The twelve-year-old company, which processes millions of pieces of used clothing each year, lost $ 48 million to $ 186 million in revenue in 2020.
Photos by Gani Pinero
ThredUp launched its online public market for its first public visit on Friday, hoping investors would look beyond their lack of profits and instead focus on the growing demand for used products among a generation of young customers.
The San Francisco-based company raised $ 168 million at a valuation of $ 1.3 billion after pricing its shares at $ 14 per Thursday afternoon, at the high end of its previous range. . Shares fell 30% in the first few minutes of trading on Friday morning.
ThredUp is one of a series of companies looking to take advantage of a growing market for second-hand products, which is expected to more than double to $ 64 billion by 2024, which according to the company’s own estimates, compiled by GlobalData. Most Gen Z buyers do not see stigma when buying second-hand, and 40% have bought clothing, shoes or accessories, twice that of Gen X and Boomers .
“I think that’s when investors start to pay attention: When you have big markets and companies like ours have a real advantage,” cofounder and CEO James Reinhart said in an interview Friday. .
ThredUp follows competitors Poshmark and The RealReal in the search of the public markets. Poshmark had a strong debate in January, with shares doubling in on the first day of trading and giving the company a market capitalization of $ 7 billion. However, the stock has lost two-thirds of its value. The RealReal, which focuses on luxury goods, has been public since 2019. Its market capitalization has changed virtually since then at $ 2 billion.
Since its inception in 2009, ThredUp has taken a hands – on approach in an effort to make things as user – friendly as possible. They search for goods by offering people to post “cleaning kittens,” which they can load up with unwanted clothing, shoes and accessories and return to the company for free. It is up to ThredUp employees to do the big job of going through the merchant, deciding what is in good enough shape for reselling and listing items online.
Nearly 1,600 of the company’s 1,862 employees are located across their four warehouses. Last year, they sorted through 24.7 million items and decided to list 59% of them on the site.
“It’s hard to touch things. ‘Low price points’ are harsh. ‘Single SKUs’ are simply misleading, “Reinhart wrote in a letter to investors ahead of the offer. “Yes … We are doing the hard things that will significantly expand this opportunity and enhance our leadership position. ”
To keep costs down, it works to automate more tasks, such as photo editing and pricing. In 2019, it moved to a burners model, meaning it won’t pay sellers for an inventory until it has been successfully sold and until the two-week return window has passed.
Revenue climbed 14% to $ 186 million last year, marking a slowdown from the previous year when it recorded 26% growth. The company noted outbreaks related to the Covid-19 pandemic, which hampered its ability to process new investments quickly. Net losses also expanded to $ 48 million, up from $ 38 million the previous year.
The company says it has 1.24 million active buyers, up 24% from the previous year, who visit the site an average of six times a month and place 3.2 orders a year. It also has 428,000 active vendors, down 4%. Vendors will receive a cut of the retail price, which is between 3% and 15% for listed products between $ 5 and $ 20 and up to 80% for items $ 200 and above. The average cut last year was 19%, with retailers typically earning $ 51.70 on their cleaning facilities.
In the last few years, they have formed partnerships with retailers to sell their products in their stores or online. There are currently 21 such partnerships, including Walmart, Gap, Madewell and Reform; Others, along with JCPenney, were stopped during the pandemic. Reinhart said this will be a growing priority for the company in the coming years as it looks to expand its customer base. The company is currently gaining brand awareness at 13.8%.
Reinhart, 41, is the largest individual shareholder. It has a 6.5% stake in the company, excluding uninvested options, worth about $ 80 million based on the company’s initial prices.
For more, see:
Gold in your closet: Start time helps Patagonia and Levi’s cash in on resale increase
Poshmark IPO: Resale is the big new thing for a reseller, but their customers don’t come cheap