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ThredUp and Rebag on Fashion’s New Resale Reality

Rebag CEO Charles and ThredUp chief James Reinhart have very similar things to say about why resale is not just having a moment, but taking the fashion world by storm.

Not to mention those millennials and Gen Zers again, but younger generations, the two founders agree, are starting to “make secondhand their first choice,” Gorra said, while Reinhart insists his company “inspires a new generation of consumers to think secondhand first.”

While retailers of all stripes are struggling to make sense of under-40 consumers who are as young as tweens and teens, these shoppers are already making their values known to the tune of new business models like resale and rentals that threaten to upend the apparel apple cart.

In fact, Reinhart still marvels at just how far the resale movement has come in a decade.

“Never in my wildest dreams would I have imagined 10 years ago when I started ThredUp that 20 percent of the sessions today in a conference talking about the future of retail would be about resale,” he said at the WWD Retail 2030 in New York City on Wednesday.

The early 2019 boost from decluttering diva Marie Kondo’s Netflix showing certainly drove some business ThredUp’s way but Reinhart believes that extra interest will fade. “I don’t know about you but going through my house every year and asking ‘does it spark joy?’ is hard,” he said. “What’s easier is putting a bunch of stuff in a bag and putting it on my doorstep.”

That laser focus on “easy” is at the heart of the ThredUp, which was built on the acknowledgement that there’d been little “innovation in secondhand since eBay” arrived in the mid-1990s. Digitally native ThredUp standardizes the resale process for products “from Gap to Gucci,” encouraging people to earn a little money by sending in their good-condition (or even new-with-tags) unwanted clothing in one of the company’s cheery green polka-dotted Cleanout Kit bags. For a small fee, ThredUp can ship back any items it deems unsellable or customers can opt for the company to donate those items in exchange for a tax receipt.

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ThredUp wants to make the experience of browsing women’s shoes, shirts, slacks and more on its website “indistinguishable” from shopping first-run goods at a traditional retailer. The company sells 35,000 brands in 100 product categories, processes 100,000 unique SKUs each day and is on track to clinch its 100 millionth SKU this year, Reinhart noted.

“We’ve built the data set and the data layer for how resale works on the internet,” he added.

What’s more, ThredUp’s built the physical infrastructure, too. Not only does it “run the largest garment-on-hanger facilities in the world,” but the company has a new distribution center in the works that will be double the size of existing facilities, said Reinhart. Those additional plants should help ThredUp meet its 2025 goal of processing $50 billion worth of merchandise—up from $5 billion today—en route to $150 billion by 2030.

Yakaranday Arce packs sold clothing for shipment at the ThredUp sorting facility in Phoenix. Charitable organizations like Goodwill have cited how Marie Kondo’s popular Netflix series, “Tidying up with Marie Kondo” has led to a surge of donations. And sites like OfferUp and thredUP also note an uptick in the number of items being sent to them for sale. Matt York/AP/Shutterstock

It takes a lot of technological prowess—including robust pricing and markdown tools—to facilitate the online resale business at scale, though Reinhart admits that figuring out the tech isn’t always smooth sailing. “Turns out machine learning and visual search technology is harder than I expected it to be,” he said the innovations that are useful in discerning the differences between similar-looking garments. How effective those technologies are right now largely depends on the product category and the item’s uniqueness, he continued, while the goal is to ensure more product can be processed using these automated approaches.

“I think it will be a larger part of our business over time,” Reinhart said.

While ThredUp’s business continues to chug along at a rapid clip, Reinhart knows that brand and retailer partnerships will play a growing and important role in the resale ecosystem. New data commissioned by the company shows that 87 percent of retail executives are interested in at least exploring the resale opportunity by 2020, motivated chiefly by the promise of new revenue streams, ThredUp found. But they also know they need to become sustainable in some way to satisfy young, conscious consumers. Retail leaders intrigued by resale also believe it’ll foster loyalty among existing customers and attract new ones, Reinhart noted, while some see the secondhand market partnerships as a way to grow footfall to their stores or visitors to their websites.

ThredUp’s already proven that its department store pop-ups benefit everyone involved. When the company first pulled the data, it found that pop-up visitors spent 21 percent more than others and returned 70 percent more frequently, driven by the promise of newness and discovery, Reinhart explained. Over time, the data got even better: Now pop-up visitors are spending twice as much money and visiting twice as often because of the freshness, the value and the selection of brands, he continued.

Millennial-favorite and sustainability sweetheart Reformation forged its own circular fashion economy partnership with ThredUp, shipping the secondhand firm’s bags inside customer orders. Customers who want to participate in the new Upcycle program send ThredUp any unwanted items and receive a larger slice of the typical payout. ThredUp also gave sellers the option to be paid in Reformation credit.

“Yael calls me a couple weeks ago and says, ‘this has been amazing. We want to put a ThredUp bag in every order from now on forever,’” he explained, referencing Reformation’s founder and chief executive.

Brands should take a cue from this partnership, he continued, as they explore ways resale can work for them.

The breadth of products available on ThredUp are geared toward women, juniors and children—but not men, whose spending on apparel has been trending upward. “This irony is not lost on me,” Reinhart said when asked why ThredUp doesn’t currently cater to male shoppers when that’s the thrift-shop problem that spurred his company’s creation. Beyond the logistical complexity of having to build an entirely different supply chain to shoot garment forms for male consumers, he continued, the men’s market is dramatically smaller than women’s—male shoppers account for less than 10 percent of fashion spending. “That’s why I think we won’t do it anytime soon,” he admitted.

Rebag luxury resale secondhand
Rebag’s World Trade Center store features the startup’s signature rainbow wall of pricey, high-value handbags. Rebag

Rebag’s Gorra believes sustainability is just one factor—even if it’s a big one—driving the emerging resale economy. “Everyone’s trying to be efficient with their dollars,” he said of the value-shopping mindset that remains firmly entrenched in the wake of the Great Recession. But just look at Lyft’s newly completed IPO and the rise of Rent the Runway and its wildly successful subscription model and the consumer’s new love affair with asset-less and asset-light living clearly comes into focus.

“People want to be smart with what they own,” Gorra explained. “The infinite ownership cycle is being broken down into pieces.”

Four-and-a-half-year-old Rebag operates three stores in its hometown of New York City in addition to a pair of outposts in L.A.—and plans to open 30 more in the coming three or four years, according to Gorra. “Moving from a digital construct to a full retail construct” requires Rebag to be “very financially disciplined,” he continued, but stores make complete sense for a business whose model has attracted $50 million in venture capital funding to date.

Not only do the luxury products that Rebag inventories command high ticket prices in stores where shoppers can verify quality and condition for themselves, but these locations also function as product intake centers for people looking to sell their Hermes and Chanel heirlooms with the promise of “immediate liquidity.” When someone purchases one of the several dozen items on the half-million-dollar “Birkin wall,” Gorra explained, “we can pay the outrageous rent that people want.”

The company’s Rebag Infinity program is designed to foster loyalty and stickiness, guaranteeing that people who resell a Rebag purchase back to the company within six months can receive 70 percent of their original purchase price, provided that the item is in very similar condition. Gorra said the program gives customers confidence in their purchase and assures that they can recoup a significant amount of their original investment.

“I think that’s going to pretty dramatically change how the luxury ecosystem works,” Gorra noted.

Fashion took notice when ThredUp’s latest annual resale report documented the market’s continuing outsize growth relative to apparel retail overall as well as projections that it’ll be 1.5 times larger than the fast-fashion segment by 2028.

“People are not going to stop buying new stuff but the rate at which they’re getting rid of stuff and looking for new ways to change up their looks is accelerating,” Reinhart observed.

“This isn’t a trend, this isn’t something that’s going to go away. This is a structural shift in consumption and I think we all need to figure out how to work on it together,” he said.