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ThredUp CEO on the Fashion Categories Where ‘Resale Really Wins’

Two of the top resale players in today’s apparel marketplace revealed more than just their own financial results—they’re giving insight into the pent-up demand shoppers have to get back to their social lives. Earlier this week, ThredUp previewed new data from its upcoming 2021 Resale Report, revealing that 80 percent of U.S. consumers plan to refresh their closets once the pandemic is in the rearview mirror.

In its first public earnings report since its March IPO, ThredUp showed strong revenue growth to $55.7 million, an increase of 15.2 percent year-over-year ahead of the $48.3 million during the year-ago period.

At Poshmark, in only its second public report after its January IPO, net revenue totaled $81 million in the first quarter, a 42 percent increase year-over-year from $57.1 million. Poshmark, which doesn’t hold inventory, significantly widened the gross merchandise value (GMV) traded on its platform to $441 million, an increase of 43 percent year-over-year from $309.3 million in the first quarter of 2020. Quarterly GMV has increased year-over-year for the past 12 quarters.

While ThredUp and Poshmark are showing their ability to scale as public companies, Lithuania-based secondhand fashion seller Vinted has raised 250 million euros ($302 million) in a Series F funding round, at a pre-money valuation of 3.5 billion euros ($4.2 billion).

Vinted has operations across 13 markets—France, Germany, Belgium, Spain, Italy, the Netherlands, Austria, Poland, Czech Republic, Lithuania, Luxembourg, U.K. and the U.S. The funding will be used to both strengthen its existing position across its core markets and bolster its status in new, lucrative markets, particularly the U.S. operation. The round is a massive step up for Vinted, which was valued at $1 billion after a $141 million investment in November 2019.

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The continued investments in these platforms reflect shoppers’ interest in rebooting their wardrobes after being cooped up for more than a year.

In predicting a “clean out frenzy,” ThredUp says that 46.4 percent of U.S. consumers plan to get rid of clothes that no longer fit, while 34.4 percent plan to buy items for events that were paused including work and travel. Another 31.1 percent of these shoppers plan to buy items to refresh their style.

Aligning with this “refresh,” ThredUp CEO and co-founder James Reinhart revealed in the earnings call that items like loungewear, sweats and leggings saw a 10 percent decline as a percentage of total sales since March. By contrast, the company also saw a strong performance in dresses across categories, with midi dresses up 20 percent jump and formal dresses improving 15 percent.

“We’re definitely seeing this rotation back to ‘going out’ clothing, and I think what’s good for us is those are the categories in which resale really wins, and, and those categories also tend to have higher price points so we feel like there’s two factors that should provide some tailwinds,” Reinhart said.

Poshmark shared similar instances of sharp increases in “going out” clothing. Top-performing secondhand categories by sales including crop tops, up 101 percent, an 86 percent increase in bikinis and sales of hats up 71 percent year over year.

“We’re optimistic that as consumers begin to leave their homes and engage in social activities once again, there will be demand for a different wardrobe from the stay-at-home outfits that prevailed in 2020,” Poshmark founder, chairman and CEO Manish Chandra said in an earnings call. “Pent-up demand for apparel could drive more frequent purchases in a wider range of apparel and accessory purchases, benefiting our marketplace.”

Despite the return to a wider array of social events, both companies will still faces challenges in turning a profit. Net losses amounted to $16.2 million for ThredUp the first quarter of 2021, versus a $13.2 million loss in the prior-year quarter. Adjusted EBITDA loss was $9.1 million for the quarter, compared to the adjusted loss of $10.4 million a year ago.

Poshmark saw $20.7 million in net losses in the quarter, almost doubling the $11.2 million loss in the first quarter of 2020. However, adjusted EBITDA did swing positive to $4.2 million, ahead of a loss of $8.7 million a year ago.

For ThredUp, Reinhart said that the company has processed over 100 million items to date, “but to be honest, we aren’t thinking about the next 100 million items, we’re thinking about the next billion items.”

There are currently no restrictions on customers sending in Clean Out Kits, according to chief financial officer Sean Sobers.

“We are fully open for business which feels great, given how much we had to deliberately scale back processing last year during the height of the pandemic,” Sobers said. “In our distribution centers, we are well positioned to process and manage many millions of unique items per year at improving unit economics.”

ThredUp’s newest distribution center in Georgia is less than a year old and “continues to exceed expectations,” Sobers said. This distribution center is the company’s largest facility with capacity expected to grow from 5.5 million to 6.5 million items by the end of 2021.

Reinhart indicated that ThredUp is currently planning its next distribution center in an undisclosed location, and expects it to come online in mid-2022.

The company’s first earnings release came one day after the announcement that it was providing “resale-as-a-service” for Vera Bradley, in which the handbag and accessories retailer will offer ThredUp Clean Out Kits to their customers online and in-store. Vera Bradley joins Gap, Madewell, Abercrombie & Fitch and many others in offering the ThredUp service.

And on the Poshmark side, while the company doesn’t house any distribution centers, Chandra believes the peer-to-peer social selling marketplace has an advantage in today’s tough retail environment, which has been mired by exorbitant freight costs and international shipping delays.

“Because our community of millions of sellers are constantly adding new products to the marketplace, our model is incredibly responsive to demand and we are generally not impacted by supply chain disruptions,” Chandra said. “Our asset-light model holds no inventory leading to consistent high gross margins, resulting in a scalable and profitable business.”

The Poshmark app.
The Poshmark app. Poshmark

Chandra said that Poshmark users spend an average 27 minutes a day on the app.

Total active buyers at Poshmark reached 6.7 million in the first quarter of 2021, an 18 percent increase from 5.7 million in the year-ago period. Active buyers are unique users who have made one purchase on the Poshmark platform in the past 12 months.

At ThredUp, total active buyers totaled 1.29 million, increasing 14 percent from the 1.13 million in the year-ago period. A ThredUp active buyer is a buyer that has made at least one purchase in the last 12 months.

Repeat buyers represent approximately 80 percent of the company’s sales, Sobers said. In the quarter, total orders were 1.13 million, an 18 percent jump over 956,000 in the first quarter of 2020.

Gross margin at ThredUp expanded to 71.3 percent from 67.5 percent in the comparable quarter last year. The main drivers of gross margin improvement reflected operating scale on the company’s distribution centers, and the improved use of data to drive superior unit economics.

For Poshmark, adjusted gross margin, which is net revenue minus the cost of net revenue, improved to 1.2 percentage points year over year to 83.9 percent of revenues in the current period. This came in ahead of Poshmark’s initial expectations, benefiting from lower-transaction processing costs and leveraging app hosting costs.

For the second quarter, ThredUp expects revenue in the range of $53 million to $55 million, with gross margin in the range of 70 percent to 72 percent. The company anticipates an adjusted EBITDA margin loss in the range of 28 percent to 23 percent.

For fiscal year 2021, the “resale as a service” provider expects revenue in the range of $223 million to $229 million, well ahead of the $186 million generated in 2020. Like the second quarter, ThredUp sees gross margin falling in the range of 70 percent to 72 percent, while it expects adjusted EBITDA margin loss in the range of 20 percent to 16 percent.

Poshmark was far less revealing on the guidance front, giving an expected second-quarter revenue range of $79 million to $81 million, ahead of the $66.9 million generated in the year-ago quarter. The company also gave an adjusted EBITDA range of $1.5 million to $2.5 million. Poshmark is not revealing full-year guidance.