How ThredUp could be changing the clothing resale business

James Reinhart built his secondhand clothing e-commerce site, ThredUp, based on a simple thesis: Women don't wear more than 50 percent of the clothes in their closet.

And so he thought there could be big business in helping them sell those pieces online if he could make it as easy as stuffing the castoff clothing into a bag and getting it to a mail carrier. There are signs that his model is gaining some traction: ThredUp received 3.8 million items from sellers last year and $81 million in fresh funding earlier this month.

ThredUp, along with like-minded digital apparel resale sites such as Threadflip, Tradesy and Poshmark, are attempting to remake the secondhand clothes market by innovating on both sides of the consignment equation in a way that could meaningfully expand the ranks of people willing to shop for and sell goods this way.

All will face serious hurdles: Their supply chains are unpredictable and efficiency is hard to achieve, since their workers must inspect thousands of items each day that ultimately are not sellable.

With ThredUp, sellers need only pack their clothes into a hamper-size "Clean Out" bag, which the company sends to them for free. Once customers send clothes in, ThredUp does the rest, pricing and taking photos of the items before posting them on the company's website. Once the item is sold, the seller is given the option of receiving their portion of the sales price in cash or using it to make purchases of their own on the site.

"It really empowers the consumer to control that exchange that always in the past was viewed as a hardship or challenge," said Brandon Rael, a retail strategist at consultancy North Highland.

ThredUp is aiming to attract the kinds of sellers that eBay, perhaps, has not: Those turned off by the effort it takes to sell online and instead take unwanted clothes to the dump or leave them to be munched by moths in the attic.

The company says that for more than half of its customers, their purchase on ThredUp was their first time buying a used item. In other words, ThredUp might be growing the overall audiencefor secondhand shopping, rather than stealing customers from traditional brick-and-mortar thrift stores.

"It's actually replacing the shopping behavior of buying things at a deep discount from the discount retailers," Reinhart said. "So we're seeing that it's a shift from the T. J. Maxxes, the Marshallses, the Rosses, the flash sales, into a world where they can acquire things that are secondhand."

That may reflect ThredUp's focus on providing a boutique-like user experience. Purchases, for example, arrive wrapped neatly in tissue paper and come with tags scrawled with sayings such as "Life is full of second chances."

Kirthi Kalyanam, a professor at Santa Clara University in California who researches retail, said the slick website design may also help nab a different kind of customer than eBay.

"The selling atmosphere also matters. If the buyer is looking for a Louis Vuitton handbag, she may want the site to have the look and feel of (the) Louis Vuitton site," Kalyanam said in an email.

ThredUp says it is finicky about the brands and quality of the goods it is selling. But that doesn't mean it's only looking for your fancy Chanel handbags - in fact, Old Navy and H&M are among its best-selling brands. But it has focused on delivering a curated shopping experience that differs from the free-for-all that is eBay. Clothes that don't meet its standards in trendiness or wear-and-tear are recycled or given to charity.

That attention to detail could present a challenge as ThredUp aims to attract a bigger audience. The company has 500 employees who assess and price incoming items. But it plans to open two additional distribution centers by early next year and ultimately wants to open as many as 15 centers nationwide, which will only require more workers.

Plus, ThredUp has limited control of its merchandising.

"You're really at the mercy of the quality of the products you're getting in," said Andrew Billings, senior manager of retail and consumer products at North Highland.

ThredUp's strategy is similar to what Warby Parker is aiming to do with eyeglasses or what Casper is trying to do with mattresses: bring new convenience to a category that's widely thought to be rife with hassles. It is also trying to convince devotees of the brick-and-mortar thrift store that they can get some of that same treasure-hunt experience on the Web.