ThredUp’s Unique Approach to the Resale Market
ThredUp (NASDAQ:TDUP) may be the most disruptive company in the resale sector thanks to its resale-as-a-service business. This entails operating the clothing resale component for large clothing brands like H&M and Madewell.
In this episode of Upgrade or Topgrade recorded on Nov. 12, Millionacres editor Deidre Woollard and Fool contributors Jeremy Bowman and Nicholas Rossolillo discuss how ThredUp is differentiating itself in a unique corner of the apparel market.
Image source: Getty Images.
Deidre Woollard: Let’s talk about ThredUp. I started this hour with the idea that I wanted to go into the RealReal, and then when I started studying ThredUp, the more I started looking at this company, the more excited I got about it because they’re doing something that I think is so smart, which is this resale as a service thing. They had some pretty strong revenue numbers. Now, they’re relatively new to the market. They’re currently still hovering around their IPO price, but year-to-date, they’re up about 25 percent. But their numbers are going up dramatically. They’re still pretty small. Total revenue was $63.3 million, up 35 percent year-over-year. Gross profit was $46 million, up 41 percent year-over-year. Net loss of 14.7 million, active buyers of 1.4 million. That’s where you see the difference in the prices and how it all shakes out because with The RealReal, you have fewer buyers and sellers, but you have much bigger high ticket items. ThredUp is definitely not that.
Jeremy Bowman: I think I saw that 71 percent of their sales are for items or $20 or less, which makes me think that it’s probably hard for them to make money on some of them.
Deidre Woollard: Yeah, I think that’s one of the things that if I had to pick a downside for them, that’s one of the things that does worry me and they keep trying to cut their prices more to compete. It’s great you can buy things really cheap on there, but it does make it hard to make money. Eighty percent repeat buyers, you really see that circular effect going on with ThredUp. 77 percent of their Cleanout kits, which is where they send you a bag and you basically stuff it and send it back is from repeat sellers. Going into that resale-as-a-service, the thing that makes me most excited about them is their brand partnerships. They partnered with Madewell, they partnered with Farfetch. They just announced deals with Adidas, Crocs, and Michael Stars. I feel there’s so much potential and there’s a couple of private companies that are also doing this white-label resale-as-a-service. But I feel the potential here is massive. I know H&M has started to think about it a bit. All of the fast fashion stores and really fashion in general is starting to have to address this clothing issue and trying to figure out how to accept clothing back, how to offer discounts, all of that stuff and it’s a hard business to get into….