You've probably heard the saying, "One man's trash is another man's treasure." But this phrase holds profound significance in the lives of lifelong thrifters who perpetually live by these words.
Many people, responded to the stresses of the pandemic by decluttering their homes. As pandemic housekeeping became a thing, Americans acquired more than just additional closet space.
"The pandemic forced people to look at their stuff, they were overwhelmed by their stuff, and they took the opportunity to cleanse,”...We saw this from young families to seniors who had been putting it off for years,” according to an October 2021 report by The New York Times.
And in return thrifters got their treasure trove.
But this fashion stockpile was not merely retail therapy it was also adding up to the fortunes of second-hand retail companies like ThreadUp (TDUP).
Supply Chain Creates a Market for Second-Hand Clothing
Over the last two years, U.S. retailers have grappled with supply chain shortages unleashed by the coronavirus pandemic, apparel had among the highest online out-of-stock levels last year, and that's given second-hand clothing companies a leg up with an unintended supply advantage.
Online thrift store ThredUp, which went public in March 2021, has seen annual revenue increase 35% to $251.8 million from $186 million at the end of its first year as a public company. For the full year, net loss widened to $63.2 million from $47.9 million in 2020.
The company clocked record orders of 5.3 million for the full year 2021 compared to 4 million in 2020.
The online consignment store sells second-hand products from Walmart (WMT),, J. Crew, Ann Taylor LOFT, Banana Republic, BCBGMAXAZRIA, Lululemon (LULU), Athletica, Talbots, Free People, Lilly Pulitzer, and Madewell. It also sells shoes and handbags.
ThredUp, founded in 2009, has recently added resale and clean out kit programs with brands including Adidas (ADDDF) , Crocs (CROX), and Michael Stars, giving it more scale.
"As more brands join our platform, we gain access to a greater share of closet cleanup happening across America," said Chief Executive James Reinhart during ThredUp's fourth quarter earnings call.
The company has a total of 28 brands in its resale kit. Brands that had been holding back from joining the booming secondhand market in the U.S. have realized they were missing out on an untapped revenue stream.
Investment firm Jefferies expects ThredUp to add meaningfully to this lineup over next few years.
"This supply that comes in from our varied RaaS [Resale-as-a-Service] clients can then be sorted and used to power the growth of branded resale shops of other clients, which is to say the more RaaS clients, the wider the sources of supply and the larger the potential growth of each client's resale shop," he added.
Thredup Has No Inventory, So It's a Less-Risky Business
Jefferies analyst Ashley Helgans pointed out that ThredUp's managed marketplace lets Americans get a bang for their buck from selling low-cost items they do not need and gives thrifters or garage shoppers access to quality secondhand goods that cost $17 on average.
"Sellers order a Clean Out Kit, fill it, and return it with a prepaid label; they then receive credit, cash, or donation receipt. ThredUp utilizes single-SKU [stock keeping unit] technology, coupled with patented systems, to process sellers Clean Out Bags. Millions of daily data points are leveraged to drive pricing optimization, seller payouts, item acceptance, sell-through, etc. Its tech and automation capabilities make it economically feasible to sell secondhand items with an average of 90% off retail price -- typically about $17," Helgans wrote in a note.
"Of course, the not so secret, but I think often misunderstood economic engine that underlies our model is that most of our clothing is listed on consignment. This means we have little inventory risk and we boasted negative working capital cycle measured in months, not weeks," said Reinhart during the company's latest earnings call.
ThredUp's data-driven, managed marketplace that connects buyers and sellers has proven to be a valuable asset for the company based in Oakland, California, in growing the number of customers and orders placed.
"Importantly, the success of our marketplace is built on the foundation of the proprietary resale data that we've selected over the past decade. We ingest millions of data points on the items we process, sell and reject, the items that are added or removed from carts and so forth," Reinhard explained.
The secondhand clothing market is heating up in America and could more than double in size to $76.4 billion by 2025, Reuters reported.
Future Plans for ThredUp
ThredUp is also planning to expand to Europe as the emerging European resale market is set to explode and is estimated to be worth $39 billion by 2025.
ThredUp acquired European thrift site Remix in July last year and is building a new larger processing facility in Sofia, Bulgaria as part of its plans to grow in the region. Remix currently operates in nine central and eastern European countries.
Separately, ThredUp's upcoming Dallas, Texas facility will have network capacity to hold up to 16.5 million unique items in the U.S. alone, the company said.
At nearly 600,000 square feet, it will be ThredUp's largest and most automated distribution center. When fully scaled, the company expects its four-level facility will increase its total network live capacity by more than three times.
The company opened two processing centers, one in Grapevine, Texas and one in Lebanon, Tennessee.
