ThredUP Taps Resale-as-a-Service for Path to Profitability

Is resale profitable for brands? While that question has yet to be answered, deploying the technology and functionality to create the resale-as-a-service (RaaS) apparently is. At least that’s what it’s looking like for thredUP.

“That we are on track to break even in Q4, which is traditionally not our best quarter, gives us a lot of confidence in the momentum building in the business into next year when we get into our better quarters,” said thredUP’s CEO James Reinhart

Despite a decrease in its user base over the past year, thredUP revenue rose 8% year over year (YoY) in the last quarter, as revealed in its report Tuesday (Aug. 8). The growth can be attributed in part to its resale-as-a-service venture in which thredUP facilitates brands in their resale by providing the infrastructure.

During the earnings call, Reinhart announced that thredUP onboarded 11 brands to its RaaS program in the quarter, raising the count to over 50 brands.

According to the company, 6 of the top 10 brands on its Recommerce 100 list are supported by thredUP’s services.

Names like American Eagle and Toms have contributed to thredUP’s objective of achieving profitability by the conclusion of this year, Reinhart said.

Reinhart said thredUP has consistently surpassed its projected earnings for each quarter since its 2021 IPO.

During the earnings call with analysts, Chief Financial Officer Sean Sobers said consignment revenue grew 10% year-over-year and product revenue grew 5%.

“We’re happy to report that consignment revenue has inflected growth for the first time in four quarters as we make progress in transitioning our European business and our RaaS supply to a consignment model,” he said.

Why Resale Resonates With Brands

As consumers limit their discretionary spend, high-quality items at an affordable price can still be alluring.

Speaking with PYMNTS, Andy Ruben, the founder and CEO of Trove, said consumers anticipate a retail experience when resale shopping,  and brand’s view this as a chance to transform one-time buyers into repeat customers.

“Brands want to be involved in their own resale experience because they want to take charge of the experience,” said Ruben. “You don’t want is someone buying a preloved Rolex and not having the Rolex experience.”

Is Resale Only for a Select Few?

When brands provide an exceptional experience, consumers seek them out.

Take REI. It’s known for its outdoor equipment and commitment to environmental responsibility and sustainability, so REI’s resale options harmonize with the brand image.

“Our reCommerce business continues to exceed our expectations,” said Ken Voeller, REI manager of new business development and reCommerce in 2020. “We see many benefits to expanding this business. First, as an opportunity to introduce our members to more outdoor activities through lower-priced products. Also, having a robust used gear business helps reduce the co-op’s overall impact on the environment as we work to achieve our climate and zero waste objectives.”

Toms Shoes has also entered the resale arena witha specialized website section (re)Wear Good, powered by thredUP. However, while the shoes available are designed to be gently used or new, the idea of buying preowned footwear could present a challenge for consumers.

Read more: Footwear Retailers Launch Branded Resale, but Who’s Buying?

ThredUp by the Numbers

In the second quarter of 2023, thredUP reported a quarterly revenue of $82.7 million. The gross margin stood at 67.4%, with a gross profit increase of 6% YoY.

There were 1.7 million active buyers and 1.8 million orders during Q2 2023, a slight 0.8% decrease and a 5% increase, respectively, YoY.

ThredUP’s reported a net loss of $18.8 million, a negative 22.7% of revenue, an improvement YoY from the net loss of $28.4 million, a negative 37.2% of revenue.