Secondhand marketplaces thredUP and The RealReal say they have been immune thus far from the higher prices and tangled supply chains plaguing many other retailers and brands heading into the holiday shopping season, though shipping costs and staffing levels remain a challenge.
James Reinhart, CEO of thredUP, told analysts on a conference call that the company’s U.S. business “is entirely domestically sourced from our sellers,” with no dependence on direct manufacturing for supply.
“As a result, we see a compelling customer acquisition and wallet share opportunity in the near term,” Reinhart said, adding that thredUP has “strategically” lowered prices “in order to engage as many customers as possible during a time when consumers are feeling price pressure in many other parts of their life.”
Average listed prices on thredUP were 15% lower on average in the third quarter of this year compared to the same period last year.
Julie Wainwright, CEO of The RealReal, said in a separate conference call that her company’s product supply has actually now exceeded pre-COVID levels, and added that “we believe we are well-positioned from a supply perspective as we enter the holiday season.”
“Our markets are back,” she said. “We have regional strength and national strength, and I wouldn’t say it’s stability. I would say … we’re exceeding pre-COVID growth levels in our market.”
In the third quarter, thredUP recorded revenue of $63.3 million, up 35% year over year, as well as 1.4 million active buyers, up 14%, and 1.3 million orders, up 28%. The RealReal said its revenue reached $119 million in the three months that ended Sept. 30, an increase of 53% compared to 2020 and 46% over versus two years ago. Active buyers reached 772,000, a 25% increase, and orders reached 757,000, a 38% year-over-year jump.
Wainwright said 30% of The RealReal’s new consignors come from the company’s neighborhood stores, which have also helped drive down return rates and boost average order value. The RealReal currently has 15 stores — more than it anticipated having at this point, Wainwright noted — and plans to open two more before the end of the year.
Increasing Efficiency
Strong demand, however, is pushing thredUP’s capacity for taking in new products to its limit, with processing times for its cleanup bags at around 12 weeks on average and some people currently unable to request a kit.
With a new 10-million-item automated distribution center set to open in Dallas by the middle of next year and a dedicated processing center in Grapevine, Texas likely to begin operations in early 2022, Reinhart expects wait times to come down in the coming months.
Chief Financial Officer Sean Sobers also noted that the fourth quarter is traditionally not thredUP’s strongest sales quarter. The company typically reallocates marketing dollars to its processing efforts, shifting associates to “aggressively process bags and build selection” ahead of the new year.
Wainwright said The RealReal has also been investing in automating its processing and distribution centers since 2019, which has provided “incredible leverage” in the company’s operations and helped address staffing shortages, particularly at the company’s authentication centers. The company has also been working on several initiatives to combat elevated shipping costs, including “shipping diversification and last-mile optimization.”
“We are confident in our ability to manage these challenges,” Wainwright said. “While we are in the early innings of delivering operation expense leverage, we believe the company is starting to see the benefits of previous investments.”
The Competitive Landscape
The RealReal is facing newfound competition in the luxury resale market, with Net-a-Porter announcing last week that it’s working with technology provider Reflaunt on a service that lets customers resell designer goods. The project will ultimately cover all of Net-a-Porter’s platforms, including Mr Porter and The Outnet.
Read more: Luxury Brand Net-a-Porter Steps Into Resale Market
Additionally, thredUP has its own resale-as-a-service (RaaS) platform through which it partners with retail brands to offer cleanout services, a dedicated shop in its marketplace and full-service resale shops — a suite of offerings that Reinhart calls “Resale360.”
“Ultimately, we think there are hundreds if not thousands of brands that could participate in our resale-as-a-service offerings,” the CEO told analysts. “And so I think you should see us continue quarter after quarter announcing new ones (partnerships) and then deepening the relationships with those brands over time.”
Related news: thredUP, LG Aim to Help Consumers Clean out Their Closets With Collab
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