Every Sunday at 4 p.m. about 300 cars gather in the parking lot of Clearview Mall in New Orleans. No one goes inside to shop—they’re meeting to exchange used clothes, furniture, and electronics being sold through an app called VarageSale. “This is pretty much my job now,” says Hope Thibodeaux, a 32-year-old mom who volunteered to help organize the weekly meetups. She’s bought and sold a steady stream of baby clothes and other items using the app. With the profit, she says, “I’m able to supplement our income enough to make it feasible for me to stay at home with my son.”
VarageSale is one of a few startups taking up a difficult mission: unseating Craigslist as king of local e-commerce. Craigslist’s 30 employees run online bulletin boards in more than 700 cities in 70 countries, offering a ton of stuff for sale. The site, which doesn’t charge fees for most transactions, looks like it hasn’t had a fresh coat of paint since the mid-1990s, when programmer Craig Newmark created it in San Francisco. It doesn’t incorporate social media services, and most listings on its mobile version are cut off and tough to read. Craigslist declined to comment for this story.
Tami Zuckerman was frustrated with Craigslist and other local marketplace sites when she started VarageSale three years ago in Montreal. A former kindergarten teacher, she was pregnant with her son, Noah, and spending a lot of time at home, nauseous and obsessed with clearing out the house to make room for the baby. She asked husband Carl Mercier, who sold an antispam company to security-software maker Websense in 2009, to help her construct an app that would let her sell the junk easily from her phone. “When we started, it was almost like a toy,” she says of the site, whose name is a portmanteau of “virtual garage sale.” “We never intended it to become a business.”
The app lets people connect through their Facebook profiles, and it conscripts volunteer moderators to approve new members. Members list anything they want on the site and attach an asking price, then others leave comments, haggle, or declare their intent to purchase. While VarageSale is somewhat rudimentary—there’s no online payment tool or purchase button, hence the parking lot cash—half the “millions” of members who use the app at least monthly check it once a day or more, Mercier says. A few months after their son’s birth, when the haze of raising a newborn started to lift somewhat, he and his wife checked on the service and noticed the frequent-visit trend emerging. “That’s when we realized we had something special,” he says.
Over the past year the couple have expanded the service to cities in every Canadian province and 42 U.S. states. They’ve moved to Toronto, which has a bigger pool of software developers. In March the company raised $34 million from venture funds Sequoia Capital and Lightspeed Venture Partners. “There’s an engagement here which is unprecedented in this category,” says Bryan Schreier, a partner at Sequoia. “A bunch of little companies have tried this, and no one has come close.”
OfferUp, another marketplace that, like VarageSale, focuses on tailoring its interface for smartphones, has raised more than $60 million from venture firm Andreessen Horowitz. (Bloomberg LP, which owns Bloomberg Businessweek, is an investor in Andreessen Horowitz.) Nextdoor, a San Francisco company designed to encourage online discussions among neighbors, says about 20 percent of its 7 million daily postings revolve around commerce. Even Facebook has become a repository for some classified ads posted on local group pages.
As long as Craigslist is free, it won’t be easy even for another free service such as VarageSale to supplant it. Mercier and Zuckerman say that while they have some ideas about ways the app can make money, that isn’t a priority yet. In New Orleans, Thibodeaux says she doesn’t think people will keep using VarageSale if it starts charging transaction fees. She does, however, value the sense of community and mutual trust that the app helps foster at her local mall. “It just feels so much safer” and more user-friendly than other sites, she says. “I can’t see myself going back to Craigslist.”
The bottom line: Startup VarageSale competes with Craigslist by focusing on mobile and has raised $34 million in venture funding.