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How ThredUp Plans to Spend $175 Million in New Funding

Resale website ThredUp has received a whopping $175 million infusion of funding, which the company has vowed to use to fund partnerships with brick-and-mortar retailers. The announcement comes after last week’s news that Macy’s and J.C. Penney will be working with the San Francisco-based e-commerce startup on programs meant to draw in younger shoppers.

ThredUp’s latest investment round, led by Park West Asset Management and Irving Investors, brings its total amount raised to $300 million. The company plans on using some of that cash to improve its own logistics and marketing, executives told Reuters. It will also open its sixth distribution center by the end of 2019 or the beginning of 2020.

The re-commerce company’s biggest goal, though, is to capitalize on an opportunity to drive sales to flagging retailers in need of fresh blood. Department stores have been grasping for relevance with a new generation of consumers that’s bolstered the explosion of online commerce, as well as trends like resale that are becoming increasingly prevalent and relevant.

ThredUp will work with the Macy’s and J.C. Penney franchises to energize their offerings through the addition of pre-owned clothing and accessories, and CEO James Reinhart told Reuters on Wednesday that “dozens of retailers” have expressed interest in implementing similar programs. ThredUp executives told Reuters that the company would be using a chunk of its newfound capital to implement the online and in-store infrastructures to support new lines of business at retail.

Analysts from Cowen & Co. said online resale is projected to grow up to 10-15 times faster than fast fashion players like H&M, department stores, and off-price chains, Reuters reported. Presently, the apparel resale market is worth $24 billion globally. Movement toward selling and buying secondhand clothing is a no-brainer, according to Reinhart.

“The conversation from our end is: ‘Look, you guys need a strategy, this is what young people are doing… and if you’re a retailer and you’re not ambitiously trying to figure out how to be a part of this, you’re going to wake up one day and wonder what the hell happened,’” he told Reuters on Wednesday.

Indeed, resale is proving to be more than just a passing fad. For millennial and Gen Z shoppers who seek to practice “conscious consumerism,” the practice of buying second-hand goods has come to represent an economical and sustainable choice.

Department stores, luxury retailers and fast-fashion franchises are all feeling the impact of resale’s rise.

The RealReal, an omnichannel enterprise that specializes in the buying and selling of secondhand luxury apparel and accessories, said its business is primarily pulling from fast-fashion favorites like Zara, long popular with young consumers. Data from the company’s Luxury Resale Report, released earlier this month, showed that about one third (32 percent) of consumer respondents said that they used the platform primarily as a replacement for shopping at those popular, mass-market outlets.

When it comes to the world of sneakers, the resale market has skyrocketed to previously unimaginable heights, and retail companies new and old are hoping to win big with investments and partnerships. Luxury fashion company LVMH attempted to capitalize on the phenomenon by investing in sneaker re-commerce site Stadium Goods in early 2018. (The company was bought by luxury marketplace Farfetch later that year.)

And in February, Foot Locker invested $100 million in GOAT, which features products from rare collaborations, exclusive drops and designs from across the world. Bergdorf Goodman just announced a partnership with GOAT that will bring a tightly curated selection of the resale player’s ultra-rare sneakers to an installation in its Fifth Ave. Goodman’s Men’s store ahead of fashion week.

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