One would assume that bargain shoppers would be driving the resale market, but that’s what you get when you assume. According to thredUP’s Q1 2023 earnings report, the marketplace is resonating with premium buyers, not bargain shoppers.
According to James Reinhart, the CEO and co-founder of thredUP, there has been a shift in customer behavior, with more premium shoppers showing interest while value shoppers are losing interest. This trend is evident from the fact that the average order value of the discount subsegment of customers has decreased by 24%, whereas that of upscale shoppers has increased by 6%.
The findings from the report follow thredUP’s 11th Annual Resale Report, released in April, which projected that the global secondhand market is expected to almost double by 2027, reaching $350 billion.
But while thredUP might be striking a chord with premium buyers, the resale marketplace is still looking to those bargain shoppers.
“While we are benefiting from some shoppers, quote trading down, we’re also facing the headwinds of budget shoppers sitting out while products still offer excellent value to budget shoppers. … When macro conditions improve … we anticipate budget shoppers will return to our marketplace and provide a nice tailwind for growth,” said Reinhart during the earnings call.
Unlike deal chasers, especially during a time where inflation continues to impact consumer wallets, premium shoppers, not luxury shoppers, are more likely to stay loyal to a brand or retailer.
In fact, cash-strapped consumers are becoming more discerning, and the “Consumer Inflation Sentiment: The False Appeal of Deal-Chasing Consumers,” report by PYMNTS suggests that merely offering good deals or an easy shopping experience is no longer enough to satisfy them.
In addition, over 50% of deal chasers indicate that their salaries have either remained stagnant or reduced in the past year. While both deal chasers and persuadable consumers have suffered comparable declines in their purchasing power due to inflation, deal chasers have a bleaker outlook on the duration of the persistently high inflation, projecting it to persist until almost the end of 2024.
See also: Deal Chasing Becomes Mainstream — and Merchants Shouldn’t Be Happy
While thredUP’s resale marketplace faces headwinds with deal chasers but lands well premium buyers, the company is extending its servicing arm, which enables brands and retailers to provide their own resale solution.
During the call, thredUP noted to have launched new programs with American Eagle, H&M, Toms and SoulCycle.
PYMNTS also reported last month that the resale company partnered with handbag and accessory brand Patricia Nash to launch its new Rediscovered program.
See also: Patricia Nash Launches Resale Program Powered by thredUP
During the call, thredUP also revealed its expansion into non-fashion categories through a partnership with The Container Store, where customers can purchase a thredUP Clean Out Kit from any of The Container Store’s 97 retail outlets nationwide.
“It’s exciting to venture outside of the fashion industry and work with a nontraditional retailer to extend their impact reaching a broader swath of American consumers looking to be more sustainable,” Reinhart said.
thredUP finished out the quarter with revenue of $75.9 million, indicating a year-over-year increase of 4%. The company also reported a gross margin of 67.3%, an increase in gross profit of 2% year over year. However, the Q1 2023 figures for active buyers and orders showed a decrease of 3% and 8% respectively, as compared to the same period last year.
With that, the 2023 outlook for resale appears to be a mixed bag in terms of consumer preferences, especially with the impact of inflation on spending and brand loyalty.
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