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Better the Second Time Around? Online Resale Market Surges

Appealing to increasingly popular concerns about the financial and environmental cost of fashion, online second-hand clothing stores are booming in popularity as consumers seek out affordable fashion that reduces their carbon footprint. Over the last three years, the online resale market has grown 82% and is expected to grow 6% each year through 2025, resulting in an estimated $25 billion in sales.

While perhaps a generation ago there was a stigma attached to such savings, these numbers suggest this is no longer the case. “I think luxury retailers are going to run a little scared,” said one market research analyst.

Sustainability for Planet and Wallet

For the sustainability-minded consumer, the online resale market makes perfect sense.  Beyond the vast amounts of water and power consumed by clothing production, the rise of the fast fashion industry has increased textile waste; by 2019, there will be 35.4 billion pounds of textile waste per year in the United States alone. According to emerging online resale giant thredUP’s recent report (which leans firmly into its image as environmental stalwart) if only 1/100 Americans shopped resale, it would save 1.1 billion pounds of Carbon Dioxide and 99,400,000,000 gallons of water each year. 

For the more financially-minded consumer, thredUP also estimates that the average American saves 61% per year by moving their clothing purchases from traditional retail to resale. 

But why, with signs of an improving economy and low gas prices are Americans still so concerned by cost? “A lot of people have post-traumatic stress disorder when it comes to spending,” says Todd Knoop, an economist at Cornell College. “The economy has evolved more quickly than people’s [thoughts] on how the economy is doing.”

Curate the Collection, Eliminate the Fakes

Finding themselves at the nexus of cultural and economic trends, and seeking to distinguish themselves from eBbay and other first wave peer-to-peer resale sites, resale companies such as TheRealReal, PoshMark, Grailed, thredUP, and Tradesy offer augmented online experiences, providing curation, verification, and customer support services.  This creates an identity for each site, built around style and cost. For example, TheRealReal is devoted almost entirely to high-end designer wares while Grailed curates urban and street fashion. 

A More Traditional Resale Market

And where do all these clothes come from?  Everyday sellers send their unwanted clothing through company-supplied mailbags to processing centers where employees sift through the submissions with a discerning eye.  Not leaving much to chance, most resellers produce buying and reselling guides to ensure a consistent aesthetic and consumer base. Of particular concern during this process, especially in the era of the superfake: weeding out the knock-offs, which have plagued e-Bay and would undermine reseller’s credibility.

Winner Take All?

So far, it seems to be working. Venture capitalists have pumped over half a billion dollars into resale sites, much of it within the past year. Just this month, Tradesy was funded an additional $30 million; the month before, TheRealReal received $40 million; and last year thredUP was funded to the tune of $81 million.

"I still think it’s winner-take-all and we're still pushing to be the winner," Tradesy CEO Tracy DiNunzio said in an interview. "But whether winner-takes-all means everyone else dies, I don't know."

Some have died already, others consolidated. Despite raising $20 million in venture capital, San Francisco-based Threadflip has already folded into Le Tote after roughly five years of operation. According to Recode, this consolidation trend is likely to continue as only one or two of the second-hand sellers will be able to build sizable businesses in this crowded field.

With an estimated $8 billion of unused clothes wasting away in American closets, a bounty of how-to guides and lifehacks geared around the market, and no signs of any impending return to the retail status quo, leaders have already emerged within specific niches and the RealReal looks to cross into profitability by the end of the year.  But, like taste, fashion retail success can be fleeting.

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