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ThredUp Uses AI to Take the Guesswork Out of Secondhand Shopping

While thrifting has typically demanded consumers be open to some degree of randomness and discovery, ThredUp is using artificial intelligence search capabilities to improve the relevance and exactitude of secondhand shopping.

On a call with analysts Monday (March 4) discussing the digital consignment and thrift store’s fourth-quarter and full-year 2023 earnings results, CEO James Reinhart discussed how the company’s new AI-powered search tools are driving conversion by improving the platform’s ability to offer targeted results.

“Our vast selection of inventory is one of our biggest assets, but it also creates challenges for buyers, as they shop up to 4 million unique secondhand items in a given time,” Reinhart said. “This new search functionality significantly enhances the secondhand shopping experience in our marketplace by combining visual language with personal style.”

He noted during the call that the tool enables shoppers to search either for specific items such as a type of dress, for garments relevant to specific occasions (he cited the example of a “Sunday brunch dress”) or for products that match a certain tone or ethos (Reinhart’s example being “Academy Award chic”).

There is demand among shoppers — especially younger ones — for AI-powered convenience in retail. PYMNTS Intelligence’s report “AI-Enabled Payments Enhance Customer Options” found that 44% of consumers are at least somewhat interested in integrating AI technologies into shopping experiences. Plus, that share rises to include more than half of younger generations, with 69% of Generation Z consumers and 54% of millennials and bridge millennials reporting they are interested.

In addition to these search functionalities, the company is also using generative AI to boost its ability to get customers to buy multiple items at once. Reinhart noted that the technology will “soon give customers the ability to create outfits they love using just a text description,” matching multiple items.

“The list of outfits that can be generated from this tool is endless and restricted only by the imagination of our buyers,” Reinhart said on the call. “We’ll be leading these style inspiration touchpoints throughout the product experience over the year ahead.”

The company’s revenue was up at a time when many consumers have been turning to secondhand shopping to weather ongoing financial challenges. ThredUp reported a 12% year-over-year increase in revenue, with net loss declining from 32% of revenue the year prior to 22%.

PYMNTS Intelligence’s study “Consumer Inflation Sentiment Report: Consumers Shop Secondhand Stores as Often as Other Retail,” which drew from a survey of more than 2,300 U.S. consumers in December, found that 43% of consumers purchased a secondhand product in 2023, with high-income shoppers disproportionately likely to make such purchases. Plus, 19% of consumers said they increased their secondhand purchasing during the year.

As ThredUp continues to innovate and evolve its platform with AI-powered search tools and generative AI capabilities, it aims to meet the growing demand for convenience and personalization in retail.

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