Sarah Davis: Founder and President of Fashionphile

0:05Hi, everyone. I'm Hilary Kerr, the co-founder and chief content officer of Who What Where, and this is Second Life, a podcast spotlighting women who have truly inspiring careers. We're talking about their work journeys, what they've learned from the process of setting aside their doubts or fears, and what happens when they embark on their second life. Today on the show, I'm chatting with the founder and president of the luxury resale company Fashionphile, Sarah Davis. I've loved watching Fashionphile grow over the last couple of decades, so I was thrilled to sit down with Sarah and go back to the origin of her brand.

0:44Sarah originally planned to become a lawyer. She did debate in high school, graduated from law school, and even passed the bar before realizing her career was going to go a completely different path than she had imagined. Sarah paid her way through law school, so during her studies, she was always looking for a way to make a dollar. She created tons of odd jobs for herself, like cutting fellow students' hair, and even started a used law book platform called LawSwap.com. But in a chance encounter, she overheard a stranger talking about reselling things on eBay, and she was intrigued. She began by selling her own belongings on eBay and then quickly realized that luxury handbags and accessories sold faster and held their value better than any other category.

1:34Seeing the untapped potential in the luxury resale market, she launched Fashionphile as an eBay storefront in 1999. Over the next 25 plus years, Sarah built her business into the largest online platform for buying and selling ultra-luxury handbags and accessories in the country. The brand now has headquarters in San Diego and New York City, an office in Tokyo, and retail locations all across the country. Fashionphile is showing absolutely no signs of slowing down. In fact, the company saw its most profitable year to date in 2024. Sarah is such a savvy businesswoman and a wonderful example of how to just get started, even if you have one foot in your first life.

2:20I can't wait for you to hear from her. Now on Second Life, it's Sarah Davis. Sarah, are you ready? Yes, I am. Okay. So we like to start this podcast at the beginning. So So what did you study in school? And much more importantly, what did you think you were going to be when you grew up? I always like to say I was a debate nerd. You know, in high school, I loved debate and I watched 12 Angry Men and like all of the red riveting courtroom dramas. And when you're in speech and debate, debate nerds go to law school. And so that's what I did. I went to law school and I loved it. And I always thought that, you know, I'd be a lawyer and I'd wear my suits to court.

3:06And here I am not doing that. Not doing that at all. So was the goal to be like a criminal litigator or like a courtroom drama sort of law aspiration in your mind? It's interesting because when I was young, I saw myself that way more, you know, save the world and altruistic and Aaron Brockovich. Exactly. And the interesting thing is when I went to law school, I thought I was going to go in with that interest. And I was going to really like stay in that lane. Every class I was in, I was like in property law contracts. I found it very interesting. What creates the law is like these weird cases. It's almost like reality TV, but like written form where it's like the interesting facts that create the case.

3:49It really was very interesting to me. Once I was in law school, I kind of opened my mind to other possibilities. You know, what should I do? But at the same time, I always had to pay my own way in my life with my family situation. So it was always like making money. My husband and I both didn't have any money. He was in medical school and I was in law school. And so I started selling on eBay in law school. But really it was like that's like the early seeds of what I'm doing today. So it's interesting where that all started. Interesting seeds. But before we get into all of those seeds, I want to talk about undergrad first.

4:21So you did your bachelor's degree in psychology, correct? I did, yes, with the minor women's studies. Why psychology? Because it was short. I knew I wanted to go to law school and I was just like, okay, what's the shortest path out of here? It was like, honestly, the fewest credit hours to get through. And so that's kind of what I did. Yeah. And you had just mentioned that you always had a job. I read that you also had jobs the whole time when you were a kid, that you were always looking for the next thing and what the job was. Where did that come from? Literally, it came from, you'll talk to anybody whose parents don't give them money for school clothes.

4:59And that's just what that comes from. I didn't have parents with any money. So I was the oldest of six kids. I cared about what I was wearing. If I didn't want to wear literal hand-me-downs, I bought my own clothes my whole life. So it wasn't like, oh, look at this cute little entrepreneur. It was like trying to make money here and there, however you can make it happen. Okay. So you went to school with the goal of going to law school. Did you get in right away? What was the plan there? Yeah. The thing I didn't realize, there's a law school who will take you no matter what your grades are. My husband was going to medical school.

5:30It's not that way. He had straight A's. I can go to law school anywhere. And I didn't have straight A's. So I'm not going to Harvard. So I was like, OK, well, let's apply to all the medical schools and see where you can get into medical school. And then I'll find a law school around it that I can get into. If we go to LA or New York or DC, there's going to be 10 law schools in the area. And I'll just go to the best one I can. or the cheapest one that I can. And so he ended up going to school. We went to D.C. And there's like 20 law schools in the D.C. area, metro area. So I applied to a few of them.

6:02I got into a couple of them. And I went to the cheapest one, went to the University of Maryland. Love it. Talk to me about your time there. So you went in with one idea about what you were going to do. One of the parts that I love about college or any learning experience is you have the idea of something and then the reality of it often can be quite different, not in a bad way, just different. At what point did you start thinking, maybe this part is more interesting for me, or maybe I could see this being a thing for me? One of the things you do in law school, they have these law journals. And as part of the program, you can join the journal and be part of like an editor on the journal and you do research and things like that.

6:41And so I had an interest in joining the race, gender, religion, and class journal. Those issues were fascinating to me. and I thought maybe there could be something for me in that. This is like in 1999, 1998. In the olden days, when I was in college, we didn't have a computer before we went to grad school. Computers were in the college that we would use in a computer lab. And so I have vivid memories of myself. I would bring the things I was selling on eBay to the computer lab at school. Fashionphile is my user ID on eBay. My son now sells sneakers on eBay and Depop and all that. If you said to him, hey, Ike, I love your sneakers, he'll say, thanks, I got them on eBay.

7:21My goal was that if you said, hey, man, I love that bag, where'd you get it? I didn't want you to say I got it on eBay. I wanted to make it so obvious that came from me from Fashionphile that you would say I got it from Fashionphile. There was no social media in these early days, but I'd see notice on a discussion board or something that says I got this from Fashionphile. When I was only in eBay storage in 2006, I was like, yes, this is so cool. But it's hard to really pull out the whole last school experience because the founding of that whole thing for me was in school and I really fell in love with it.

7:51I graduated and I was making money and paid off my law school loans with what I was doing on eBay. And I had fallen in love with the building, the brand and the building, the business side of it. And so I took the bar knowing that I probably wasn't going to practice because I would have to abandon this thing that I was really loving doing. I didn't want people to think that I get a job because I couldn't pass the bar. So out of pure pride, I was like, I've got to pass the bar. So it was like, Oh, did she not, she not pass the bar? Is that why she was doing this weird thing? Anyway, I passed the bar and I just kept selling.

8:25So talk to me about some of those early things that you were selling on eBay as Fashionphile. What got you into it in the first place? And how are you doing enough to make enough money to pay off your law school? Well, I worked at the gap and I didn't like the hours and clocking in, clocking out and any jobs I had, I realized that I don't really like that. I can make as much money on my own doing something that I think is fun and creative or whatever. And so I'd find other things to do, not trying to, again, start a big like thing. When I was in college, I bought hair clippers and I cut hair in the boys dorms.

8:58I had four little brothers and we had no money. So my mom cut their hair and then I cut their hair. And so I go to the dorms. I never went to hair school, but I knew how to use clippers. and so I charged him like five bucks a head and met the cute boys and made some money and so did little things like that where I'm not making a bunch of money there but I'm making enough to like buy food and buy this and that and piece it together, whatever. In fact, before I started selling on eBay, my business partner now and I started a business called LawSwap.com when I was in law school. It's a legal book platform to sell your law books but what was cool is when I started selling on eBay, I had done so many things like that.

9:33I can just list so many little odd jobs that I just pieced together these little things that I'm making money with. My very first start on eBay, like everybody, I just started selling my own stuff and then realized that, whoa, whoa, whoa, the better the brand, the closer that you get to retail prices, the better the brand, then the better it sells. When it's not a brand or a bad brand, it sells for next to nothing or doesn't sell. How would you find product? Local consignment shops, off Nima Marcus last call, you know, off Saks off Fifth, you know, in those early days that, and then hilariously, I go to law school And my friends are like, okay, you are so weird.

10:06And like, why are you wasting your time with this? And by the way, can you sell this for me? That kind of thing. And then every single thing I shipped, I shipped with a little invoice thing that says, here's your item. Number one, on the front side, when you're done with it, sell it back to me. And on the other side, it's like, do you have anything else that you want to sell? And there's like a little list where you could write your item down. And then, and people would just send me stuff for years. Like literally you'd had this transaction with me. So it's like, yeah, sure. Here's like blah, blah, blah.

10:34and they'd fill out this little form. The ones I shipped out, I shipped on pink paper because I didn't have any technology. I'd only really know that, oh, this is someone who bought something for me because it was on the paper that was in the box that I'd shipped it to. So it's like little things like that are the way that I'm getting started in those early days. And it all felt so cool because it felt so different. You know, sometimes you have a lot of different fresh starts and second, sometimes third, fourth lives that you can really go, whoa, whoa, I found something good here. Because when it clicks, it clicks.

11:04Yeah. That's like clicking in all the ways because it's like super fun for me. I'm like, okay, I got to study for my final year, but I want to list more stuff. And my husband's kind of like, what is going on with you? And I was just loving it. And then, of course, I graduated from law school. I passed the bar and everybody's like, now you can get a real job. But I'm kind of in love with this other thing that I'm doing, which today it looks very sexy. And you come to our authentication centers, you go to our stores like, oh, this is so cool. but in 2001, it did not look that cool. It was in my bedroom when I like didn't get a job when I graduated from law school, you know what I mean?

11:43So at that point, you'd basically paid off your tuition. Paid off my loans and I was paying taxes and things like that. But I was like, is there a structure for the business that's better from a tax perspective than what I'm doing right now? Is there more I should be doing on that front to like protect myself or to get myself in a better position? I didn't have anybody to go to. There was a man that I knew that we'd gone to church with who owned like a cancer clinic. I just knew he was really successful. That's all I knew. I did not know him well. I literally go to him like, do you have like an accountant or like, I'm trying to figure out, I'm trying to explain to him.

12:15I've got this tiniest thing, but it's going pretty good. And I don't know. I'm just trying to figure it out. And he's like, yeah, actually my accountant is super entrepreneurial and you probably like talking to him, you know, and he gave me his information. So he sends me to this guy and I go to talk to him and I brought up my like basically Excel spreadsheet. And he looks at it. He's like, wow, this is pretty impressive. He's like, do you have a business plan? And I'm like, no, just, he's like, listen, read this book and then come back and talk to me. I'm gonna look at your numbers. You know, we'll get some stuff together.

12:43And so the book was called the entrepreneurial myth. It's like, I'm working so much in the business. I can't work on the business. The idea. And so it was really a light, like a aha moment for me. Cause I was spending so much time photographing and doing all this stuff and making it all happen that I couldn't really grow the business or work on it. because I was just in it doing all the packing and shipping and all those things. You know, I read that book. Basically the idea is that if you get people to help you in each part of the job that you don't have to do, I didn't have to ship that stuff.

13:11I didn't have to photograph it. Somebody else could do a better job than me. So get those people. And I'm so nervous to do that. I was like, if I hire someone, I've got to pay them. And then like, what if I'm not making any money? Like, I don't know. I was so nervous. When I read that book, I moved out of my house. I hired people. And then that's when the business really started growing. 2006, I partnered with my brother-in-law because again, there's parts of the business that I loved and there's parts that I've felt a little bit of imposter syndrome, so to speak, but I legitimately had lacked sophistication in some areas in the accounting side and finance side.

13:46Part of my brother-in-law who started UCLA business school in 2006, I'm like, there's something really incredible here. Nobody's doing this at all. Talk to me about what the juncture was of going from we're selling on eBay to we're actually going to start our own website. So back in 2006, in those early days, literally, I'm doing HTML to put up the first website. It's a one pager with like a phone number and the form on there. So simple. Just for folks to realize like it's pre WordPress days, like there's nothing out there. We had to build a website for that exact reason. Exactly. In fact, in the very, early days, that's what eBay was.

14:25And even on eBay, there's no input form like they have on eBay now. They would give you a box and there's no formatting. My listing would just be like a couple paragraphs of text and you couldn't put a photo in there unless you had basic HTML to code a photo in and there's no photo hosting. You have to host it somewhere else and then use HTML to pull the photo in and then you can create templates. It was so archaic. And so again, the first website, it's like the idea of doing anything off of eBay in an e-commerce where there weren't websites, like none of the brands that we know today had a website.

14:58And so the early days of even what it would look like, you'd have to hire a team. Nowadays, again, Shopify and so many other platforms like that, you really on your own can open up a store that It looks amazing. Also at that point too, as you were building the business, why would you take yourself out of the eco structure that is eBay? Because that's your customer acquisition tool. But eventually you did eight years into the business. What was the decision making? I mean, always I wanted to, because I was like, I don't want to give eBay 10%, number one. Like at the time that was what it was. So what we did is my brother graduated from college.

15:37And I'm like, hey, do you want a job? Like can help us to do this. And so he basically learned on the job and opened the website in 2007. So eBay now has like an authenticity guarantee, which obviously is a relatively newer development. How did you build your own authentication process and gain the trust at such an early wild, wild, less formative stage for eBay? There was not a single website that you could buy luxury accessories pre-owned on the internet. eBay did have the baked in the reviews, your ratings, your eBay rating score. There was no social media. There's no Facebook, no Instagram, no nothing.

16:14But eBay started doing what they called reviews and guides. And so I just was writing all these reviews and all of these guides. Like today, eBay does a very good job with authentication. But back in those days, it was like the vast majority was counterfeit. And so I was like, hey, listen, if you're not buying from me, there's a lot of counterfeits on this site. So here's what you need to look for. And I like would create these guides and side by side photos and all this and like bookmark this page. So you always can come back to it and, you know, check and reference. You can help to authenticate your own purchasing as you're doing this on eBay.

16:46And that was really great for me that eBay was really propping up those pages for me because they're like, well, this person's really helpful. And eBay didn't really have any tools for authentication. And so it was helping the algorithm. And then every one of those pages had links to my listings. But how did you know? How were you able to even write that guide? Because it doesn't sound like you grew up with authentic Chanel floating around. So how did you educate yourself? Number one, I started out with only Louis Vuitton, one brand, because I could learn it because I knew that I would get an item and I would go to the store and I would do a side by side.

17:20And so I was able to go in and have friendly conversations and take pictures. So I created my own guides. And as I'm creating those guides, I actually published them and was like, hey, this is what I'm learning and also good for you too. From day one, I'm like, we have 100 % lifetime guarantee. If there's any issue, you can return this item. And I was just racking up these positive ratings and just had this reputation. And so people trusted me. They trusted me because you could call me. You could email me. I'm responding right away. And I knew from the very beginning, I'm like, people are trusting me with this and I can't be wrong.

17:55And the truth is, is authentication, it's not rocket science. And especially in those days, 25 years ago, it was a lot worse. So thankfully, the counterfeiters kind of grew with me. It was a lot easier when I started many, many years ago. Now, counterfeiters are using crazy tools, and we have to also have crazy tools to combat theirs. So eight years into the business, you decide to leave eBay and start your own website, which is a big milestone. And we didn't leave eBay completely. We kind of just started selling things mirroring on both sites and really trying to market and pull people to the website.

18:33Oh, that's smart. The way that Google evolved over time, too, everything was SEO in those early days. It was search engine optimization. There was no Google ad platform or like Facebook ads. That's later in the game. And so you put up your website, it's like crickets. Everybody knows you're there. So over time, we were just doing everything we could to like teach people. They buy something on eBay and our communications with them is like, well, you might cheapen our website next time, bookmark this. And trying to grow it, you know, kind of organically that way, but there's no social media. There's no all these things today that you're using to drive people.

19:07Your website didn't exist in those early days. And so we just went slowly growing the website and shrinking eBay. And that's so interesting to have that parallel path because you're using one to build the other, which is a really smart business move. You were approached by an investor in 2007 who wanted to buy your company, but you ended up not taking outside investment at that moment and not for many, many, many to come. But what made you decide not to take outside investment at that stage? We had the chance to have lots of conversations over the years and we literally took every opportunity because we wanted to be able to speak to the business and to be able to have those conversations and speak the language.

19:51And so it's not like we said, oh, yeah, we're not interested. We actually said, let's talk. What do you have to offer us? Like we really went down that road. And the reality is we realized that what would we do with the money? Like we're going to give away a quarter of our business for like$400 ,000. and the money actually sounded like a big chunk to us at the time but we're like you know what number one we're trying to buy as much as we can at any given time what's a challenge in resale is like how do you get more authentic fill in the blank what you're looking for you know and the same is true today that if all of a sudden something happened and fashion ball like blew up in such a way that we got twice as many people wanting to sell to us right now it would create a

20:35If we got like five times the traffic, we couldn't offer a really great experience because it's a heavy lift, the whole process. We're buying this product. Every single item, there's so much manual treatment to it. We're authenticating each one of these items. We're photographing them and storing them. And every single item is getting a cleaning. And it's just a lot of labor. And$400 ,000 would buy us a lot of inventory. But we're like, we're growing 50 % a year at that time. And we're profitable. And so we're like, we can't really grow much faster than we're growing right now because we have to train some authenticators, train procurement people.

21:13And so we said, you know what? No, not now. Let's have that conversation down the road, maybe in a couple of years. And so we just kept on having that conversation. And then the next time we talked, we had the conversation. It's the same thing. Like, OK, well, we're kind of growing at the same trajectory, 50 % growth every year, and we're still profitable. And every time we're like, what is the money going to do for us? The problem is we can keep doing this all day long in a vacuum, keep growing and keeping profitable if there's no one else out there. But there are lots of people out there. And not only folks like the RealReal who will do all the work for you like we will, but also so many peer-to-peer players, the Poshmarks, and there's so many different platforms out there.

21:55And so we just said, wow, we're growing. But the truth is, is that people are becoming even less aware of us as more awareness is going to all of these other platforms. And at the end of the day, we need to play the game. People are playing a game and they're playing at a different scale. And we either need to decide we're going to be a lifestyle business that's going to stop growing as much or we need to play the game, you know, and what would we do with the money at that point? We realized to play the game, we need to hire some professionals on the C-suite who've been they've done that, who were running finance for Ralph Lauren, and now they're with us, or running ops at Best Buy, like seasoned professionals.

22:32At this time in 2018, when everybody that was on board, we'd kind of hired and was growing with us, you know? And so we're like, we need to start really upping the game. Again, let's get a team here together to help us to grow it. We're building some really cool tools, but like, that's actually very expensive to build this technology to help us to scale. Finally, nobody knows who we are. Let's get some awareness. And so let's do it. Let's raise some money. And so that's when we decided in 2018, like, let's do a formal process and like go out and see what we can do. The fact that you were hitting a hundred million in revenue when you decided to raise is so interesting and it's so smart.

23:10On a side note, I don't know if you follow Doan, that business, but they too just raised a series A after they had crossed that hundred million dollar mark. And it feels so counterintuitive, but it's also so smart in so many ways because it's like to get to that level and then take money, you're in a very different position than when you're making 10 million or 5 million or even 30 million. Like you have a lot more leverage and control because you've demonstrated a healthy, profitable business for years. It's so true. We've raised a lot of money now at this point, and Ben and I still have the majority.

23:48That's what happens when you get to that level. So I've got friends that raise a ton of money, You know, at the end of the day, private equity companies, everybody's taking the money out and they're making less than anybody. And they founded the company and they've raised tens to hundreds of millions of dollars. And you can have the tiniest portion of that. And I mean, that's really great if you've got a multi-billion dollar company and you get a smaller percent. If you have a trillion dollar company, great. But the reality is, is for most of us, we don't know where we're going to go. And the reality is, is that we've had to raise some money to get to the growth route right now, we still are able to kind of keep that majority and then keep that control because we've been doing this a long time of a lot of opinions about how to do it right.