changing direct-to-consumer advertising dynamics… the list goes on.
The excess inventory market already generates $500B of sales annually, expected to grow to $830B by 2030 — while approximately $160B of that inventory is destroyed each year.
What’s the issue? Excess inventory represents a rare instance of a highly-manual, inefficient workflow within a sector with a huge TAM that has not evolved in 30+ years, nor seen meaningful technological innovation applied to solve it — until now (or circa 2021 when Ghost was born).
Ghost is an LA-based startup that has built a B2B marketplace for excess consumer goods that’s helping retailers solve the surplus inventory issue in a major way. At Cathay Innovation, we just led it’s $30M Series B, joining the ranks of an all-star syndicate of commerce and supply-chain VCs like Union Square Ventures (Series A lead), Eniac and Equal Ventures (co-lead Seed investors), FJ Labs and Quantum Light.
Here’s why we believe Ghost is set to revolutionize inventory management and reshape the future of wholesale commerce.
First, Today’s Excess & Off-Price Industry — Suboptimal Brand Outcomes
Traditional avenues for offloading excess consumer goods, including selling to discount retailers, wholesale liquidators / jobbers or destroying the stock, each pose unique challenges to brands and lead to suboptimal outcomes.
1. Discount retailers — e.g., TJMaxx, given their scale ($50B in annual sales in 2022), leverage their market position to offer lower prices than desired by sellers and are typically only accessible to blue-chip brands like Nike or Calvin Klein.
2. Wholesale liquidators and jobbers — offer even lower recovery rates (pennies on the dollar), lack visibility into where the sold goods end up (creating brand equity risk), and operate in an outdated, inefficient manner (faxes, phone calls and emails).
3. Disposing of products — e.g., landfills or burning, harms the environment and adds to the cost for brands with no financial recovery.
We expect the excess inventory market to continue to grow and we’re not the only ones: TJMaxx is opening 150 stores in 2023 while Ross (+100 stores) and Burlington (+80 stores) are expanding as well.
From a workflow perspective, excess inventory is the Wild West. It operates in an ad hoc manner with deals historically done via fax, phone calls and emails. This does not provide real-time insight into available inventory, so once buyers sift through the dozens of listings spreadsheets with thousands of products they receive daily, desired items have already been sold — wasting time and energy for both buyers and sellers.
Clearly, this process is a far cry from the highly polished consumer-driven UI/UX we’ve come to expect from retailers like Amazon, Nordstrom or Target.
Enter Ghost: A Paradigm-Shifting Platform for Excess Inventory
At the highest level, Ghost offers a private, B2B marketplace where brand sellers can discreetly and efficiently monetize their surplus inventory to vetted buyers. Ghost provides an automated platform for posting, selling and shipping inventory, complete with suggested sales prices and invaluable buying/selling data. The platform’s consumer-like UX/UI offers a familiar, frictionless marketplace experience, eliminates inefficiencies present in historical workflows, and offers meaningful quality-of-life improvements like on-platform comms, text-based alerts, templatized offer sheets, simple catalog ingestion / uploading, etc. This innovative approach optimizes outcomes, increases efficiency and benefits both sellers and buyers.
Let’s dig into a few of the most promising elements of the platform:
1. The Access (Not Excess): Historically, the excess inventory market has been challenging for anyone apart from blue-chip brands — creating a material long-tail of buyers and sellers with no good options. Ghost isn’t only offering excess inventory, it is democratizing access and unlocking the tremendous purchasing and selling power of these long-tail businesses. By allowing sellers to stop being price takers and generate superior recovery rates while simultaneously granting buyers access to premium, highly sought-after inventory, Ghost grows the pie for everyone and creates win-win solutions.
This net-new value unlock for all marketplace participants is what our team views as Ghost’s critical differentiator from competitors and underscores why we believe Ghost offers much more than just an improved workflow solution.
Ghost effectively levels the playing field for long-tail buyers and sellers to compete with the TJMaxx’s of the world by creating real buying urgency / FOMO given the competitive field for these sought-after goods is so much deeper. This urgency is what allows brands to generate materially improved recovery rates because buyers understand that if they don’t move fast to buy a lot when it lists, it likely won’t be around for long. This democratization is true both domestically and internationally, as there is tremendous demand for US-brands abroad and Ghost represents an enticing, low-risk way to dip into new international markets.
2. The Team: At a fundamental level, early-stage investing is a people business and we’re continuously impressed by the thoughtfulness and quality of co-founders and co-CEOs Dee Murthy and Josh Kaplan. Both are already well-known entities in the fashion industry: Dee co-founded an OG streetwear brand in Young & Reckless as well as Five Four Group and its portfolio of brands, while Josh deftly ran and grew Five Four Group’s premier brand New Republic to millions in annual sales. They started Ghost while running Five Four and seeing there were no good existing solutions to manage their excess inventory — it was true founder-market fit from the start. But most importantly, they are the types of high-quality, high-caliber people you want to see be successful.
3. The Vision: We believe that off-price, excess inventory is merely the initial wedge for Ghost to start working with brands. The fact remains that b2b transactions for consumer goods are still clunky and inefficient. We see a future where Ghost evolves into being the leading pricing and discovery platform for consumer goods (i.e., the Kelley Blue Book of consumer goods) and serves as the default OS for B2B commerce for consumer goods.
Since their Series A last year, Ghost has grown significantly with a 10x increase in run-rate GMV, a surge in platform memberships and inventory listings (+5x YoY) — all while doubling the team.
They’ve also seen powerful indicators that their marketplace is taking off with more repeatability from buyers and sellers and brands listing larger lots more frequently. Blue-chip, hyper trendy and hot emerging brands (we REALLY wish we could name names) are leading the charge. It’s not just fashion and footwear either; there is a strong and growing demand for beauty and home goods (e.g., dining ware, appliances, etc.) — especially in international markets. International buyers are highly active on the platform for access to popular US brands which can be a powerful customer traffic driver.
The icing on the cake? The customer zeitgeist. Ghost is fundamentally changing the industry for the better and important stakeholders agree. Across buyers, sellers and brands ranging from $1M — $1B+ in annual GMV, we heard things like:
“It’s a one-stop shop. They have everything for everyone.”
“I have 400 vendors. I spend the majority of my time with Ghost vs my other 399 vendors. 6 months ago, Ghost was 5% of my business. Today it’s 25%.”
“I’m going to pay the extra 5 points to get access to inventory that’s never been available in the market. I refresh the Ghost feed at 3 AM to try to see new inventory before anyone else can.”
Parting Thoughts: A Consumer Ecosystem for Scale
We feel our firm brings a few unique value-adds to the table to help Ghost’s scaling efforts. Our deep network of commerce-related strategic partners (and committed investors in our funds) like Kering, Anta Sports (Salomon, Arctery’x), Groupe SEB, Unilever and L’Oréal allowed us to better understand the real pain points around excess inventory. Accessing the knowledge of our global consumer ecosystem was a critical point to supplement our research and learnings from prior investments in commerce companies like Pinduoduo (NASDAQ: PDD), Glovo (acquired by Delivery Hero), Colizey or Reebelo. And for Ghost, a global company from day 1, the intros we can make to these geographically diverse, industry-leading corporations and brands certainly doesn’t hurt.
With a deep understanding of the market and a timely solution, Ghost is set to revolutionize inventory management and reshape the future of wholesale commerce. While this round only represents a small milestone in Ghost’s journey, we couldn’t be more thrilled to join the ride.
Interested in joining an all-star team changing the future of commerce in sunny LA? Check out the link below for available positions!
Written by Simon Wu & Brian Schwarzbach; Edited by Jaclyn Hartnett
