ThredUP is reeling in a more upscale clientele.
“We’ve done a really good job as a team of focusing more of our buyer efforts on a slightly more premium shopper,” said thredUP’s CEO James Reinhart during the company’s Q3 2023 earnings call on Monday (Nov. 6).
According to the team, the company’s efforts to navigate the current environment has resulted in an upswing in the number of active buyers, both on a year-over-year and sequential basis. This has instilled confidence in thredUP, fostering optimism for the fourth quarter and into 2024.
During the call Reinhart noted that the company focused on its commitment to delivery, with the aim of delivery within three days or less. This enhanced customer retention and improve the business’s margin profile.
Reinhart also highlighted a decrease in the return rate.
Reinhart said thredUP is focusing on creating a user-friendly platform for sellers. The thredUP seller base caters to an array of segments, including everyday sellers, VIP sellers seeking quicker processing, and resell service clients seeking to earn credit with their preferred brands.
Regarding thredUP’s strategies for attracting diverse buyers, Reinhart explained that the company has harnessed knowledge gained from its U.S. operations to grow buyers in Europe. This includes introducing credit choices in European markets and the transition toward consignment sales.
Reinhart said there may be short-term revenue challenges linked to the transition to consignment sales, but it is expected to bring benefits in the long run. To provide additional context, during discussions with analysts, Reinhart pointed out that thredUP continues to shift more of its revenue to the consignment model. Although they have transitioned all their partners from resale-as-a-service (RaaS) to consignment, there is remaining inventory that needs to be sold, so the actual consignment percentage of revenue is expected to increase through 2024. The company is transitioning its European business to the consignment model.
Reinhart said thredUP’s RaaS division has recently added several brands to its portfolio of clients, including Levi Strauss, SmartWool (a subsidiary of VF Corp), and Journeys.
“As we head into the final quarter of the year, we will maintain our focus and steady approach in controlling the controllables how we spend our time the quality of the decisions we make during times of uncertainty, the urgency we have to invent on behalf of our customers and the willingness to keep learning what’s different this time around,” Reinhart said.
To keep its momentum, thredUP has opted to incrementally increase its promotional efforts. This decision has been driven by the anticipation of growth returning.
In the third quarter, thredUP reported quarterly revenue of $82 million, representing an increase of 21% year over year. The U.S. business reached quarterly adjusted EBITDA break-even for the first time in the company’s history. ThredUP achieved a gross margin of 69% for the third quarter and an increase in gross profit of 27% year over year.
Active buyers reached 1.8 million, and orders reached 1.8 million in Q3 2023, representing an increase of 4% and an increase of 11%, respectively, year over year.
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