How the Secondhand Clothing Industry Is Getting a Major Makeover (and Tapping $220 Billion of Retail Value)
ThredUP’s new approach is helping thrift grow 20 times faster than retail.
PHOTO CREDIT: Getty Images
If you were to want some nice, secondhand clothes and accessories even a decade ago, your best bet would have been to go to a thrift store and simply try your luck with what you could see on the racks. Not so in today's age of big data, mobile and artificial intelligence. Like many other industries, thrift is getting reborn thanks to technology, with companies like thredUP leading the charge to make thrift digital.
How tech is rewriting the thrift story
Customers have been able to buy a host of used items from sites like eBay and Craigslist for years, and you now have the option of working through social media, too, such as with Facebook Marketplace. But as thredUP's CEO and co-founder, James Reinhart, explains, thredUP has been able to use technology to establish a clothing-based platform and distribution system that's hard to differentiate from a buy-it-new experience.
"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."
To shop thredUP, you simply browse and search for items on the company's site, just like you would at Amazon or the sites for other major retailers or brands. Personalization algorithms even make recommendations for you based on data purchase history. You pay with payout credit or your credit card, like you're also used to, and then your order gets packaged and shipped to you, hassle free. What's more, there's always something new. Around 1,000 items get added to the site every hour, and the company accepts over 35,000 brands, including evergreens and luxuries like J. Crew, Lululemon, Kate Spade and Michael Kors.
And like Amazon, thredUP is finding a balance between online and brick-and-mortar for a more omnichannel experience. They've opened three Smart Thrift Stores this year alone. You can scan each item in the stores to find up to thousands of similar SKUs.
Donating is as easy as buying
"In the past, people had to lug bags of clothes to their local thrift store, where it would be subjectively evaluated. Now, it's as easy as ordering a thredUP Clean Out Kit, and sending it in via prepaid shipping label.
"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."
A diverse and varied customer base
Reinhart asserts that millennials are among the company's biggest buyers and donators. This makes a lot of sense--not only are millennials tech-savvy and comfortable working online, but they're also keen on eco-friendly ways of living. Additionally, despite stereotypes, they're quite concerned with making their money go further, as they face a tougher job market and higher debt.
But people over age 65 are big customers, too. These individuals likely appreciate that thredUP offers a relatively inexpensive way to maintain a good wardrobe even as income slims during retirement. They also often clear out closets and downsize as they start to enjoy their golden years.
And guess what. Even millionaires use thredUP. In fact, Reinhart asserts that up to 10 percent of the company's most active customers fit this socioeconomic bracket. But this isn't all that hard to explain, either--successful individuals don't get that way through waste. And as more and more CEOs and entrepreneurs lead businesses based on a sharing economy, the concept of secondhand is hardly a turnoff.
Achieving into the future
ThredUP's approach has caught the eye of major backers, including the likes of Golman Sachs, Highland Capital and Trinity Ventures. The company also has hit some impressive milestones:
- 1,000 employees across San Francisco headquarters
- 4 distribution centers
- New York City press office
- Expanding shipping to 44 countries
- On track to sell 10 million items in 2017
And like any good company, thredUP continues to evolve. Reinhart notes that each consumer tosses between 60 and 70 pounds of clothes every single year, and that there's about $220 billion of retail value sitting in consumer's closets, 70 percent of which is unworn. To keep combatting this waste, the business recently launched Goody Boxes, which lets customers try around 15 clothing items before they buy. This initiative likely will help customers see even less risk in using the site.
Shoppers still patronize more traditional competitors like Goodwill Industries and the Salvation Army in big numbers. Those businesses get significant support not only for their thrift focus, but also for their community work. But thanks to companies like thredUP that effectively use technology to cater to multiple audiences, thrift is enjoying a massive rejuvenation. To quantify, thrift is projected to be a $33 billion industry by 2021 and is growing 20 times faster than retail.
The biggest lesson? You don't necessarily have to work with something new to innovate. Sometimes, the biggest innovation is putting a modern spin on handling what you've already got.