AI Drives ThredUp’s 32% Growth in New Customer Volume

Artificial intelligence (AI) is at the core of ThredUp’s strategy, driving growth and improving customer engagement. New customer volume rose 32% year over year, according to CEO and Co-Founder James Reinhart, and AI has played a pivotal role.

By focusing on AI, clothing reseller ThredUp is offering a more personalized and convenient online thrifting experience that aligns with consumer expectations.

Accelerating Growth

“We’ve made substantial progress in reaccelerating growth in the U.S.,” Reinhart explained Monday (March 3) during the company’s fourth-quarter earnings call. “Customer acquisition and retention strategies are at an all-time high. Generative AI can significantly enhance the second-hand shopping experience.”

ThredUp’s AI-powered tools, particularly its image search, are impacting the overall customer experience, Reinhart said. The visual search tool allows users to search by uploading images, improving user engagement by making it easier for shoppers to find exactly what they want. Along with visual search, the Style Chat chatbot provides personalized style recommendations.

“The sessions with image searches result in 85% higher conversion rates,” he said. “Our AI strategy was developed with a deeply calculated approach to build and sustain a competitive advantage over time.”

Overall, consumers are buying secondhand apparel due to financial challenges. The PYMNTS Intelligence report, “Consumer Inflation Sentiment Report: Consumers Shop Secondhand Stores as Often as Other Retail,” revealed 43% of those surveyed had bought a secondhand product, particularly clothing and accessories.

Many consumers are now living paycheck to paycheck, which has led retailers to adjust their strategies to cater to cost-conscious shoppers. As inflation continues to outstrip income growth, PYMNTS Intelligence data reveals 67% of U.S. consumers are living paycheck to paycheck.

When shoppers splurge, they do so on clothing. According to the PYMNTS Intelligence report, “The Nonessential Spending Deep Dive Edition,” 70% of retail shoppers who buy “nice-to-have” items typically spend on clothing.

Scaling Operations With AI

Beyond improving customer experience, AI is also helping ThredUp scale its operations, Reinhart said. The company has implemented AI-powered automated digital measurements, enhancing the accuracy of item listings, and improving inventory management. These technological advancements are enabling ThredUp to manage increased buyer demand while maintaining a high-quality customer experience. AI helps streamline processes, automate manual tasks, and improve efficiency, supporting ThredUp’s efforts to meet the growing demand for secondhand apparel.

During the fourth quarter of 2024, ThredUp sold 91% of its European business and Bulgarian subsidiary, Remix Global EAD. Fourth quarter revenue grew 9.5%, to $67.3 million while total orders increased 2.2%, to 1.23 million. Full-year revenue increased 0.6%, to $260 million while total orders slipped 0.6%, to 4.85 million.

Looking ahead, ThredUp expects revenue in the range of $67.5 million to $69.5 million in the first quarter and between $270 million and $280 million for the year, representing 6% growth.

“Given the uncertain consumer environment and the impact tariffs might have, second-hand could become an attractive option,” Reinhart said. “We are proud to have closed out 2024 with a definitive return to growth, while also delivering strong bottom-line results. In 2025, we look forward to leveraging our multiyear infrastructure and technology investments to accelerate growth while making steady progress towards our long-term profitability targets.”