Online consignment marketplace ThredUp will go from two to 10 stores by the end of the year. But CEO James Reinhart has big plans: He foresees a future where ThredUp will operate more than 100.
It’s an unexpected prediction to make, considering in-store consignment boutiques like Second Time Around are being wiped out, as reselling migrates.
ThredUp’s value proposition to sellers — for which it’s fighting competitors like Tradesy on the mass end and The RealReal on the high end — is that it makes them do as little of the heavy lifting as possible. The company sends out a bag for sellers to fill with anything they want to get rid of in their closets and then mail back; ThredUp’s team then decides what will make it onto the site and what will be donated. Sellers are alerted and paid out once something is sold.
And while Reinhart believes the majority of the business will remain online, he believes physical retail will play an integral role for both buyers and sellers.
In shifting offline, ThredUp is joining other reseller companies like The RealReal, which began experimenting with pop-up shops in 2017, as well as other digitally native retailers. Moving into the physical retail space is a way to raise brand awareness, build trust with wary customers and launch offline marketing initiatives like in-store events. For resale sites, there are two separate groups a store could potentially motivate: those wanting to get rid of old clothes, and those looking to buy them.
“When we look at our piece of the retail pie — the percentage of retail that will be driven by resale — we think about how we can be an even bigger part of people’s lives,” said Reinhart. “That’s when you really start to see just how important the physical retail piece is in the overall ecosystem. It’s about making it at as seamless as possible for everyone.”
ThredUp does not disclose revenue, but it reportedly far surpassed $100 million in 2017, while The RealReal’s projected revenue the same year was $500 million. It’s raised a total of $130 million in venture funding, about $40 million less than The RealReal. But despite the boom in online resale, Goodwill is still the leader in the space — and at $4 billion, it’s a big competitor to tackle.
So ThredUp is hoping that a big in-store presence will bring it top of mind. For buyers, ThredUp’s store inventory is tailored to the region it’s in, and stock is updated weekly. In fitting rooms, shoppers can scan items on an iPad and pull up similar styles in their size to help navigate the 2 million-product inventory online. The goal is to incorporate style recommendations, as well. The technology is scalable, said Reinhart, who pointed out that it only costs about $1,000 per fitting room to deploy. As more stores open, the company plans to build out holistic customer data profiles that account for in-store behavior as well as online, and that data will also help inform inventory buys.
While the ThredUp shopper experience in store is based on newness, the seller experience is based on convenience. Sellers can pick up and drop off garment bags in store locations, and ThredUp is working on partnerships with third-party locations to integrate pick-up and drop-off outposts in high-traffic areas. He also alluded to potential partnerships with traditional retail brands to work together on more outposts. And he sees an opportunity to partner with dry cleaners to get ThredUp garment bags in more locations.
The retail strategy is based around flexible leases and a reimagining of where customers are willing to interact with a brand like ThredUp.
“People are busy, and our value is in being as convenient as possible for the customer,” said Reinhart. “We’re looking at her shopping habits shift, and resale can take up a more considerable part of the closet if we’re everywhere the customer is. It’s not different for us than it is for a traditional retailer.”
The goal is to open stores where it knows customers and sellers already are and then tailor the inventory to reflect the shopping behavior in that region. As far as newness goes, Reinhart said he’d like to eventually get to a point where new inventory could be swapped in every day.
“For an industry like resale, you win by being top of mind. When someone has something they want to get rid of, you have to be the company they think of first. You do that through convenience,” said Kasey Lobaugh, the chief retail innovation officer at Deloitte. “That’s where customers respond best. Not to mention, the inventory models help these companies avoid the common pitfalls like unwieldy overhead. It’s basically a ground’s race now.”