In our early professional days in New York City, we had a limited budget which translated into an even more limited wardrobe. We recall the stress of trying to track down clothes that would be suitable (pun intended) for an incoming analyst at a fancy mid-town Manhattan finance firm without blowing through the next month’s rent. As our lives evolved and we developed more confidence in ourselves (and accepted our inherent lack of fashion sense), we have maintained a healthy respect for accessibility to high-quality clothing at affordable prices. Consequently, we are big fans of the rapidly evolving market for secondhand clothing, which we have been actively tracking (and increasingly participating in) for the past couple of years.
Despite being a $25 billion industry, the secondhand clothing market was highly fragmented and hyper-localized until fairly recently. While there is a thrill of going to a thrift store in a fancy zip code and finding a designer outfit some rich lady gave away, the reality is that most of these brick and mortar stores offer a limited variety at best and a very low overall return-on-time-invested.
Happily for consumers, over the past couple of years a host of companies such as thredUP, TheRealReal, and Poshmark have completely revolutionized the secondhand clothing market. Leveraging technology to source and resell clothing in a way that is almost identical to the “bought-it-new” experience, these sites offer a compelling value proposition: variety (thredUP sells 35,000 brands and adds 1,000 pieces of clothing to its site every hour; discounts (up to 90% off retail); ease of use (online shopping, easy returns, etc.) and eco-friendliness (by definition, secondhand clothes are recycled). James Reinhart, CEO of thredUP, (Chenmark’s go-to source for women’s and kid’s clothing), provides some insight into their process:
“thredUp leverages technology to do all the work that traditionally made secondhand unappealing to customers. We step in as the middleman between buyers and sellers to vet, price, photograph and sell every single item–and do this at a massive scale of up to 100,000 items per day. […] Every item is hand inspected, and only the quality garments make it online…thredUP’s proprietary automation processes, photographs, and lists items online more quickly than a human ever could. Our machine-learning algorithms know what to buy and for how much, based on seasonal trends and historical data, and we use these millions of data points to set prices up to 90% off retail.”
This strong value proposition has allowed the sector to gain momentum with growth numbers that would make traditional discount retailers blush. In 2017 for instance, 44 million women shopped secondhand, up from 9 million in 2016 and this year, leading resellers are expected to grow sales 49%. Part of this growth is driven by the fact that long-standing perceptions about secondhand clothing are changing rapidly. For instance, whereas historically this type of shopping was viewed as an undesirable economic necessity, thredUP notes that 13% of “active” secondhand shoppers (those who have spent over $10,000 on secondhand clothes in a two-year period) are millionaires.
For Chenmark, the rapid evolution of the secondhand market is not only good for our wardrobes and pocketbooks, it’s a compelling reminder that there is great value available for those who focus on what traditional investors may consider second-class markets. As Inc.com reported, when the thredUP team started their venture in 2009, they were rejected by 27 of 27 venture capitalists because “there is no phrase less sexy to an investor than ‘secondhand clothes.'” While we’d challenge them to pitch landscaping to traditional investors and see what happens, the lesson here is that there are many markets out there which can offer exceptional opportunities for those willing to put on their secondhand clothes and look beyond traditional stereotypes. All that matters is the confidence to say, we’re sexy and we know it.