Amid rumblings that it’s planning to go public, Fabletics is partnering with ThredUp to extend the life of its popular, Kate Hudson-approved activewear and any other fashion its consumers want to turn in.
For ThredUp, the announcement marks the latest in a flurry of new brand partnerships, including Vera Bradley, Farfetch and LG Electronics, and an expanded relationship with existing partner, Madewell.
The news comes as ThredUp finally launched its public offering of 6,424,369 shares of its Class A common stock. The offering includes 2 million shares to be issued and sold by ThredUp and 4,424,369 shares to be sold by the company’s existing stockholders. The fashion resale giant noted that the selling stockholders are expected to give underwriters a 30-day option to buy up to 963,655 additional shares of Class A common stock. According to Refinitiv data Tuesday morning, ThredUp’s stock price had slumped 12.77 percent following its Monday-afternoon debut.
On Fabletics’ end, the ThredUp partnership heralds its entry into the resale ecosystem, giving consumers with a more sustainable way to refresh their closets and extend the life of clothes.
The athleisure brand sees the growing secondhand apparel market’s potential in the U.S., in which 33 million shoppers bought secondhand apparel for the first time in 2020, according to ThredUp’s annual resale report. Over the next five years, resale in the U.S. is set to double from its current $36 billion value all the way up to $77 billion.
“Fabletics’ move into resale is part of a broader strategy to become more environmentally conscious. As a global fashion brand, we do our best to give back to our communities and our precious planet, but we know we must do more to lighten our footprint and stimulate more eco-consciousness,” Fabletics CEO Adam Goldenberg said in a statement. “This deal with ThredUp is a win-win for us and a good step into circularity—our customers now have a hassle-free way to give their unwanted clothing a second life, while gaining perks to refresh their closets, and we at Fabletics are excited to play a more meaningful role in creating a more sustainability-conscious fashion industry.”
Fabletics will offer ThredUp “clean out kits” to online and in-store customers who then fill up these packages with apparel, shoes, and accessories from any brand and ship them to ThredUp for free. ThredUp said that returning just one clothing item back into the circular economy extends its life by an average of 2.2 years and reduces its carbon, waste and water footprints by 82 percent, according to a study it conducted with supply chain sustainability analysis platform Green Story.
ThredUp pays the seller in the form of Fabletics credits for salable items that meet quality standards, Credits are automatically added to the seller’s Fabletics account and can be redeemed online or in-store for up to 12 months. Fabletics VIP members, which now total more than 2 million, also receive 50 VIP reward points. In addition, ThredUp sellers can turn earned ThredUp credit into Fabletics credit, with a value that is 15 percent higher than the cash payment option.
This deal is part of a broader sustainability push from Fabletics with the goal of reducing its fashion footprint. Last year, Fabletics established carbon neutrality at all of its stores, replaced plastic shipping bags with versions made of recycled material and launched an eco-conscious capsule for Earth Day made entirely from recycled or upcycled materials.
“We believe by helping brands like Fabletics enter the resale ecosystem that we can widen that reach, keep even more clothes in circulation, and further our mission to inspire a new generation of consumers to think secondhand first,” said Pooja Sethi, senior vice president and general manager of RaaS, ThredUp.
Meanwhile, ThredUp is kicking its international expansion plans into high gear by taking the acquisition route. The online resale platform is acquiring Bulgaria-based Remix Global AD, a fashion resale company operating in nine markets across Central and Eastern Europe, for $28.5 million.
Analytics firm GlobalData estimates that the European resale market was valued at $21 billion in 2020 and is expected to reach $39 billion by 2025 and $59 billion by 2030. This data highlights why ThredUp would be incentivized to immediately jump in with an existing resale player that has already established a customer base.
The Remix acquisition means ThredUp can extend its “resale-as-a-service” (RaaS) platform beyond the U.S. for the first time, enabling brands and retailers to deliver customized resale experiences to their customers in Europe. ThredUp’s European website positions the new acquisition as the centerpiece of the fashion resale company’s strategy on the continent, indicating that the Remix platform could continue to expand across new markets in the region.
Remix currently operates in Austria, Bulgaria, the Czech Republic, Germany, Greece, Hungary, Poland, Romania and Slovenia. The company has built a custom “single-SKU” logistics platform that can process millions of unique garments, with ThredUp comparing it to its own proprietary operating platform.
With this acquisition, ThredUp adds a complementary operational infrastructure and an experienced management team to springboard its expansion into Europe. ThredUp says it plans to invest in Remix’s product offerings, processing infrastructure and go-to-market strategy to accelerate its marketplace growth.
Remix generated $33.9 million in revenue in 2020, and ThredUp expects the acquisition to be accretive to its total revenue, dilutive to its gross margin and modestly accretive to its adjusted EBITDA in “the near term.”
Remix will operate as an independent business unit under the ThredUp umbrella, led by CEO Lyubomir Klenov. Klenov will lead ThredUp’s European expansion efforts as it continues to build out its presence across other key markets.
“Lyubomir and his team have built a strong, lean, customer-first business and they know how to deliver resale operationally across multiple markets in Europe,” said James Reinhart, co-founder and CEO at ThredUp in a statement. “We’re bullish about the massive opportunity in the European resale market and are thrilled about the chance to build on Remix’s technology and operational expertise to help accelerate its growth.”
Upon the acquisition’s closing, which is expected to take place in the fourth quarter of 2021, ThredUp will also grant the Remix management team $6.5 million in restricted stock units to vest over four years.
“We’ve long admired ThredUp’s leadership in the U.S. and their dedication to building a mission-driven company that makes it easy to buy and sell secondhand,” said Remix’s Klenov in a statement. “Together, I believe we can build upon Remix’s core operational engine, technology, and logistics to bring that scalable experience to the European market, where resale has only scratched the surface.”
In total, ThredUp says it has processed more than 125 million unique secondhand items from 35,000 brands across 100 categories since the RaaS launch in 2018.
Additional reporting by Jessica Binns.