San Francisco-based recommerce site thredUp will today unveil $81 million in funding, bringing the total raised by the six-year-old company to more than $125 million, and setting a record for the largest round of funding received in the online resale industry to date. Goldman Sachs Investment Partners led the Series E round, with participation from Trinity Ventures, Upfront Ventures, Highland Capital Partners and Redpoint Ventures.
ThredUp reports that it is growing at a rate of 50 percent each quarter, and is on track to process one million items of secondhand apparel each month by the end of the year. It has four million registered users and is on target to have two million visits to its site this month.
Cofounder and chief executive officer James Reinhart credits the company’s customer experience on the selling side for thredUp’s popularity, and claimed that was partly why Goldman Sachs was so interested when they “looked under the hood.”
“People don’t have time to sell things one at a time for $15,” Reinhart said. “The only way to create value is to aggregate and let someone else deal with it. That level of convenience has really increased the growth of the number of products we have available.”
Customers fill a prepaid bag with unwanted clothing, and then thredUp pays the customer up front and processes, lists and sells the items. It accepts 25,000 brands of women’s and children’s clothing, and donates or converts to pulp any items it can’t use. (It uses about half.) It began as a peer-to-peer model in 2009 and changed to its current model in 2012.
“While most brand-oriented consumers have historically held a negative bias toward purchasing secondhand clothing, thredUp is proving it can reverse that perception,” said Ian Friedman, cohead of GSIP Private Investments. “We found that over half of their customers had not purchased pre-owned clothing in the year prior to becoming a thredUp customer, highlighting the potential for market expansion.”
Reinhart said thredUp plans to use the funding to build out its operations and distribution by adding two processing centers — one outside Chicago and one outside Atlanta — in the next six months. It currently has one in San Leandro and one in Pennsylvania. The new centers will allow thredUp to process as much as two million items a month.
It plans to add about 1,000 more employees; currently, 75 work in its San Francisco headquarters and 500 in operations. The new employees will work in operations, technology and customer service to scale the distribution network.
Reinhart also plans to add more personalization to thredUp’s platform, and to invest in automated merchandising. “Everything we sell is a snowflake — it’s unique — so how do we merchandise it in a way to find the right stuff?” he asked.
Finally, Reinhart hopes to increase the company’s public profile, having thus far focused more on building the business than on marketing.
Investments in and attention to the online resale market have been significant, and significantly growing, in the past few years. In 2014, it’s estimated that $100 million of venture capital went to secondhand apparel companies. TheRealReal revealed $40 million in Series D financing in April, and Twice was acquired by eBay in July.
Reinhart thinks this popularity is only going to continue to grow.
“The analogy I tell people is, there was a time when we bought used cars, now it’s certified pre-owned cars; we bought used electronics, and now it’s factory refurbished. I think the same thing will happen in apparel, and it’s a great way for brands to segment to a different set of customers,” he said.
Ultimately, he said, he sees retailers joining in to help power that.
In perhaps a nod to this endorsement, The RealReal formed a partnership with Neiman Marcus in July, in which the site’s customers are paid in gift cards.
So could Reinhart see, for example, a thredUp floor at Nordstrom? Absolutely — although it might take 10 years for this trend to fully manifest.
“The way to grow is to make the tent bigger — not to just make core products cheaper,” he said. “That item can resell to someone who can’t afford it new, and that cycle becomes more virtuous.”