Ghost, a B2B marketplace that tackles brands’ inventory problems

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This time, we will introduce Ghost, which connects brands and retailers and provides a B2B marketplace where excess inventory can be bought and sold What challenges in the industry does Ghost, which is growing at a breakneck pace, focus on and what solutions does it provide?

Brand inventory problems and solutions

As you know, in the brand business, which rethinking lead magnets: beyond the pdf era is seasonal and greatly influence by trends, “inventory management” is one of the biggest management agendas that directly affects competitiveness and profitability.

For example, ZARA, a leader in SPA (Specialty store retailer of Private label Apparel: manufacturing retail industry) , is famous for using “inventory optimization” as a source of competitive advantage .
ZARA has a lead over competitors such as Fast Retailing and H&M in the KPI of shelf asset turnover days, thanks to thorough small-lot, short-cycle production .

ZARA’s Supply Chain

Failure to optimize inventory can result in significant losses for a company. For example, GAP’s gross profit margin fell 8.2% in 2022 due to rising prices and changes in consumer behavior, of which 2.2% was due to increase discount rates .

So how have brands dealt with inventory issues up until now?
Approaches can be broadly categorize into two categories:
“optimization of production volume and distribution” as a proactive measure, and “optimization of excess inventory” as a reactive measure.

① Optimization of production volume and distribution

The first, “optimization of production volume and distribution,” has the ultimate goal of producing and selling only what is need, when it is need
. Many major brands collect all kinds of data. From inventory data from stores and warehouses to market data that influences demand. And use AI and other tools to calculate optimal production volume and distribution.

Major brands are also acquiring inventory management and demand forecasting technologies through M&A.
・NIKE acquire CELECT, an AI startup that forecasts demand, in 2019.
・GAP acquire CB4, an AI startup that also has strengths in demand forecasting, in 2021.

Smaller brands are unable to take

Effective measures because they do not have access to a large amount of purchasing data or can not invest in large systems. Even
the mega-major GAP has difficulty controlling inventory, so it is easy to imagine how difficult it is for smaller brands.

② Optimization of excess inventory

The second approach is to “optimize excess inventory,” which is a retroactive measure. Specific methods include resolving the issue through your own channels, such as selling at low prices in stores and online, or through family sales, and ” selling to off-price retailers ,” which
may not be familiar to many people .

Off-price retailers operate a business model in which they purchase excess inventory from brands at bargain prices and sell it at discount prices in their own stores.

One company that has set its sights on this market and achieved success as an off-price retailer is TJ Maxx . While it may not be a familiar name to Japanese people, it is a very well-known retailer in the United States.

TJ Maxx purchases excess inventory from over 21,000 manufacturers and retailers in over 100 countries and sells it at 20-60% off the original price .

The problem with off-price retailers

Inventory at American retailers is said to exceed $500 billion (as of July 2022), up 21.6% from 2021. In response to this market expansion, TJ Maxx is opening 150 stores in 2023.
In addition, TJ Maxx’s competitor, Ross, is also expanding by 100 stores, and Burlington is also expanding by 80 stores.

Off-price retailers continue to grow in this way, and from the brand’s perspective, they seem like a savior that can help them deal with excess inventory.
However, it’s not all good for brands.

Selling at off-price retailers can lead to problems such as:
your brand’s products will be sold at popular stores (such as TJ Maxx)
; it will be harder to control the market price at which your brand is sold
(because it will be sold at a discount from the price the brand wants to sell at)
, and there is a risk of brand value being damage.
Furthermore, traditional off-price retailers value large lot transactions, so small and medium-size brands are often ignore.

Ghost is solving these problems faced by traditional off-price retailers and is taking market share from off-price retailers such as TJ Maxx .

Ghost’s Founding Story

Ghost was found in 2021 by Dee Murthy and Josh Kaplan . Dee Murthy is the founder of Five Four Group,
which owns several apparel brands , and Josh Kaplan also work as a brand manager at Five Four Group.

The two experience the inventory problems of the brand business through the operation of an apparel brand. After receiving seed funding from Equal Ventures and others , they will release Ghost in stealth mode in October 2021 .

The following year, in July 2022, the company came out of stealth mode and raise $20 million in a Series A round with Union Square Ventures as the lead investor .
By this time, the company had already . The generate millions of dollars in sales (not GMV) and was in the black . So it can be said that it achieve PMF at an astonishingly fast pace.

Seed lead investor Equal Ventures also commente on the company’s speed Simply put, been amongst the fastest cases of product-market-fit I have ever seen .

Then, one year later, in July 2023, the company will raise $30 million in a Series B round led by Cathay Innovation . Existing investors Union Square Ventures and Equal Ventures also participated in this round.
At the time of the Series B round. The central african leads number of members had exceeded 1,000, GMV had increase more than 10 times compare to the previous year, and inventory had increase more than 5 times , showing incredible growth