The fashion resale has long been described as a disruptor in the retail industry, promising sustainability, affordability and a life at the time of luxury goods. .
Take Thredup, the online fashion store that has raised more than $430 million since its inception in 2009. Since going public in 2021, the company has yet to benefit, reporting a loss in EBITDA (earnings before interest, taxes, depreciation and amortization) of BitDA’s loss (managed before interest, taxes, depreciation and amortization) $37. 5 million of $314 million in cash in its recent fiscal year (Thredup says (Thredup says it will report the EBITDA benefit for the quarter ending December 31, 2024, from 3. 2% to 3. 7%, but has not yet filed its quarterly financials with the SEC).
The RealReal, another major player, has raised over $600 million since its founding in 2011. While it posted a rare profit of $5.4 million on $580 million in revenue in its most recent 12-month reporting period, four of its top executives took home a combined $9.15 million in 2023, not an encouraging sign to the financial market.
If the appeal of this industry eludes you, you are not alone. The RealReal’s stock is heavily shorted—at nearly four times the average rate on NASDAQ. ThredUp, once trading at $31 per share, ended the day at just $2.54.
Both were founded at a time when the risk capitalists invested in new high growth companies in the expectation that the scale would result in profitability.
I didn’t paint that way. The path to profitability in the resale of electronic commerce turns out to be another from the first thought. But it is not impossible.
While the resale models of giant scale have had difficulties, niche players show that profitability in the resale of fashion is possible. Companies such as Archive Real and Leprix draw another course, which favors efficiency, specialization and strategic supply.
Earlier today Archive Resale announced that it secured $30 million in growth equity. Archive is not public but that transaction at this time, when the market is laser-focused on profitability, likely means that Archive is at or near being profitable.
Unlike ThredUp or The RealReal, Archive provides a white-label resale service platform for brands, allowing them to control their own secondhand markets. CEO Emily Gittins told me “Brands are the unlock to making this more value-creating for everyone and it’s starting to be proved out.”
As she explains, having brands involved in the resale of the products they produced has multiple advantages:
Major brands including Doc Maartens, The North Face, New Balance, M.M.LaFleur, Sandro, Hanna Andersson, Faherty, ba&sh and others have already partnered with Archive to capitalize on this model.
The prize, some others that develop a good fortune history, have expanded their business in supplying second -hand products, basically in the auction market established through Japan for resale products. The corporate specializes in high -end brands such as Chanel, Hermès and Louis Vuitton and, according to the reports, obtained a benefit despite collecting $ 5. 5 million in general capital (through pitchbook) compared to Thredup and the royal, which raised more than $ 1 billion combined.
LePrix’s model is a classic case of arbitrage, buying in one market and selling in another. The barriers to entry—navigating Japan’s luxury resale ecosystem and managing cash flow effectively—give it a defensible position and room for growth.
The demanding situations faced through the resale platforms of the mass markets are added inefficiently on a scale. Unlike classic retail trade, where the same products can be stored in bulk, the resale is based on the control of exclusive and exclusive items, which require authentication, charges and individual marketing. The charge of processing an article of $ one hundred can be as higher as a $ 1,000 article, which makes the ticket categories more viable.
Companies that in the segments of close products of higher value see the results. Several of them told me that they prioritized:
Unlike classic retail, where the source is abundant and the call is the challenge, resale operates the opposite: the customer’s call is high, but securing desirable actions is the restricted factor. Industry experts cite the same restriction: If they can locate more products than customers want, they would sell immediately.
Anyone who needs to succeed in resale will have to face the basic characteristics of the corporate that are in conflict:
On the plus side, consumers need it because the products are cheaper, pile up in their cabinets to be disposed of, it’s a moneymaker, and it’s more durable.
On the negative side, it is worth an umbrella in the maximum resale products that can be sold because they want to be proportional to the new products. And there is a competitive market to buy desirable products so that the loading of the pieces looks too low. .
Market operators will have to be very effective and margins will almost never be excessive, since external points exercise prices and prices.
Despite the difficulties in climbing the resale corporations in the classic retail mold, the interest of the client in the fashion for the moment is undeniable. The challenge for marketing and investors specialists is to reconsider the style to reproduce a branch store of used products, but to expand rationalized and successful approaches that welcome market realities.
Companies that recognize these dynamics and create advertising models about efficiency, specialization, and strategic partnerships are in a position to succeed. While resale continues to evolve, expect to see more innovation in this area, right down to the check than when done right, the secondary market is not only durable for consumers, but also for businesses.