Summary List Placement
ThredUp is the latest resale platform to go public.
The resale marketplace raised $168 million in an initial public offering on Thursday, pricing its 12 million shares at $14 per share, joining the ranks of other reselling platforms that have gone public in the last few years. It was up by as much as 26% in early trading, indicating investor appetite remains strong for resale.
According to research from ThredUp, the resale sector is projected to grow from $28 billion to $64 billion by 2025, despite current headwinds faced across the entire retail industry.
“All the big trends are in our favor,” ThredUp CEO and cofounder James Reinhart said in a Friday morning interview with Insider. According to a filing with the Securities and Exchange Commission, ThredUp’s revenue was $186 million in 2020, up 14% over 2019.
ThredUp is one of multiple resale platforms that saw an uptick in site engagement and sellers during the pandemic. In June, Reinhart said a wave of “conscious” shopping among consumers was making value a major priority.
Resale on the rise
Other resale platforms, like Poshmark, have seen similar success. In Poshmark’s IPO in January, the peer-to-peer marketplace platform sold 6.6 million shares for $42 apiece, raising a total of $277 million. San Francisco-based online luxury consignment retailer The RealReal became the first resale company to go public in June of 2019, raising $300 million.
“We actually think it creates real advantage,” Reinhart said, comparing ThredUp’s model to Amazon and Poshmark’s model to eBay. “I think Amazon has really shown that if you do the hard things on behalf of the customer, whether it’s the supply chain or the logistics or the selection, you can really create an enormously delightful customer experience.”
However, according to managing intelligence analyst for CB Insights Thomas Sineau, ThredUp’s model requires more capital in order to scale. It also keeps the platform dependent on users for inventory.
“Poshmark doesn’t have to commit capital to buy goods, that’s definitely one of the pros” compared to ThredUp, Sineau said. However, he added that while ThredUp avoids Poshmark’s community-based interactive model, the middleman model makes the platform feel like more of its own brand, which could be helpful in terms of expanding to physical stores and establishing brand identity, Sineau said.
How ThredUp will grow
Much of ThredUp’s continued growth depends on its solid customer acquisition and retention strategy. As of December 31, 2020, the company had 1.24 million active buyers and 428,000 active sellers, but the platform said it needs to expand its customer base beyond people who would typically purchase secondhand.
“What really drives our business over time is supply,” Reinhart said, noting how ThredUp grew its customer base 24% in 2020. “As we add more supply, that really attracts buyers. And so it’s about moving those things together in the ecosystem.”
ThredUp’s RaaS (resale as a service) offering, which powers resale businesses for 21 brands and retailers including Walmart, Reformation, and Madewell, is also an advantage for the company, as more brands opt to go all-in on resale.
“Every brand that makes quality products will have its own resale program in the future, the same way brands have started owning their own e-commerce channels today,” said Andy Ruben, the CEO and founder of resale technology company Trove, which powers resale for brands such as Patagonia, Levi’s, and REI. “Offering RaaS is a smart business advantage for ThredUp in the marketplace, but brands will need to figure out what’s right for them over the long term.”
ThredUp is seeing positive numbers online in terms of traffic. According to web traffic data from SimilarWeb, ThredUp was the second-largest resale platform in terms of average monthly traffic in 2020, trailing only behind Poshmark. ThredUp grew online traffic by 25% in 2020 compared to the previous year, totaling about 7.9 million site visits a month.
According to SimilarWeb’s lead retail industry consultant Caroline Kim, most of ThredUp’s web visits were organic, which points to a high level of brand awareness among consumers.
“It also ensures that ThredUp can keep their visitors on-site without worrying about their competitors,” Kim said.
Now that the company has gone public, Reinhart expects ThredUp to continue to grow.
“I think it’s going to be an exciting time for ThredUp,” Reinhart said. “2021 should be a whole lot better than 2020.”