eBay-Backed Cudoni Shuts Down, Highlighting Growing Competition in Luxury Resale

Back in January, Cudoni, a startup based in London, added eBay to its roster of investors with a $9 million fundraise. Today, the company no longer exists.

The company stated that the present economic situation has made it unfeasible to continue its operations. The move is noteworthy as the startup focused in a thriving category in retail — resale.

eBay’s investment in Cudoni aimed to reinforce its renewed focus on resale and regain its position in the category after falling behind its competitors.

“We’re leaning into where Gen Z and millennials are,” eBay CEO Jamie Iannone told the Financial Times in October 2022. “There’s a bigger focus on sustainability, and ‘reCommerce.’ eBay is really the pioneer … that gives us an opportunity.”

At the time of the $9 million fundraise, PYMNTS research had found that economic pressures have not stopped consumers from acquiring couture and high-end fashion.

Similar to other markets, secondhand fashion retailers have achieved success by selling through online and mobile platforms and expanding their global presence via eCommerce marketplaces, according to the “Buy Now, Pay Later Tracker®,” a PYMNTS and Splitit collaboration.

Luxury retailers themselves have shown a growing interest in reCommerce, PYMNTS’ Karen Webster wrote in January 2022.

“The smart luxury retailers will set aside their disdain for the democratizing of their luxury brand and use it as an entry point to build the next generation of brand loyalists — on their terms,” Webster wrote at the time.

See also: Luxury Reseller Cudoni Adds eBay, Others With $9M Fundraise

Booming Resale Category

Initially, third-party platforms like thredUP, Vestiaire Collective, Poshmark, The RealReal, and eBay had a significant share of the secondhand market, driving its global value to $184 billion by 2022.

The exponential expansion of the resale sector brought about widespread adoption of peer-to-peer (P2P) transactions, extending the lifespan of clothing and accessories and satisfying substantial consumer demand. However, it also caused significant disruption for brands.

As a result of the upheaval caused by the resale industry, an increasing number of brands are endeavoring to safeguard their image by creating their own resale platforms. Additionally, these brands are targeting a distinct clientele that has embraced an alternative approach to apparel shopping, choosing to rent clothes instead of buying them outright.

Brands Want More Control

Just last month, PYMNTS spoke with the founder and executive chairman of Trove, Andy Ruben, and how branded reCommerce solutions are making the resale venture possible for brands.

Ruben stated that preowned buyers are mainly from Gen Z and millennials and are generally 10 to 20 years younger, with 80% of them using mobile devices and having less disposable income.

“They gravitate toward the brands that are the ones that are the hardest to access. So they naturally gravitate toward quality. They just aren’t often able to access that brand. And this allows brands to provide that access without degrading the quality that the brands are known for,” Ruben said.

According to Ruben, providing more chances for dedicated customers to engage with their favorite luxury brands results in long-term customers, benefiting the brand in the end. Ruben added that the branded experiences are vastly dissimilar from discovering the same product on eBay.

In fact, by adding resale, trade-in, and other shopping options, brands can enhance brand engagement and customer loyalty, according to Trove’s Brand Resale Index. Furthermore, by doing so, brands can provide additional value to customers, particularly sustainable shoppers, and build stronger relationships with them.

To date, Trove has collaborated with brands and retailers such as Lululemon, Patagonia, Eileen Fisher, Canada Goose, and most recently Carhartt, enabling customers to sell and buy their favorite brands directly on the brand’s website.

See also: Trove Leads Lululemon, Canada Goose and Carhartt Into Resale Boom

Not All Startups Make It

Startups, they’re a risk. We all know this. In fact, although it’s difficult to determine the exact reasons for their decision to shut down without access to their financial records, it’s likely that the company struggled to capture the market share they were targeting and couldn’t compete with others in the space.

According to a TechCrunch report on Jan. 18, the Spanish company Wallapop raised $87 million more at a $832 million valuation led by Korea’s Naver to expand its peer-to-peer marketplace, which facilitated the buying and selling of secondhand goods. The company planned to use the funds to continue its expansion throughout Europe and invest in research and development. Wallapop, which began in Spain a decade ago, had already expanded into Italy in 2021 and Portugal in 2022, according to the report.

See also: Wallapop Raises $88M to Grow P2P Resale Marketplace

Then there are platforms like Rebag, who last reported a $33 million raise and has since looked to make the reselling process is seamless and as transparent as possible with a proprietary digital pricing tool that provides consumers with a free appraisal and the confidence they need to make high-dollar transactions, often without ever seeing or touching the item in person. In addition, Rebag recently introduced its Wallet feature to turn secondhand luxury buyers into sellers and investors, thus boosting its inventory.

See also: Rebag’s AI Solution Brings Transparency, Confidence To Luxury Resale Market

And Poshmark was acquired by Navar in late January with the aim of accelerating its efforts to create a global eCommerce portfolio and enter untapped markets.

“As part of Naver, we’ll benefit from their financial resources, significant technology capabilities and leading presence across Asia to expand our platform and enhance our user experience,” Poshmark Founder and CEO Manish Chandra said at the time of the acquisition.

See also: Naver Completes Acquisition of Poshmark and Aims to Grow Globally

Why Cudoni’s Shutdown Is Shocking

With eBay joining Cudoni’s portfolio of investors, it was positioned as a promising startup that would have brought innovation and competition to the luxury resale market. Its closure raises questions about the viability of other luxury resale startups and their ability to compete with established players like The RealReal and Vestiaire Collective.

The move by eBay to invest in Cudoni was seen as a strategic one, as it sought to increase its share of the luxury resale market. However, Cudoni’s inability to gain market share may indicate the challenges that new entrants face in an already competitive market.