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ThredUp IPO Shows Why Brands Need to ‘Own’ Resale

Last week’s $168 million ThredUp IPO illustrated once again that secondhand retail is thriving, with the fashion resale platform’s initial $14-per-share pricing reach more than $22 per share when the Nasdaq closed Tuesday.

According to the CEO of one company aiming to reimagine re-commerce for retail, don’t expect the pace of growth and interest in the resale space to slow down anytime soon.

Andy Ruben, CEO of Trove, a technology provider that helps brands and retailers like Nordstrom build out their own resale platforms, said that while retailers have an obvious need to approach resale for sustainability and circularity purposes, they now must jump into the field to be competitive with customer acquisition, loyalty and brand protection.

“If you’re not doing this in four to five years, you’re going to be rendered less competitive. You’re going to be at a huge disadvantage. It would be like looking at a brand today and saying, ‘Oh, they’ve just chosen not to do e-commerce,’” Ruben told Sourcing Journal.

Last year, a GlobalData study conducted in partnership with ThredUp projected the market growth for resale from 2019 to 2024 to reach a monstrous 414 percent, compared to a 4 percent decline across the rest of retail.

ThredUp’s ease of use has escalated its popularity in recent years, according to Ruben. The company’s “clean out kits” offer an easy way to help consumers get started with participating in the resale economy. Upon request, the ThredUp mails out a kit, which contains both the bag and a pre-paid label. After filling the bag with the items they are selling, consumers can simply drop the kit off at a FedEx or UPS location.

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When items sell, sellers earn a payout in the form of cash, ThredUp online credits, select partner retailer credits or a charitable donation receipt. But the back end is entirely processed by ThredUp’s distribution centers, taking the hassle of that process out of their hands.

ThredUp has done a really impressive job of making it easy to get items out of a consumer’s closet,”Ruben said. “They’ve proven that and built a very good business on it. The way that you get a bag and you fill it, and the bag immediately goes away. They’ve made it very easy to participate.”

The growth of businesses like ThredUp, TheRealReal, Poshmark and StockX among others has given used products a new lease on life and ushered in a new era of sustainability awareness. But given the overall demand (and growing supply) of used apparel, the opportunity to capitalize on secondhand sales doesn’t have to be tied to a larger marketplace.

Like ThredUp, Trove does all the back-end processing so the shopper doesn’t have to, enabling them to return clothing from REI, for example, to an REI store for a gift card. But he hopes that the company’s white label technology can encourage more brands enter the resale space and enable them to flourish, especially as they stand to benefit by taking ownership of their place in the red-hot secondhand fashion market.

“Brands aren’t going to let [resale] live outside the brand, they’re going to want to own it,” Ruben said. “That’s the shift that’s coming. Any brand that is worthwhile will want to own this market because this is a significant shift with how people shop.”

Trove has made headway in the space since rebranding over a year ago. The company already powered the resale programs of existing brands including PatagoniaREI, Eileen Fisher, Arc’teryx and Tailor Stitch, all of which saw between 200 percent and 500 percent growth over the past year, according to Ruben. The company launched its most recent partnership with Levi’s in October to operate the denim giant’s SecondHand buyback program.

But in the case of these programs, what’s most important is that the brand is the center of attention. For example, Levi’s SecondHand, Patagonia Worn Wear and Eileen Fisher Renew all have their own e-commerce sites without any mention of Trove’s role in their programs. On the other hand, while ThredUp partners with 21 retailers as part of its resale-as-a-service program, the ThredUp brand is a major selling point whether it’s the packaging or the logo and color scheme of the stores that it partners with.

Leveraging Trove, brands can pick and choose which of the platform’s capabilities fit their business model, so Patagonia still displays its Worn Wear merchandise on main line product detail pages, while REI can elect to ensure that only members can trade in used gear through the retailer.

“How could The RealReal or ThredUp ever do Levi’s as well as Levi’s? Levi’s used is still Levi’s, so if you’re going to exude the brand, you’ve got to be the brand,” Ruben said. “So Arc’teryx is always going to be different than Patagonia. The capabilities that we offer them are very similar, but they manifest it in the way that is unique to the brand. Arc’teryx and Patagonia both do supply chain, they both do logistics. But when it comes across to decisions they make, they’re very different brands and they mean different things to their customers.”

Data analysis will play a significant role in understanding how to set resale prices and even grade products that are traded in.

“We take those decisions that a brand will make and we manifest them across millions of decisions in the warehouse,” Ruben said. “We have essentially built ‘decision engines’ that allow the brand relationship to decide how used is going to work. We come back every week or month and say, ‘It looks like there’s an opportunity to price more aggressively here or less aggressively there in terms of your brand and your customer.”

In an era when apparel brands have been struggling, resale offers a significant customer acquisition opportunity. Sixty percent of customers who buy used from the Trove’s brand clients are new, according to Ruben.

“As long as you’re a premium brand, you’ve got customers who always wanted to be a part of your brand—always wanted to buy Patagonia but couldn’t afford it,” Ruben said. “Acquiring new customers to buy items back can be a great loyalty driver. What a great way to get them back in the store, right when everyone’s competing for traffic, You make decent margins equal or better to standard margins for your business, in a tremendous and growing revenue opportunity that’s the fastest growing sector in retail.”

However, the emphasis on “premium” should not be taken lightly.

“It’s going to be hard for brands that don’t have premium items,” Ruben said. “There’s going to be more headwinds for those brands that sell items that aren’t in demand after you sell them.”