FORMER PRESIDENT, DIANE VON FURSTENBERG & THREDUP BOARD MEMBER

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2 FORMER PRESIDENT, DIANE VON FURSTENBERG & THREDUP BOARD MEMBER or decades, secondhand and vintage have been the secret weapon of designers and fashion insiders. One unique find can be the inspiration for an entire design concept, collection, or runway show. Repurposing a garment or finding a unique print can be the catalyst to the creative process that ultimately ignites or re-ignites a worldwide trend. But in the era of e-commerce, street style, and Instagram, resale is no longer a Seventh Avenue secret; the secret is out. More and more savvy shoppers, from busy moms to style seekers, are searching online resale sites in pursuit of one-ofa-kind accessories, everyday basics, and stylish clothing at big discounts. This treasure hunt is a fun, smart, and cost-effective way to create your own unique closet. Consumers are thinking differently about how they spend their money, and they are getting more style, more confidence, and more options. On top of it all, it feels good to shop resale. The fact that everything you buy can be re-sold only makes the opportunity more attractive and sustainable. It s consumption without the elements that make consumers feel guilty or conspicuous. That is a powerful and compelling quality in an era when consumers want to do the right thing and set an example. The secondhand industry is gaining incredible momentum. With heightened interest from consumers, investors and retailers, online resale is becoming a way of life. Having spent the last 30 years in the fashion industry, I have seen many trends come and go. But online resale is changing the rules and creating a better experience for a new generation of consumers. So for me, it s not a question of if but when hundreds of millions of people all over the world make resale their new healthy habit. Paula Sutter 2

3 IF 1 IN 100 AMERICAN HOUSEHOLDS SHOPPED RESALE, IT WOULD SAVE OVER 1.1 BILLION POUNDS OF CO2 EMISSIONS EVERY YEAR A Rapidly Growing Market Resale Market Capture is Accelerating Growth in the resale market is expected to outpace all e-commerce and retail sectors over the next 10 years. Furthermore, consumers who shop off-price, outlets, discounters and department stores are making resale a regular part of their wardrobes. Consider this: by some estimates, over $8 billion of clothing in American closets is unused and ignored. As the success of online resellers continues, a growing portion of this hidden treasure will be unlocked. 3

4 In a survey conducted by thredup this past year, 87% of individuals who bought secondhand clothing online shifted their spending away from off-price retailers. In the same survey, more than 50% of respondents reported making their first secondhand purchase online. We expect this trend to accelerate and for resale to capture wallet share from off-price retailers for many years. Capturing Share from Adjacent Markets The growth in online resale is fueled by wallet capture from adjacent markets such as value retail and offline thrift. Value retail, which includes off-price retailers, outlet stores, discounters, and mainstream department stores, is a $175 billion market and growing. Offline thrift is a $12 billion market today and an increasing portion of this market is moving online in search of a wider selection of brands and styles. This will prevent meaningful growth for offline thrift in the coming decade. Note: U.S. clothing markets only (1) New players only. Does not include ebay or Craigslist 4

5 The Resale Market is Rapidly Consolidating Beginning in 2009, a number of companies launched to serve the emerging resale market. As the market opportunity became clear, competitors and investors jumped into the space - pouring more than $400 million into the sector from 2009 to At one point, there were more than 30 companies vying for the attention of American consumers. But the online resale market has consolidated rapidly as a select group of companies have accelerated away from the pack with outsized scale and business models that support profitable growth. Given the market size and longterm growth prospects, we expect there to be several winners serving distinct segments of the customer value chain. Brings buyers and sellers together within a hosted platform to perform transactions. Often referred to as a peer-to-peer marketplace. ebay and Craigslist were pioneers in this category and still have significant market share. An augmented marketplace adds valuable customer-friendly activities and takes on additional parts of the value chain (logistics, photography, customer service) to deliver a more convenient customer experience. Most importantly, augmented marketplaces make it possible for more people to participate in the service. IF 1 IN 100 AMERICAN HOUSEHOLDS SHOPPED RESALE, THEY WOULD COLLECTIVELY SAVE OVER $1.4 BILLION EVERY YEAR 5

6 Sentiment Toward Secondhand has Shifted Apparel is the third major industry where used is becoming an integral part of the overall customer engagement strategy. Resale is now a desirable trait, and it all started with cars. Consumers bought used cars until dealers and manufacturers understood the segmentation opportunity provided by certified pre-owned. By getting a customer into a branded, certified pre-owned car, you could build a customer for life. Electronic manufacturers have done the same thing through their refurbishment programs. In the past, we bought used electronics, now we buy factory refurbished phones, computers, tablets, TVs, etc. In both cars and electronics, trade-in is now a normal part of the product lifecycle and value proposition as brands try to maintain customer relationships and engagement. The same thing is happening in apparel, and the smartest brands and retailers are engaging with companies in the resale space to find mutually beneficial ways to work together. In addition, overall consumer sentiment has shifted, with resale becoming a natural part of the social conversation around smart and conscientious living. We expect these to be major themes in the next few years. 6

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8 IF 1 IN 100 AMERICAN HOUSEHOLDS SHOPPED RESALE, IT WOULD SAVE OVER 99 BILLION GALLONS OF WATER EVERY YEAR Faster Reuse is Good for Retail + Resale (and the planet) Reduce. Reuse. Recycle. When customers clean out their closets, they make room to fill their closets with fresh new items. As the velocity of closet turnover increases, consumers get more use out of the clothing in the ecosystem and fewer items end up in landfills domestically or abroad. In other words, more people share the enjoyment of every clothing item. Did you know? 85% of all clothing that gets donated ends up in landfills. A meager 15% of what we donate ends up being recycled and most of this recycled product ends up overseas. Together, retail and resale can likely do more together to reduce waste. Consumer behavior is changing and we admire retailers like Target that are innovating to adapt to today's generation. Partnerships like this provide a powerful loyalty element to a brands' customer experience. In a more sustainable future, people will buy fewer things at higher prices, technological innovation will reduce the impact of those products manufacture, and the goods themselves will be made to last and then be recycled at the end of their useful lives. Clean out your closet for fall, get $20 off a new pair of jeans, AND be a do-gooder? Oh, Madewell, we love you. 8

9 This is this first time a major U.S. retailer is acknowledging a real shift by high-end consumers toward value. It gives these fantastic items a true lifecycle. Creating a closed loop for textiles, in which unwanted clothes can be recycled into new ones, will not only minimize textile waste, but also significantly reduce the need for virgin resources as well as other impacts fashion has on our planet. 9

10 Brands Winning in Resale A brand with strong resale value is a winning consumer brand. Period. Brands with a strong resale footprint enable customers who couldn t otherwise afford the brand to experience it for the first time. At some point, these customers often jump to buying new. For customers accustomed to buying new, strong resale value only makes them more likely to keep buying a brand, knowing they can re-coup a portion of its cost in the resale market. Note: All data based on 2015 thredup sales. 10

11 Biggest Movers As online resale continues to grow, brand variety has significantly increased. Many well-known brands continue to thrive in the resale world while others have seen a huge increase in their resale popularity in the past year. Activewear is Hot! Everybody loves Lulu. And Athleta. And Nike. And Activewear continues to be among the fastest moving categories in resale. Many of the best items sell within minutes of being listed online. 11 W S S F refers to Winter Spring Summer Fall

12 Kids Winners Clothes don t grow, kids do! Resale is an especially attractive category for kids clothing given how fast they outgrow the things they own. IF 1 IN 100 AMERICAN HOUSEHOLDS CLEANED OUT, IT WOULD KEEP 95 MILLION POUNDS OF CLOTHES OUT OF LANDFILLS EVERY YEAR 12

13 Resale is Happening Everywhere Consumers are shopping resale across the country, from big cities to small towns, and everywhere in between. The secondhand market is rapidly expanding as it becomes more approachable, convenient and trustworthy. And at every income and fashion level there is opportunity in resale, which explains its wide appeal beyond just the most savvy style seekers. 13

14 Resale in the City Check out these five fashion-forward cities and see how they compare. 14

15 In resale, the traditional seasonality of styles and silhouettes is less apparent as all garment types are available year-round. IF 1 IN 100 AMERICAN HOUSEHOLDS CLEANED OUT, THEY WOULD COLLECTIVELY GENERATE 140 MILLION ITEMS THAT COULD BE RESOLD OR REUSED 15

16 The Typical American Closet: a Bad Habit The American woman s closet is a wildly under-utilized piece of real estate in the home. Too many women treat their closets like storage, but those embracing resale have started treating it like a revolving source of delight. ITEMS IN THE TYPICAL CLOSET 93 TOTAL COST $8,500 BUT MORE THAN 70% IS NEVER WORN! 16

17 Looking Good Doesn t Have to Cost a Fortune Keeping your look fresh can be costly if you want to regularly have something new and fun to wear. By mixing resale into your shopping habits, you can save money and have fresh new outfits regularly. IF 1 IN 100 AMERICAN HOUSEHOLDS CLEANED OUT, THEY COULD COLLECTIVELY GENERATE $297 MILLION IN RESALE EARNINGS EVERY YEAR 17

18 Your Closet is a Goldmine There are valuable dollars locked up in your closet. By using a reliable resale platform, women can unlock a lot of that value, do something good for the planet and feel good about buying new things they love. In the past the best you could do was fill up a trash bag with regrets and either haul it off to your local thrift shop, consignment store or dumpster, or give it away to family, friends or charities. Today, full service companies like thredup, Rent the Runway and TheRealReal offer convenient ways to simplify closet maintenance. 18

19 2015 and the Road Ahead ore than seven years ago, I opened my closet and for the first time had nothing to wear. It was this moment in Cambridge, MA back in 2008 that the seeds for thredup were sown. We ve come a long way since then. This past year was a formative one for the resale industry with a number of early pioneers closing their doors or being acquired. Why? Because this is a hard business. The logistics and operational complexity to process tens of thousands (and soon hundreds of thousands) of items per day and deliver an amazing customer experience is not for the faint of heart! But at the end of the day, businesses exist to serve the demands of customers and 2015 was a year when customers really spoke up with their wallets. They are coming to resale platforms like thredup in droves to find unique pieces of clothing they couldn t find elsewhere or could not afford to buy new. This is the most exciting part for me. It s about providing access and opportunity to wear the brands and style that you love at affordable prices. It s about finding those fun pieces that you would never have bought new, but are just perfect for the right occasion at the right price. And finally, it s about purpose. Our mission continues to be to inspire a new generation of consumers to think secondhand first. I have never been more confident that we re on our way to making this a reality. Fun, fashion, and purpose is what we re all about at thredup and 2016 is going be another big year in resale. We hope you ve enjoyed this report as much as we ve enjoyed putting it together. If you have questions, we d love to hear from you. For press inquiries please contact media@thredup.com or if you d like to speak to our research team, please contact resaledata@thredup.com. 19