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Resale Share Gains Threaten Off-Price, Match Department Store Losses

Resale continues to be on an upswing, as shoppers look for bargains, brand names and bigger thrills.

The 2018 edition of ThredUp’s Resale Report found that one in three women shopped secondhand last year for a total of 44 million shoppers in 2017. Further, this apparel channel is growing at 15 percent a year, while regular apparel retail has a growth rate of 2 percent annually.

According to ThredUp’s estimates, the resale apparel market will more than double, reaching $41 billion by 2022.

The company includes itself in the category of so-called “retail disruptors” like The RealReal and Poshmark, which are characterized by the curated assortment of quality brand names they sell. According to the report, these are the businesses that are fueling the entire category thanks to 49 percent year-on-year growth.

“The closet of the future is going to look very different from the closet of today,” stated James Reinhart, co-founder and CEO of ThredUp, adding the change is coming from all directions, including subscription services, rental models and direct to consumer. “There is a powerful transformation of the modern closet happening and I’m proud that resale is a key driver of this transformation.”

ThredUp found that 62 percent of consumers who’ve gotten on the thrifting bandwagon have done so because of the ever-changing product selection. And it noted 66 percent of thrifters shop secondhand in an effort to trade up to better brands. The report also found that once they start, these shoppers get hooked. In 2012, the company estimates that 11 percent of the clothes in a thrifter’s closet was used. By 2017, that increased to 24 percent, and by 2022, it is projected that up to 40 percent of the clothes these shoppers buy will be secondhand.

Looking ahead, ThredUp projects that resale will represent 11 percent of the apparel market by 2027, compared to the category’s 6 percent share in 2017. Mid-priced retailers are projected to continue to lose out, going from 26 percent market share in 2007 to an estimated 14 percent in nine years. Similarly, department stores are expected to drop from 23 percent in 2007 to 10 percent in 2027. Overall, the report said resale is growing 9 times faster than legacy retailers.

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The growth of this segment is affecting some retail channels more than others. For instance, 71 percent said they intend to shop resale more in the next five years while an equal number anticipate shopping department stores less. More than 40 percent of the survey respondents plan to shop Amazon in the same time frame, while 38 percent see an uptick in direct-to-consumer brands like Everlane and Asos. On the other hand, 49 percent intend to pull back on spending at value chains like Walmart and Target, and 25 percent anticipate skipping shopping trips at mall-based stores like Gap and Ann Taylor.

While department stores are set to lose the most shoppers, the report shows off-price is the biggest direct competitor to thrift shops. It found that just under 30 percent plan to shop off-price less, with 50 percent of ThredUp users already opting for the site over off-price stores. The report credits resale with offering the same treasure hunt that stores like TJ Maxx and Ross have built their brands on. ThredUp said resale offers “the same thrill, but better deals,” adding “shoppers spend less on resale, but get more overall retail value.” In 2022, the $41 billion spent on resale apparel will represent $135 billion in goods, according to the report authors. That’s compared to $74 billion spent in off-price, representing $123 billion in retail value.

For the frugal but fashion conscious, Thredup claims to have an edge. The site says consumers can buy 5.5 dresses for $100 on its platform versus 3.3 at Target, 1.5 at Nordstrom Rack and 0.2 at Net-a-Porter. In fact, the company said its users have saved $1.1 billion over the last five years. And for anyone still on the fence about thrifting, whether its clothes, electronics or furniture, the site estimates individuals could save as much as $2,420 a year by buying used.

From dollars to sense, the report says we would reduce waste and emissions by 73 percent if every garment got a second life. In just one year, according to the report, we would save 13 gallons of water, 350 billion kilowatts of electricity and 165 billion pounds of CO2.

As previous reports on the resale market have noted, those who thrift make their buying decisions based not only on what they like but also on what they think they could get for an item once they decide to sell it. ThredUp ranks Frye, Lululemon and Helmut Lang among the best bets for shoppers looking to flip a purchase because they’re in high demand and are high earners on the site. Contrast that with labels like Mango, Puma and Charlotte Russe, which don’t garner much interest or cash.

The company also tracks the top brands landing on ThredUp by state, revealing that Coach is tops in Florida, Rag & Bone leads in New York and Columbia is No. 1 in Oregon.